BY Art Thiel 08:52PM 07/12/2012

Thiel: Arena deal passes scrutiny from experts

Panel of seven experts told King County Council the deal from Chris Hansen bears no red flags; one said the arena “should be the least of the port’s concerns.”

The port's Terminal 46 is most affected by surface-street traffic. / Don Wilson, Port of Seattle

No score is kept in the game to get the NBA game back in Seattle.

But if there were an accounting, Thursday was Arena 1, Opponents 0.

King County’s budget committee heard from a volunteer panel of seven longtime local experts formed six weeks ago to assess multiple aspects of Chris Hansen’s proposed $490 million basketball/hockey arena in SoDo.

No single conclusion was reached in the report, which can be found at the bottom of this page.  That rests with the councils of the county and city.

Neither were red flags sent up. Which, in this game, constitutes a stage win, as they say in the Tour de France. There were questions, concerns, request for deeper information, but no one shouted, “Bogus!”

There was, however, this shot from Dick Conway, a local economist long experienced in the business of pro sports. It wasn’t directed at the arena.

“If I were at the Port of Seattle,” he said, “the arena would be the least of my problems.”

After presenting report on the arena’s economic impact on the area (negligible) and market analysis (borderline over-saturated with two more pro sports teams), Conway also contributed an analysis of the claims by the port, the arena project’s most high-profile challenger,  that the arena would be a “job-killer” by further congesting the already crowded front door of the port on First Avenue South and helping discourage customers in a highly competitive business.

Conway reported that the port identified 194,000 jobs statewide “associated” with port activities. Of those, 56,300 are seaport jobs, the rest airport jobs. Marine cargo handling, the task most directly impacted by increased SoDo traffic, has 12,400 direct jobs and 20,900 indirect jobs — or 1.2 percent of the state’s total non-farm employment.

In Conway’s worst-case assessment, he wrote that loss of all those jobs would have a significant but not devastating effect on the state economy, since the state is currently adding about 50,000 jobs a year. That represents zero solace if one’s job is flushed, but he wrote that, in the unlikely event that the port shuts down cargo handling, most of the jobs would migrate 30 miles south to the Port of Tacoma.

The port disputed Conway’s findings. The port’s media manager, Charla Skaggs, cited Prince Rupert, B.C.,  as an aggressive port that would take jobs out of state, and pointed out that the port has never cited a specific job-loss figure, nor did Conway speak to port officials for his report. Nor was port the lone commercial user impacted.

“The port is not the only generator of freight,” she said. “The port is only part of the traffic that uses SoDo. There’s FedEx, UPS and all the air cargo carriers. There’s the distribution centers that repackage goods.

“There’s traffic people don’t talk much about, like Waste Management, which has a big distribution center is South Park that has trucks coming and going all day, and the school bus depot. All of these users on the same few roads add up.”

Aside from the argument about traffic impacts, the issue of market saturation has been one of the least discussed, mostly because it’s harder to predict than traffic. Panelist Bill Beyers, a University of Washington professor of geography, along with Conway, looked at 22 national sports markets with pro teams and concluded that adding NBA and NHL teams would make Seattle, currently eighth with the Mariners, Seahawks, Sounders and Storm, the third-highest per-capita market for pro-sports saturation, trailing only Denver and Cleveland.

“One way to look at it is that everyone in the market would have to go to two events per year to fill every seat in every building to capacity,” Beyers said. He rejected the claim by the Hansen camp that Seattle was the best major city to which a relocate a team, claiming instead it was third-worst.

However, Beyers’s study is flawed. While he included the WNBA Storm, which is not considered a major sport, he left out University of Washington football, which is a highly professional sport in every aspect but federal tax law. And unlike the Cleveland and Denver markets, which have no major college football within the cities, the UW in its new stadium scheduled to open in 2o13, will be in the dead-red middle of competition with the officially pro teams for season-ticket buyers, suite-holders, advertisers and sponsors. That probably makes Seattle an even worse market for relocation.

“Adding two more teams could have adverse impacts on fan spending for existing teams,” Beyers said, stating the obvious and perhaps the riskiest aspect of the entire enterprise, one that drives the Mariners’ opposition, even though the franchise’s stated resistance is over SoDo traffic.

