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June 08, 2012
Seattle arena's tax exemption would cause other property owners' tax bills to rise
Exactly who would pay how much in Chris Hansen's proposed $500 million Seattle arena project remains a moving target — see the long discussion in comments here — but one more piece of the puzzle has fallen into place, with the revelation that moving the arena off the property tax rolls would increase property taxes on other Seattle property owners:
In a blog post Wednesday afternoon, [Seattle City Council member Richard] Conlin said some of the previously announced details of the arena deal "do not quite live up to the hype."
Conlin then takes on the challenge of explaining Washington tax law, noting that once the city and county purchase the completed arena, it will be removed from the tax rolls, but its value (minus the land) gets added to the city's total assessed valuation and slightly increases the amount every property owner will have to pay. The city estimates that amount to be about $2 to $3 per year per homeowner.
It's important to note that this property tax rise (which would total about $15 million, according to Conlin) isn't an added subsidy or an increased cost for taxpayers — the property tax break for Hansen would still be worth the same thing, it's just that property owners would be taxed to make up the shortfall, instead of the city having to raid the general fund.
The overall calculus for the Seattle arena now looks something like this: The city would give up $107 million in admission, property, sales, and other taxes on the arena, some of which would be new (admission tax almost entirely), some of which would be cannibalized from existing city entertainment spending (sales tax in particular). They'd make at least some of that back from increased sales taxes on any new arena-patron spending downtown — whether it'd be enough to break even depends on a ton of assumptions about where fans would be spending their money otherwise, something the hopefully Conlin and the rest of the council have economists working on as we speak. The county would lose a few million in arena tax money, but again gain something from outside-the-arena spending (though not much, since it's unlikely many fans would be coming from outside the county). The state would gain something if Seattle property values and consumer spending rise on the whole, which is an open question. And surrounding communities would lose something from whatever spending would get shifted to Seattle as a result of people again having basketball to drive downtown to go see.
All of this would undoubtedly add up to a small public cost — $53 million in subsidies doesn't just get spontaneously generated out of thin air — but there are enough moving parts that it's hard to tell exactly who would end up holding the short end of the stick when the music stopped. And in any event, even $53 million is a pretty low price to pay, as these things go, toward a $500 million arena, and possibly an amount that Seattleites are willing to spend to secure an NBA team. Still, a million here, a million there...
Meanwhile, one easy way of estimating the impact on spending of the arrival of the neo-Sonics in Seattle would be to run the clock in reverse, and see what happened to tax receipts among all the different Seattle-area government agencies when the old Sonics left town. So far as I know no one has done this, but if anyone can point me in the direction of the right financial figures, I'm willing to give it a shot.
One thing that I don't hear much being discussed is attendance at the "new" Sonics games. I live in Puget Sound and have gone through the ugly departure of the original Sonics. I can tell you there is very little talk of NBA in this area since the move. People are much more interested in attending the Sounders games and the Seahawks are always big here.
When you consider the Mariner's have lousy attendance right now and the Sonics attendance was down before they left I think there is a real risk that the new NBA games will not sell out. People were very pissed the Sonics left and it is no lie that many fans washed their hands of the NBA. Seriously you can see it in the Sports bars and the lack of general talk of the NBA or if there is talk 50% of it is negative (screw the NBA, etc.)
Of course, some fans still exist and will go to games. However, overall there is a damn good chance this new building won't fill (look at the non-love for the Bobcats after the Hornets move). I wonder why no one addresses this when discussing building a new multi-million dollar structure.
Posted by James on June 8, 2012 11:00 AMJames, the arena will fill if the product is successful and it will not fill if the product is not successful. That is the way it is in most mid-market cities and certainly the way it has been in Seattle. The investor group is not going to make a $900B dollars of private investment without running through different attendance scenarios. From a taxpayer perspective, I believe your concern is more that would the taxpayers be left holding the bag if due to low attendance, the investor group fails to pay the bond payments. If you read the MOU, you will see that the group has provided guarantees to fill in any gaps if the attendance figures do not live up their projections. The guarantees they have provided are actually pretty significant and I believe Neil would agree with that point. A cynic would of course have his doubts. But then again, a cynic usually does.
Posted by Patrick on June 8, 2012 11:13 AMYeah, so long as the public risk is low, it's Hansen's problem how to sell tickets. Actually, you could argue that it's in the taxpayers' interest for the Sonics *not* to draw well - then people will spend their money on things that actually pay their full fair share of taxes, while the Sonics would have to increase their rent payments to meet any shortfall...
Posted by Neil deMause on June 8, 2012 11:45 AMWhen Clay Bennett tried to shove the $500M publicly paid Renton Arena down our throats in 2008, I was in the frontlines opposing the public handout for a very rich guy, not to mention a complete creep. Too many arena and stadium deals have been approved over the last two decades that have turned out badly for the taxpayers. No doubt Seattle fans should be upset and Stern and Bennett for holding a gun to our heads and threatening to leave if we did not pony up. I was proud to oppose Bennett and proud of those who fought alongside me because I truly felt that we had done more research than the other side, were better informed, and had logically concluded that it was a bad deal.
