BY Art Thiel 12:12AM 03/08/2012

Thiel: Hansen makes a compelling arena case

Would-be arena builder Chris Hansen casually explained to the Arena Review Panel that for the first time in modern civic history, private capital, not government, will drive this project.

For 45 minutes at City Hall Wednesday night, would-be arena mogul Chris Hansen calmly answered questions from politicians, bureaucrats and agency heads who reflected Seattle’s pain from repeatedly getting kicked in the bicuspids by pro sports owners, starting with the loss of the Seattle Pilots in 1970.

In the sometimes lame give-and-take, he made a point lightly understood but significant for grasping why his idea is different than those of his sporting predecessors more practiced in the art of shoe-leather dentistry.

“Our equity in this project is larger than the city (and county combined),” he said. “Are we going to risk a $600 million investment over a $2 million annual shortfall?”

Unlike the Kingdome, unlike KeyArena, unlike Safeco Field, unlike Century Link Field, this project proposes to put the privates’ privates at greater risk than the public’s privates.

That’s a new one for Seattle.

Not saying there isn’t some public risk. Not saying that some people, businesses and industries aren’t going to feel pain. Not saying it’s going to work.

But putting $290 million in private money up front is something no other enterprise has done in the modern sports history of this town.

It changes the whole dynamic. It takes government off the motorcycle and puts it in the sidecar, where it belongs.

Each of the four Seattle sports buildings mentioned all were driven by public grants of tax money that put government in a position to do what it is not trained to do – manage an entertainment facility.

It isn’t necessarily a fatal flaw, but in the cases of the Kingdome and the Key, it was. Both were built by a conservative public entity, forced by public accountability to choose the least expensive option when it came to creation, maintenance and upgrading of the enterprises.

The Kingdome lasted 24 years, partly because no King County Executive wanted to write the big check for the preventive fix to the roof that ultimately failed, dooming the building.

The Coliseum remodel that became KeyArena lasted 13 years before the anchor tenant moved away –seven years short of the construction-bond debt retirement –  unable to survive because the funding mechanism made the building economically obsolete for the bloated needs of its main income source.

The football and baseball stadiums were better deals, but if the Mariners owners were given truth serum, they would admit being bitter to this day that they had to pay $120 million on cost overruns mandated by the Legislature.

The public-private deal that worked best was the last one, the Seahawks stadium that won a 51 percent majority in statewide voting in 1997.  The team owner, Paul Allen, picked up a chunk of the tab and has continued to spend on the building and the team, because he can. Watch what happens with free agent quarterback Peyton Manning.

Sports spending is a Hansen passion too.  That’s the deal with rich guys. They can do what they want, unconstrained by the limits of government or, hey, even good business judgment.

Hobbled by a brace protecting his right knee, whose ACL and MCL was torn up by a ski accident, Hansen limped into City Hall to submit to questions from several members of the government-appointed Arena Review Panel.

His first public explanation of the plan to build a 20,000-seat area south of the stadiums not only wasn’t adversarial, it was uncommonly polite for such things. It’s what happens when government is offered money, instead of being asked for it.

In several different ways, Hansen was asked by panelists the same thing: Why won’t we get screwed in this deal?”

“I’m trying to put this (deal) in a (situation) where it won’t blow up,”  Hansen said. The easiest, and only, way to do that is to make private capital more responsible for success than government. The public portion is limited to using the combined bonding capacity of the city and county for what amounts to a $200 million loan, and a return of tax revenues generated by the arena that would not otherwise exist, plus an admissions tax (a user fee). No new taxes, no diversion of current revenues, only a reduced capacity to borrow for other projects.

“We will pay for (any construction-cost) overruns,” he said. “And the owners will backstop any (annual operating revenue) shortfalls with increased rent.”

No current or former Seattle pro sports owner has come within miles of those remarks.  As he reads those quotes, hot coffee will burn its way through the nostrils of ex-Sonics owner Howard Schultz.