But it’s also a risk for Hansen and his investors. Since expansion does not appear to be a near-term option for either the NBA or NHL, Hansen almost certainly will have to pull out weak teams from their markets. A honeymoon in Seattle will undoubtedly prevail for a couple of seasons, but lousy teams are part of the risk for ownership.

Although he hasn’t said so, that’s another reason he feels as if the public should be an arena partner. Investors are funding 100 percent of the purchase price of the teams and 60 percent of the arena. The ask from the public is $200 million lease-purchase in the form of construction bonds to be repaid by rents and tax revenues the building generates.

Panelist Justin Marlowe, another UW professor who specializes in public financial management, explained a previously undisclosed reason Hansen wants a public partner: Besides the fact that municipalities can get cheaper interest rates than private investors, they also can get 30-year terms, spreading out the amortization to make annual payments cheaper.

“Since (the market collapse in 2008),  corporate bonding over long periods like 30 years is not available,” he said. “Even 20 years is very difficult find. That drives up the cost of capital.

“Lenders tend to believe King County will be around a long time.  Municipalities are unique for their ability to borrow over time.”

Regarding the entirely of the financing proposal, Marlowe concluded, as have others with experience in public-private projects, that in terms of balancing risk/reward between the partners, is good.

Said Marlow: “It’s one of the better allocations we’ve seen.”


YourThoughts

  • http://manywordsforrain.blogspot.com/ Mr Baker

    Art, the Storm lease is for the bottom bowl. I hope they were not using the total capacity of Key Arena, the Storm literally are not planning on that happening.
    Also, their numbers appeared to weigh population and not really the wealth in the market. They did admit they did not have sports marketing data.

    Port took a beating at the end by Conway, and in a way, MacDonald diminished their impact claims further by noting who the greatest consumers of freight traffic really are.

    • Artthiel

      Don’t know what capacity figure was used on the Storm, but they shouldn’t have been in the consideration. Different scale.

      Port is late to the party of facts, but they’ve been on defense the whole time. Hansen’s people never gave them a headsup.

  • http://manywordsforrain.blogspot.com/ Mr Baker

    Art, the Storm lease is for the bottom bowl. I hope they were not using the total capacity of Key Arena, the Storm literally are not planning on that happening.
    Also, their numbers appeared to weigh population and not really the wealth in the market. They did admit they did not have sports marketing data.

    Port took a beating at the end by Conway, and in a way, MacDonald diminished their impact claims further by noting who the greatest consumers of freight traffic really are.

    • Artthiel

      Don’t know what capacity figure was used on the Storm, but they shouldn’t have been in the consideration. Different scale.

      Port is late to the party of facts, but they’ve been on defense the whole time. Hansen’s people never gave them a headsup.

  • Iv92588

    This is Seattle, logic and good sense will not prevail.

    • Artthiel

      Any logic and good sense prevail . . . where? Seattle is like every other city when it comes to the private-public sports stadium fight. Hell it took four no votes in SF before the rich guys put the money together to build the ballpark privately. LA still hasn’t figured out fb. Florida can’t do MLB, Vancouver failed at hoops . . .

  • Iv92588

    This is Seattle, logic and good sense will not prevail.

    • Artthiel

      Any logic and good sense prevail . . . where? Seattle is like every other city when it comes to the private-public sports stadium fight. Hell it took four no votes in SF before the rich guys put the money together to build the ballpark privately. LA still hasn’t figured out fb. Florida can’t do MLB, Vancouver failed at hoops . . .

  • http://twitter.com/rossphimister Ross Phimister

    It’s not like Mariners attendance can get much worse.  If they start winning in 2014 or ’15 (when their implied rebuild should hit its stride), the attendance uptick from a competitive team will more than outweigh more competition.  If they keep losing, they don’t deserve any protection from the city or county.

    • Joey Sunseri

      If we were to get both teams, there would only be a few conflicts if the NBA and NHL teams got into the playoffs going into May-early June. 

      • Jamo57

        LA just had the Kings, Lakers, and Clippers in the playoffs in the same season.   All of them play at the same venue, the Staples Center.    They were able to make it work with 3 teams, though with sometimes having 2 events on the same day–afternoon and evening.     With two teams obviously alternating nights would work if the overlap was that tight, but more realistically I think one team might more likely be on the road and the other team at home.

