Council member Richard Conlin. (City of Seattle)
Last week, the Seattle City Council voted 6 to 2 in favor of an agreement that would ultimately result in public financing to support constructing a new arena south of Safeco Field. Councilmember Nick Licata and I voted against the legislation (Councilmember Rasmussen was absent). I'd like to explain the background and the reason for my vote.
We have often been told that this was one of the best deals any city has ever been offered, and that now it is even better. Both of those statements are probably true. But neither of them demonstrates that it is a deal that is truly in the interests of the people of Seattle. This revised agreement may prevent the most problematic outcomes. That does not mean that we will wind up benefiting from it, or that it is a good use of the City’s time, resources, or financial capacity.
As I noted in August when I first wrote about this proposal, the question before the Council is not whether we think having an NBA team is a good thing, but whether it is necessary and appropriate to invest public money (in the form of municipal bonds) for a new arena. We have seen no evidence that constructing a new arena to bring an NBA basketball team to Seattle requires City participation. The land is zoned to permit its construction, and the developer has purchased that land and lined up several very wealthy investors who have the capacity to pay for an arena and for the teams to fill it.
The core issues remain. The City has negotiated an agreement that we would never do with any other for-profit business — giving up future City taxes that the business would generate and investing them in the business instead. This is a very odd financial model for a public entity, with a very complex and convoluted agreement wrapped around it.
This agreement takes an expense away from the business owner — paying his taxes. Now this expense becomes money from the City invested in his business, and he makes a profit on it.
It takes a benefit away from the City. Normally a new business pays taxes into the general fund. Then all our residents and businesses enjoy better services or lower taxes. But now those taxes go back to the business to become an ‘investment’ that does not, in my opinion, generate returns for the City.
I respect the efforts of my colleagues to improve the proposed agreement. Getting some funds generated by the arena dedicated to transportation improvements, securing a personal guarantee from Chris Hansen that the City debt will be repaid, obtaining more City control over funds generated by the Key Arena during the time an NBA basketball team would be located there, and adding a provision limiting the possibility that we will be stuck with a money-losing arena by giving the City the right to require Hansen to buy it back after 30 years are all positive steps. Because the entire agreement is with a single entity and lead individual, there is still some exposure, but it is greatly reduced, and there is a pretty good chance that additional City resources are not significantly at risk.
But these do not change the core issue. And there are additional uncertainties. We will have to figure out the future of Key Arena, which in 2011 made $310,000 on $6.6 million in revenues, and now will face a City-funded competitor for major shows and possibly lose its primary sports tenant, the Seattle Storm. While the transportation fund will help with industrial business and Port issues, this project adds to the challenges and uncertainties about their future and the future of the thousands of jobs they support. And there is still possible litigation and the investment of City resources in managing very complex financial and logistical arrangements.
It is important to remember that this is a different financing structure from that used for Safeco and CenturyLink Fields. Those financing plans were put in place many years ago, of course, when there were more public dollars available and research on the limited economic benefits of stadia was only just beginning. In both of those cases, funding came from specific taxes authorized by the legislature (in the case of CenturyLink, it was also approved by voters). These taxes had less impact on the City’s general fund, which receives taxes from the teams and operations (admissions taxes were used, over the City’s protest, as were some CenturyLink sales taxes). The agreements were less complicated and are managed by special purpose entities that are insulated from general government.
The model in which a government funds a stadium for private owners to profit from is a relatively recent one. For many decades, since the rise of professional sports 150 years ago, new facilities were almost entirely funded by the team owners. Only since World War II has it become customary for local governments to be primary funders — and the current trend may be away from public finance. We know that in San Francisco, the Golden State Warriors are building an arena on City waterfront land and piers using only private funds. The City of San Francisco is providing the land and piers — but that is really unloading a liability, since it will require some $75-100 million to make the piers usable.
For all of those reasons, I voted no on this legislation.
Editor's Note: This article is adapted from a blog post on the councilmember's website.