Now however we have a guy willing to invest $900M of private funds in this region. Even I realize that this is a great deal. But now when I hear argument from the Anti-Arena people, I just shake my head in disbelief. It is clear that close to 9 out of 10 of these people have not even read the M.O.U. These are people who upon hearing the word Arena and Public Involvement IMMEDIATELY go in to Anti-Arena mode. Instead of rationally thinking about whether the deal makes long term sense for the region, they start screaming bloody marry. What is most disappointing is some of these people actually sit on the city council and will be voting up or down on this offer.
I've been watching the Seattle City Council hearings on this proposal. Obviously it is early in the process but wow, some of these council members are already showing their clear disapproval of this proposal. We really should keep a tally on this site. Although early, by my count I have 5-4 votes in favor with Burgess, Bagshaw, Godden, and obviously Licata voting No.
There line of questioning really leaves one without any hope that they will change their mind. It seems like they are simply looking for reasons to say NO, rather than looking for reasons to say Yes. So, obviously the unknown here is Are there more no votes out there who just are not speaking up right now? I do not think anyone can make an educated guess right now based on anything other than what they see.
I have no problem with members voting no, even if the proposal is rejected. My concerns are that being typical politicians, they will vote No for the wrong reasons. Bagshaw still can not quite wrap her mind around how this deal works. She asked the Mayors staff why this arena cannot be 100% privately financed like the proposed arena in the Bay Area. At which point, even here own buddies on the council had to point out that Joe Lacob is actually getting Millions worth of land for free + other tax breaks. That genuinely seemed very surprising to Bagshaw, as if she had only read the Bay Area proposal in the headlines and never read any further. And these people make Billion dollar decisions for our city every single day and will be in charge of making a decision on this proposal, which even some of the most ardent Anti public funding for Arena people can live with.
I also want to urge those who support the proposal to write to your councilmembers. Because trust me, the opposition, namely the Port and Seattle Times is certainly making their voices heard.
I live in Seattle and feel even before the Arena announcements there was still a lot of basketball talk with lots of sonicsgate and "robbed" (with a sonics log) shirts being worn. Huskies basketball is a big ticket in town and the high school basketball scene is pretty big with producing several top college prospects. Since the arena announcement there has been a lot more buzz and interest. One thing I have noticed in my 8 years here is how loyal Seattle fans are to their teams. It took years and years of crappy performance before the Mariners attendance dropped off. Similarly for the Seahawks. I noticed at Bars, Gyms and even house parties people would rather watch the Mariners than the NBA or NHL playoffs (assuming Vancouver or the Sonics were not playing).
I don�t really know how significant the numbers would be but there should be a decent amount of people coming down from Vancouver for games against Canadian teams. Vancouver has one of the more expensive tickets in the league & sell out consistently. Similar to Buffalo, I would expect lots of fans coming down to see the Canucks (or just any NHL team at a somewhat affordable rate) play which will adding to hotel and entertainment dollars spent in Seattle. Now that might seem crazy but I have about 10 to 15 friends that have season tickets to the Canucks and they live in Seattle (that would be retaining $ in Seattle vs. spending in Canada). There are lot so people that go up to Vancouver for individual games as well. It is probably small in the grand scheme of things but it would be interesting to study buffalo as a proxy. Back of the envelop math, maybe a Million on the low end and $5M on the high end. (Note I play hockey in Seattle so it would be natural for me to know lots of Canadians and have friends that go up to Vancouver�hardly a random sample of people in Seattle).
Patrick, I'm in more-or-less the same boat as you. The last two arena deals proposed in Sacramento were so lopsided, I'd have preferred to see the Kings leave than to stay on those terms. On the last failed attempt, the deal the City offered was far too generous, and yet it still wasn't generous enough for the team owners.
I think the Kings will leave because they can get a better TV deal elsewhere. Simple as that.
And now, I'm prepared to say that with the deal in this MOU, if something resembling that had been proposed in Sacramento, I'd have taken it. Even with this "$2 or $3 per homeowner." That's really minimal. Compare that with what would have happened with downtown Sacramento parking had they gone ahead -- the parking alone would have gone up way more than $3/day. This affects me -- I work downtown.
Seattle, take this deal! And I would rather see you get the Kings if it prevents Sac from doing something stupid.
I hope this is close to happening. And if you're not familiar with the Sac deal, well, get familiar with it, so you can compare and contrast.
Posted by MikeM on June 8, 2012 05:07 PMSo who will the Sonics fans Bennet-scam for a team ? Will the same people crying that "our history has been robbed" turn around 4 years later and pull a struggling team from another city with glee or shame ?
I still think that the city should shorten projected payout periods to match the average lifespan of modern arenas. 14-18 years seems to be what is said. I also think that the city and county are wrong to provide up to 40% of the funding for an arena and willfully give up not just special "sports arena" tax revenues but also the basic tax revenues like sales and property taxes to do so. What about asking for a share of the profits ?
The strucutre of the MOU has the return to the city/county very heavily capped. I think the public should get a share of arena revenues (be it concessions, sales taxes at the arena, etc) to properly reflect that the public is fronting up to 40% of the cost.
Posted by ChefJoe on June 8, 2012 09:38 PM