        BTW, I love the reference to ‘all 6 teams making the playoffs’ and the challenges that would pose.    This is Seattle, doesn’t the ‘expert’ have any knowledge of our history????   We don’t make the playoffs.    And when we do we play video hightlights on the jumbo tron for a generation of the team making it out of the first round.  The Seattle sports fan has supported more and received less than any other fan base in the country.

        I think if all 6 teams were to make the playoffs in the same season Harborview and UW Medical better put their coronary units on alert.

        • Artthiel

           Jamo, LA has at least a dozen freeways going in all directions. We have one. Don’t even think to compare Seattle and LA.

          But I can’t argue about the playoff history. But the best-case theory has to be considered.

      • Artthiel

         Joey, what if there were 10 weekday dates a year where surrounding businesses suffer a big daily loss of revenue because customers stayed away? Do you think that might be a significant hurt on a calendar of 220 work days?

    • Artthiel

       Ross, the Mariners should be worried because they’ve allowed the bond between team and fan to dissolve. Takes years to get back, even if they get competitive. It’s the Mariner ownership’s own fault, but they are more worried about potential external threats than real internal ones.

  • http://twitter.com/rossphimister Ross Phimister

    It’s not like Mariners attendance can get much worse.  If they start winning in 2014 or ’15 (when their implied rebuild should hit its stride), the attendance uptick from a competitive team will more than outweigh more competition.  If they keep losing, they don’t deserve any protection from the city or county.

    • Joey Sunseri

      If we were to get both teams, there would only be a few conflicts if the NBA and NHL teams got into the playoffs going into May-early June. 

      • Jamo57

        LA just had the Kings, Lakers, and Clippers in the playoffs in the same season.   All of them play at the same venue, the Staples Center.    They were able to make it work with 3 teams, though with sometimes having 2 events on the same day–afternoon and evening.     With two teams obviously alternating nights would work if the overlap was that tight, but more realistically I think one team might more likely be on the road and the other team at home.

        BTW, I love the reference to ‘all 6 teams making the playoffs’ and the challenges that would pose.    This is Seattle, doesn’t the ‘expert’ have any knowledge of our history????   We don’t make the playoffs.    And when we do we play video hightlights on the jumbo tron for a generation of the team making it out of the first round.  The Seattle sports fan has supported more and received less than any other fan base in the country.

        I think if all 6 teams were to make the playoffs in the same season Harborview and UW Medical better put their coronary units on alert.

        • Artthiel

           Jamo, LA has at least a dozen freeways going in all directions. We have one. Don’t even think to compare Seattle and LA.

          But I can’t argue about the playoff history. But the best-case theory has to be considered.

      • Artthiel

         Joey, what if there were 10 weekday dates a year where surrounding businesses suffer a big daily loss of revenue because customers stayed away? Do you think that might be a significant hurt on a calendar of 220 work days?

    • Artthiel

       Ross, the Mariners should be worried because they’ve allowed the bond between team and fan to dissolve. Takes years to get back, even if they get competitive. It’s the Mariner ownership’s own fault, but they are more worried about potential external threats than real internal ones.

  • notaboomer

    but how does this help steve ballmer get charter schools?

    • Artthiel

       Frankly, I’d like to see him create Windows 9 that comes with a seawall app.

  • notaboomer

    but how does this help steve ballmer get charter schools?

    • Artthiel

       Frankly, I’d like to see him create Windows 9 that comes with a seawall app.

  • Matt

    As mentioned, population should not be the only determinant whether a region can support franchises.  Greater Phoenix, and Detroit for that matter, are larger than the Seattle-Tacoma market, but we have more wealth.  Personal income, or local GDP/capita, are better measurements, or at least should be considered along side population.

    Rough comparables for Seattle might include Phoenix, Minneapolis-St. Paul and Denver.  Sitting between large and middle market, have multiple major league teams, D1 athletics and small but intensely loyal supported stuff like the WNBA, arena football, lacrosse, etc.  The Twin Cities have a lot more Fortune 500 headquarters than the others.  I disagree with Art regarding Denver, as it has CU nearby and CSU a little further, with a good portion of its alums in the area. 

    We’ve already been here.  While times were obviously different and things didn’t go smoothly, between 1977-1983, Seattle supported the Mariners, Seahawks, Sonics and NASL Sounders.  Then, as now, the UW and SU competed at the D1 level.  It may not be easy, but we should look at why we can support the NHL and NBA in the future rather than why not.  Continuous growth of this region (ie. jobs, population, wealth) would certainly help.  And last but not least, let the sports market decide, not uninformed politicians. 