Who “we” is, remains an open question.  Hansen dodged questions about his fellow investors, other than to say they would be from Seattle and his current home of San Francisco, where he is a hedge-fund manager.  He was not asked about what return he is promising investors, other than to say they understood that they are not getting into pro sports ownership “to make money.”

He avoided talk of targeted franchises to poach, and the nature of his talks with the NBA. He repeatedly made a point that he didn’t have answers to the issues of traffic mitigation and infrastructure upgrades, but will listen to those who know better. But he was firm in his commitment to the SoDo parcel in which he has already invested more than $20 million.

“This is where I want it to be,” he said, “and where it should be.”

That will be a point of argument for some, as will many other aspects of the project. That’s what the panel and the city and county administrations are going to hash out over the next year. But first:

“My job is to explain (arena financing),” he said.  “I think it’s a fair deal. Am I biased? Probably.”

After Hansen departed, his bias was buttressed by a consultant hired by the city, Justin Marlowe, whose expertise is public-private partnerships. He used the phrase “remarkable thing” to describe the financing.

“I’ve talked to people all over the world regarding public-private partnerships,” Marlowe said. “These deals almost always come down to a feeling of trust between the partners.

“This seems to feel right.”

After decades of mistreatment by the barons of ball,  the taxpaying public has every right to its skepticism. Pick apart the consultants as house organists, the investors as charlatans, the site as unworkable and the politicians as desperate. Feel free to question — in fact demand to know — who picks up the tab for overpasses, condemnations and litigation and that 10,000 other questions that will take at least a year to answer.

Some or all may prove valid. Also be open to the notion that there remain people who mean what they say, and say what they mean. Even in pro sports.


YourThoughts

  • jafabian

    I’d like to hear Hansen address on his contingency plans.  If an NBA/NHL team doesn’t come to Seattle will he still build the arena?  So what would happen to the arena then if no anchor tenant can be found?  There’s no guarantee that either will ever come and I highly doubt an NBA team will come here while David Stern is commisioner of the NBA. 

    Curious as to how the SODO district has become the choice area for an arena.  For Howard Schultz Safeco Field and Century Link Field were the competitors for the Sonics dollar and their luxury box suites were considered better than Key Arena’s (though to be fair the Key’s were constructed well before those two stadiums were built) so you’d think he’d prefer to be across town from them rather than next to them.  There’s also not nearly as many businesses or hotel lodgings in the area to support the arena like there is in the Seattle Center neighborhood.  That will probably change after a new arena is completed but it doesn’t seem to be good business sense to build on something that might or might not happen.

    I’d also like to hear what the city has to say about the impact a SODO arena would have to Key Arena and Seattle Center since they’re so supportive of this.  The city has huge concerns on Seattle Center surviving right now.   Wish they were this supportive when Steve Ballmer offered to cover half the cost of a Key Arena expansion.

    • jafabian

       Also would want to know exactly where Hansen is getting this $290 million.  Is it on loans or is it cash on hand?  I remember how Jeff Smulyan purchased the M’s on loans and when they became due and payable he was scrambling.  I wouldn’t want to put all my eggs in Hansen’s basket and find out later things aren’t what they seemed to be.

      • Artthiel

         Jafabian, then why didn’t you show up for the hearing? He touched on a lot of your topics, but no media has fully reported all aspects. And much of it isn’t reportable yet, because until the city vets Hansen’s plan, there’s no point in moving on some other questions. There’s a sequence of events here.

        The competition among the local teams has little to do with proximity and everything to do with market saturation. Hansen has yet to address my issue from the start: Which of our pro franchises (including UW football) becomes the sixth ticket in town, and how do they survive?

        • Grover

          What makes you think even the 5th and 4th tickets would survive?  The M’s are already losing money at Safeco Field.  They can’t sell many of their luxury suites, club seats or “Diamond Club” seats.  Two new teams will likely take sales away from all of the existing teams.  There will almost certainly be more than one team that is the financial ”loser” if this arena happens.  It could be all six that lose.

