Today's loser: KeyArena.
As if Seattle Center's lackluster 50th anniversary celebration wasn't enough of a letdown for the Center, the mayor and county executive effusively announced a new arena today that will essentially unplug the Key, leaving the arena with fewer of the events and concerts that made it profitable last year.
KeyArena, of course, became a liability for the city in the past decade because of a bad deal the city cut with the Sonics in 1995, when the city financed a $77 million upgrade ($130 million with debt service) on the promise that gate revenues would be enough to pay the city back. They didn't, and the Sonics — who were ultimately supposed to cover the debt themselves — were in the red, forcing the city to make up the difference, to the tune of $2.2 million a year.
Although the new proposed arena comes with more guarantees, the city and would be on the hook for unpaid debts if all the protections in the agreement failed.
City and county officials said they've learned from the mistakes they've made with past stadium and arena projects, and King County Executive Dow Constantine and Seattle Mayor Mike McGinn said the deal announced today would protect the city and county from financial risks.
The agreement, Constantine said at today's announcement, is "unprecedented in the guarantees and the protections that the public gets for its investment. … It's one of the larger commitments of private capital ever made in America."
In a media briefing prior to Constantine and McGinn's official announcement, county budget director Dwight Dively and Seattle deputy budget director Hall Walker explained the details of the agreement. Dively noted that the city has funded four stadium projects in the past, with mixed results for taxpayers, and that "we think we have learned the lessons of those four agreements and have embodied them in this memorandum of understanding."
Among the details, some of which would help address those lessons:
- The arena itself would be paid for and built by ArenaCo, the company headed up by Hansen and his still-unnamed team of investors. They would be responsible for all cost overruns on the project and would put aside a reserve fund worth one year of debt service as a failsafe.
The city and county would buy the land for the project from Hansen, who has been buying up land in SoDo, for no more than $100 million, paying for the debt with general obligation bonds issued by the City Council. (Hansen spent $22 million for one of the parcels where the arena would go, and bought several smaller parcels, encompassing about the same area as the $22 million parcel, for an undisclosed amount).
- Construction of the arena is contingent on acquiring an NBA team. However, the arena can be built without an NHL team. With both teams, the total cost of the arena would be capped at $200 million — $120 million from the city for the NBA team, and $80 million from the county for the NHL team. If the new arena company, called ArenaCo, can't acquire an NHL team, in other words, the county would be off the hook and the entire public cost of the arena would be borne by the city.
Asked whether the deal was better for the county than the city, Dively responded: "In this agreement, the city's tax revenues are significantly larger than the county's. We were always going to be a junior partner in the agreement."
- Before the arena can be built, the project will have to go through environmental review, including review under the State Environmental Protection Act (SEPA) and an environmental impact statement.
Additionally, Hansen is funding a traffic impact study to see how the new arena will impact congestion in the area — a particular concern of the Port of Seattle, which already gets hit by traffic from the two existing stadiums.
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