    • Artthiel

       Matt, you’re right, times have changed. Seattle supported, and failed to support, different teams and different times. We lost the Pilots, Sonics and original Sounders. The Mariners and Seahawks remained only after getting publicly funded stadiums. But then 1-695 and other anti-tax initiatives became law, crippling the state’s ability to fund sports stadiums. Chris Hansen’s deal is a new-times response, but no one really knows who will be the sixth ticket in town. But it’s a fair question to ask right now

  • Matt

    As mentioned, population should not be the only determinant whether a region can support franchises.  Greater Phoenix, and Detroit for that matter, are larger than the Seattle-Tacoma market, but we have more wealth.  Personal income, or local GDP/capita, are better measurements, or at least should be considered along side population.

    Rough comparables for Seattle might include Phoenix, Minneapolis-St. Paul and Denver.  Sitting between large and middle market, have multiple major league teams, D1 athletics and small but intensely loyal supported stuff like the WNBA, arena football, lacrosse, etc.  The Twin Cities have a lot more Fortune 500 headquarters than the others.  I disagree with Art regarding Denver, as it has CU nearby and CSU a little further, with a good portion of its alums in the area. 

    We’ve already been here.  While times were obviously different and things didn’t go smoothly, between 1977-1983, Seattle supported the Mariners, Seahawks, Sonics and NASL Sounders.  Then, as now, the UW and SU competed at the D1 level.  It may not be easy, but we should look at why we can support the NHL and NBA in the future rather than why not.  Continuous growth of this region (ie. jobs, population, wealth) would certainly help.  And last but not least, let the sports market decide, not uninformed politicians. 

    • Artthiel

       Matt, you’re right, times have changed. Seattle supported, and failed to support, different teams and different times. We lost the Pilots, Sonics and original Sounders. The Mariners and Seahawks remained only after getting publicly funded stadiums. But then 1-695 and other anti-tax initiatives became law, crippling the state’s ability to fund sports stadiums. Chris Hansen’s deal is a new-times response, but no one really knows who will be the sixth ticket in town. But it’s a fair question to ask right now

  • Tian Biao

    Prince Rupert, B.C.? You’ve got to be kidding me. It’s nearly a thousand miles away. Who are these yahoos at the Port of Seattle? At first I thought they were just trying to leverage a new overpass and solve some traffic issues, but now i’m starting to wonder what planet they live on.

    • Artthiel

       Every West Coast port has advantages and disadvantages, and they’re all in play, and all impacted by the Panama Canal expansion in 2015. The port knows well the threat, but it comes from lots bigger issues than an arena.

  • Tian Biao

    Prince Rupert, B.C.? You’ve got to be kidding me. It’s nearly a thousand miles away. Who are these yahoos at the Port of Seattle? At first I thought they were just trying to leverage a new overpass and solve some traffic issues, but now i’m starting to wonder what planet they live on.

    • Artthiel

       Every West Coast port has advantages and disadvantages, and they’re all in play, and all impacted by the Panama Canal expansion in 2015. The port knows well the threat, but it comes from lots bigger issues than an arena.

  • Kevin

    I personally have no concern over market saturation. Technically, we do have 3 pro teams in Seattle. However, an argument could be made that U.S. soccer isn’t truly “pro” (it’s popular here but elsewhere in the country people don’t really notice soccer at all). And the Mariners are a AAAA baseball team that likely won’t move up to the Major League level any time soon. Thus, Seattle really has one clear-cut professional sports team. I say the more the merrier. I’d be happy to spend a little extra of my money in Seattle to attend a new Sonics game.

    • Artthiel

       Kevin, your subjective evaluations of the teams don’t play a big part in the sales-marketing aspect. What no one can say is how many crossover fans there will be like you in 2017, who can afford multiple sports passions. Some, surely, but enough?

  • Kevin

    I personally have no concern over market saturation. Technically, we do have 3 pro teams in Seattle. However, an argument could be made that U.S. soccer isn’t truly “pro” (it’s popular here but elsewhere in the country people don’t really notice soccer at all). And the Mariners are a AAAA baseball team that likely won’t move up to the Major League level any time soon. Thus, Seattle really has one clear-cut professional sports team. I say the more the merrier. I’d be happy to spend a little extra of my money in Seattle to attend a new Sonics game.