          Seattle is not New York, L.A. or Chicago.  Not by a long shot.

          • RadioGuy

            Well, neither is Denver, and they’ve got teams in all four of the major leagues (I don’t count MLS…Seattle’s the only franchise that isn’t considered a “niche” team).  But your point is well-taken.  There’s just only so much disposable income for big league sports.

  • jafabian

    I’d like to hear Hansen address on his contingency plans.  If an NBA/NHL team doesn’t come to Seattle will he still build the arena?  So what would happen to the arena then if no anchor tenant can be found?  There’s no guarantee that either will ever come and I highly doubt an NBA team will come here while David Stern is commisioner of the NBA. 

    Curious as to how the SODO district has become the choice area for an arena.  For Howard Schultz Safeco Field and Century Link Field were the competitors for the Sonics dollar and their luxury box suites were considered better than Key Arena’s (though to be fair the Key’s were constructed well before those two stadiums were built) so you’d think he’d prefer to be across town from them rather than next to them.  There’s also not nearly as many businesses or hotel lodgings in the area to support the arena like there is in the Seattle Center neighborhood.  That will probably change after a new arena is completed but it doesn’t seem to be good business sense to build on something that might or might not happen.

    I’d also like to hear what the city has to say about the impact a SODO arena would have to Key Arena and Seattle Center since they’re so supportive of this.  The city has huge concerns on Seattle Center surviving right now.   Wish they were this supportive when Steve Ballmer offered to cover half the cost of a Key Arena expansion.

    • jafabian

       Also would want to know exactly where Hansen is getting this $290 million.  Is it on loans or is it cash on hand?  I remember how Jeff Smulyan purchased the M’s on loans and when they became due and payable he was scrambling.  I wouldn’t want to put all my eggs in Hansen’s basket and find out later things aren’t what they seemed to be.

      • Artthiel

         Jafabian, then why didn’t you show up for the hearing? He touched on a lot of your topics, but no media has fully reported all aspects. And much of it isn’t reportable yet, because until the city vets Hansen’s plan, there’s no point in moving on some other questions. There’s a sequence of events here.

        The competition among the local teams has little to do with proximity and everything to do with market saturation. Hansen has yet to address my issue from the start: Which of our pro franchises (including UW football) becomes the sixth ticket in town, and how do they survive?

        • Grover

          What makes you think even the 5th and 4th tickets would survive?  The M’s are already losing money at Safeco Field.  They can’t sell many of their luxury suites, club seats or “Diamond Club” seats.  Two new teams will likely take sales away from all of the existing teams.  There will almost certainly be more than one team that is the financial ”loser” if this arena happens.  It could be all six that lose.

          Seattle is not New York, L.A. or Chicago.  Not by a long shot.

          • RadioGuy

            Well, neither is Denver, and they’ve got teams in all four of the major leagues (I don’t count MLS…Seattle’s the only franchise that isn’t considered a “niche” team).  But your point is well-taken.  There’s just only so much disposable income for big league sports.

  • Jamo57

    Art, your column reminds me of the people who are ultimately the victims of abuse here in the Seattle sports market:  the fans.     Perhaps an analogy for the fan is the children of a dysfunctional marriage or divorce where the parents have constantly fought and have used the kids as pawns in the parents’ battles.

    Whenever a transplant or out of towner criticizes Seattle fans as being ‘frontrunners’ or somehow less than loyal, I go off on a rant that isn’t much less nuclear than your famous Seattle Snow rant.  I point out that Seattle sports fans have had to endured threats and actual abandonment by franchises in all three sports, but we always come back.  (And as I write this I realize we have been abandoned by all three major league sports: the Pilots left, the Sonics left, and the Seahawks were forced to come back).

    And what have we gotten in return for all this abuse?   One measily world championship 33 years ago by a team that no longer exists.

    But us children of this lousy marriage continue to hope that someday things will be better.   Maybe this new suitor (Hansen) for mom’s affections (our local government) is really as he appears to be.   And maybe its time for mom to get over the losers she dated in the past.   And maybe its up to the kids to point out that its time to move on and have something better.

    • Artthiel

       Jamo, as a guy who likes to torture analogies myself, my hat’s off. The emotional-dependency issues in relationships and in love for sports have some similarities. In the end, because no relationship is perfect, we make compromises as to how much to put up with for the benefits.
      But we’re not alone. New York lost two baseball teams, and Los Angeles lost two football teams. Kansas City lost basketball twice. San Diego doesn’t have hoops or hockey. And Paris, London, and Tokyo don’t have any, and things are OK there.

  • Jamo57

    Art, your column reminds me of the people who are ultimately the victims of abuse here in the Seattle sports market:  the fans.     Perhaps an analogy for the fan is the children of a dysfunctional marriage or divorce where the parents have constantly fought and have used the kids as pawns in the parents’ battles.

    Whenever a transplant or out of towner criticizes Seattle fans as being ‘frontrunners’ or somehow less than loyal, I go off on a rant that isn’t much less nuclear than your famous Seattle Snow rant.  I point out that Seattle sports fans have had to endured threats and actual abandonment by franchises in all three sports, but we always come back.  (And as I write this I realize we have been abandoned by all three major league sports: the Pilots left, the Sonics left, and the Seahawks were forced to come back).

    And what have we gotten in return for all this abuse?   One measily world championship 33 years ago by a team that no longer exists.

    But us children of this lousy marriage continue to hope that someday things will be better.   Maybe this new suitor (Hansen) for mom’s affections (our local government) is really as he appears to be.   And maybe its time for mom to get over the losers she dated in the past.   And maybe its up to the kids to point out that its time to move on and have something better.

    • Artthiel

       Jamo, as a guy who likes to torture analogies myself, my hat’s off. The emotional-dependency issues in relationships and in love for sports have some similarities. In the end, because no relationship is perfect, we make compromises as to how much to put up with for the benefits.
      But we’re not alone. New York lost two baseball teams, and Los Angeles lost two football teams. Kansas City lost basketball twice. San Diego doesn’t have hoops or hockey. And Paris, London, and Tokyo don’t have any, and things are OK there.

  • RadioGuy

    How much public money went into Emerald Downs?  Wasn’t that entirely funded by Ron Crockett and Dave Heerensperger?

    Am I the only person uneasy with the knowledge that while Chris Hansen won’t name his backers (even odds that Wally Walker’s one of them) and with no NHL or NBA team even on the horizon, Hansen & Co. want the public to pony up $200 million before anything else is done on this arena?  Why would a venture capitalist, to whom government involvement should be anathema, be seeking government subsidies if a particular venture is so attractive?  It seems that private investors would be lining up to buy into this arena if they thought they could at least come out even financially.  This seems eerily similar to Nancy Pelosi saying, “You should vote for this first, THEN you can read it.”

    I’m coming around to the public financing vehicle of taxing ticket and parking revenues from the arena itself (I would add concessions and souvenirs) because it would be up to the users to make it work, although I’m a little dubious as to what would happen if that revenue wasn’t enough to make bond payments…how would the difference be made up?

    Although I’m glad Chris Hansen has at least put an offer of sorts on the table for discussion, but I’m also finding I have more questions than he’s willing to provide answers for.

    • Artthiel

      Radioguy, one step at a time. As I wrote, there are 10,000 questions left, but most can’t get answered until the city says Hansen’s financing plan is viable. The city is paying a little bit in pre-development costs now, but they do that with every proposal needing zonings and city approvals. I agree that there’s a chicken-or-egg question about how does the project start without a team, but they’re not even to that point because they have to vet first Hansen’s financing plan.
      Regarding the track, you’re right, it was privately financed. Never sought public funding. They knew better, even in the early 1990s.

      • RadioGuy

        I suppose I’m farther ahead in my thinking than reality dictates, but the question of who is backing Hansen is valid regardless of the timeline.

        BTW, I appreciate that you, Steve and the rest of the SPNW writers come on the message board and have dialogues with your readers.  This is healthy.  That generally doesn’t happen with the Times or P-I guys, and readers can’t even post comments on Bill Simmons or Rick Reilly columns.  Talk about a one-way street.

  • RadioGuy

    How much public money went into Emerald Downs?  Wasn’t that entirely funded by Ron Crockett and Dave Heerensperger?

    Am I the only person uneasy with the knowledge that while Chris Hansen won’t name his backers (even odds that Wally Walker’s one of them) and with no NHL or NBA team even on the horizon, Hansen & Co. want the public to pony up $200 million before anything else is done on this arena?  Why would a venture capitalist, to whom government involvement should be anathema, be seeking government subsidies if a particular venture is so attractive?  It seems that private investors would be lining up to buy into this arena if they thought they could at least come out even financially.  This seems eerily similar to Nancy Pelosi saying, “You should vote for this first, THEN you can read it.”

    I’m coming around to the public financing vehicle of taxing ticket and parking revenues from the arena itself (I would add concessions and souvenirs) because it would be up to the users to make it work, although I’m a little dubious as to what would happen if that revenue wasn’t enough to make bond payments…how would the difference be made up?

    Although I’m glad Chris Hansen has at least put an offer of sorts on the table for discussion, but I’m also finding I have more questions than he’s willing to provide answers for.

    • Artthiel

      Radioguy, one step at a time. As I wrote, there are 10,000 questions left, but most can’t get answered until the city says Hansen’s financing plan is viable. The city is paying a little bit in pre-development costs now, but they do that with every proposal needing zonings and city approvals. I agree that there’s a chicken-or-egg question about how does the project start without a team, but they’re not even to that point because they have to vet first Hansen’s financing plan.
      Regarding the track, you’re right, it was privately financed. Never sought public funding. They knew better, even in the early 1990s.

      • RadioGuy

        I suppose I’m farther ahead in my thinking than reality dictates, but the question of who is backing Hansen is valid regardless of the timeline.

        BTW, I appreciate that you, Steve and the rest of the SPNW writers come on the message board and have dialogues with your readers.  This is healthy.  That generally doesn’t happen with the Times or P-I guys, and readers can’t even post comments on Bill Simmons or Rick Reilly columns.  Talk about a one-way street.

  • 1coolguy

    Here’s a way for the City to save (2) things: $200m AND the Seattle Center:
    GIVE KEY ARENA TO HANSEN, INLCUDING THE LAND!

    He can tear it down, remodel it, etc, and serve both his group AND the City well.

    If a new arena is built, Key will become an even bigger money losing, white elephant, draining the Centers’ coffers and creating a virtual ghost town in that part of the Center.

    The new arena will pull all the business from Key – games, concerts, conventions, etc.

    As the Space Needle is on private land, we can do the same with Key.

    • Artthiel

       Coolguy, Space Needle I believe is a private building with a lease on public land. Seattle Center is a quasi-park, which made it unique in the NBA. Few investors want to spent #300M on land they don’t own, especially to create the nightlife district they envision. KeyArena/Seattle Center/Lower Queen Anne are no longer a fit for pro sports 

      • Grover

        KeyArena is not a “private building.”  KeyArena is owned by the City of Seattle.

        The private investors won’t own the land the new arena would be built on either.  The very first thing that has to happen in this proposal is that the City of Seattle has to buy the land for the new arena from Hansen with cash, before any construction starts.

        http://www.seattle.gov/mayor/media/PDF/120216PR-ProposalPrinciples.pdf

        “5.  After all land use issues are resolved to permit construction of the Facility, the City will acquire the Site from ArenaCo.  The purchase price for the site wil be payable in cash at the fair market value of the Site, as permitted and entitled for use as a multipurpose professional sports arena.  The fair market value of the site will be determined by an independent appraiser.

        “6.  The City will ground lease the Site to ArenaCo for a term of 30+ years.”

        So, how much will the city have to pay Hansen for the property?  Where will the City get the $20-plus millions of dollars “in cash” to buy this property from Hansen?  How much will ArenaCo pay to lease the site from the City?

        You have any answers Art?  It seems to me you did not even know any of this.  I suggest you read the entire document in that link I gave to the seattle.gov/mayor website.  You may learn a few things.

      • 1coolguy

        http://www.spaceneedle.com/discover/history.html

        Hi – The Space Needle is on private land, per the link above.
        I agree no one will desire building on land they do not own, yet I suspect the City Council, Mayor, etc al will line up to sell the Key Arena and the land to Hansen if the opportunity is presented.

        This is really a win-win, whereby Hansen saves a tremendous amount, certainly in the hundreds of millions and the City reinvigorates the Center AND gets out of the arena business.

  • 1coolguy

    Here’s a way for the City to save (2) things: $200m AND the Seattle Center:
    GIVE KEY ARENA TO HANSEN, INLCUDING THE LAND!

    He can tear it down, remodel it, etc, and serve both his group AND the City well.

    If a new arena is built, Key will become an even bigger money losing, white elephant, draining the Centers’ coffers and creating a virtual ghost town in that part of the Center.

    The new arena will pull all the business from Key – games, concerts, conventions, etc.

    As the Space Needle is on private land, we can do the same with Key.

    • Artthiel

       Coolguy, Space Needle I believe is a private building with a lease on public land. Seattle Center is a quasi-park, which made it unique in the NBA. Few investors want to spent #300M on land they don’t own, especially to create the nightlife district they envision. KeyArena/Seattle Center/Lower Queen Anne are no longer a fit for pro sports 

      • Grover

        KeyArena is not a “private building.”  KeyArena is owned by the City of Seattle.

        The private investors won’t own the land the new arena would be built on either.  The very first thing that has to happen in this proposal is that the City of Seattle has to buy the land for the new arena from Hansen with cash, before any construction starts.

        http://www.seattle.gov/mayor/media/PDF/120216PR-ProposalPrinciples.pdf

        “5.  After all land use issues are resolved to permit construction of the Facility, the City will acquire the Site from ArenaCo.  The purchase price for the site wil be payable in cash at the fair market value of the Site, as permitted and entitled for use as a multipurpose professional sports arena.  The fair market value of the site will be determined by an independent appraiser.

        “6.  The City will ground lease the Site to ArenaCo for a term of 30+ years.”

        So, how much will the city have to pay Hansen for the property?  Where will the City get the $20-plus millions of dollars “in cash” to buy this property from Hansen?  How much will ArenaCo pay to lease the site from the City?

        You have any answers Art?  It seems to me you did not even know any of this.  I suggest you read the entire document in that link I gave to the seattle.gov/mayor website.  You may learn a few things.

      • 1coolguy

        http://www.spaceneedle.com/discover/history.html

        Hi – The Space Needle is on private land, per the link above.
        I agree no one will desire building on land they do not own, yet I suspect the City Council, Mayor, etc al will line up to sell the Key Arena and the land to Hansen if the opportunity is presented.

        This is really a win-win, whereby Hansen saves a tremendous amount, certainly in the hundreds of millions and the City reinvigorates the Center AND gets out of the arena business.

  • notaboomer

    i hope hansen’s not a ponzi schemer, that he teams up with that new spanx billionaire woman, and that they name the arena the spanxbowl. 

  • notaboomer

    i hope hansen’s not a ponzi schemer, that he teams up with that new spanx billionaire woman, and that they name the arena the spanxbowl.