    • Artthiel

       Kevin, your subjective evaluations of the teams don’t play a big part in the sales-marketing aspect. What no one can say is how many crossover fans there will be like you in 2017, who can afford multiple sports passions. Some, surely, but enough?

  • LeonRussell

    The “market saturation” issue was studied by professionals in a 200 6 report paid for by the city, called the KeyArena Subcommittee Final Reports and Recommendations.   It did look at income in all NBA cities and also adjusted for cost-of-living, etc.  The report called this “effective buying income.”  Denver ranked 4th and Seattle 12th in “effective buying income.”  So, Seattle was considered well behind Denver in money available for entertainment.

    But, this reports main finding was that the Seattle area was “overbuilt” with luxury suites back in 2006.  That was before the Sounders joined the MLS and started drawing 38,000 per game, and started marketing all the luxury suites at CenturyLink Field separately from the Seahawks.  It was also before new Husky Stadium which will have 25 true luxury suites.  It was also without any NHL team trying to lease all the luxury suites in the new arena separately from the NBA team trying to lease all the suites in the new arena for all its games.

    In 2006, there were only about 220 or so luxury suites being marketed by the Sonics, Mariners and Seahawks combined.  With the Sounders trying to lease all 90 suites at CenturyLink Field now, new Husdy Stadium with 25 suites, and a new arena with about 90 suites leased by two different teams, that would amount to about 455 luxury suites for lease in our area, or twice as many as back in 2006, when the report said our area was “overbuilt” with luxury suites.  The Sonics at the time the report came out were only able to lease about 45% of the suites at KeyArena.

    So, if the Sonics could only lease 45 % of the 50 or so suites at KeyArena, how are they expecting to least 90 or so suites in a new arena, with the NHL team also trying to lease all those suites, and the Sounders trying to lease 90 suites at their stadium and the Huskies trying to lease the 25 suites in their new stadium?

    And the same thing holds true with club seats and in-stadium advertising.  Where is all the money to support all these stadiums and teams going to come from?

    And why isn’t this being studied in depth as it was back in 2006?

    • http://profile.yahoo.com/FYV2WPA4AWNEKTWFD34L4THJW4 yahoo-FYV2WPA4AWNEKTWFD34L4THJW4

      Leon just admit that you hate sports and go back to you World of Warcraft.

      • RadioGuy

        Way to refute Leon with the WoW line…why waste time building your own argument (and perhaps swaying people on the fence about the arena) when you can throw out some snappy one-liner that says nothing about the issue?

    • Artthiel

       The “overbuilt” characterization was a fair assessment then. What it will be in five years is anyone’s guess. Given the tech wealth in the hands of a growing minority in 2012, lots more suites could be bought by individuals and less by corporations, law offices, hospitals, etc..

      I wouldn’t worry about NBA/NHL suite rivalry. The ownerships will work in tandem, because to do otherwise risks failure.

      Hansen has done his study, but the risk to the public is much less here than on the private investors. And the deal is the reverse of any previous one in Seattle. Hansen put his stake in the ground with cash and asked questions later. There isn’t time before the MOU vote, but there’s no risk to the public until a team has been poached. Could be 5-7 years.

  • LeonRussell

    The “market saturation” issue was studied by professionals in a 200 6 report paid for by the city, called the KeyArena Subcommittee Final Reports and Recommendations.   It did look at income in all NBA cities and also adjusted for cost-of-living, etc.  The report called this “effective buying income.”  Denver ranked 4th and Seattle 12th in “effective buying income.”  So, Seattle was considered well behind Denver in money available for entertainment.

    But, this reports main finding was that the Seattle area was “overbuilt” with luxury suites back in 2006.  That was before the Sounders joined the MLS and started drawing 38,000 per game, and started marketing all the luxury suites at CenturyLink Field separately from the Seahawks.  It was also before new Husky Stadium which will have 25 true luxury suites.  It was also without any NHL team trying to lease all the luxury suites in the new arena separately from the NBA team trying to lease all the suites in the new arena for all its games.

    In 2006, there were only about 220 or so luxury suites being marketed by the Sonics, Mariners and Seahawks combined.  With the Sounders trying to lease all 90 suites at CenturyLink Field now, new Husdy Stadium with 25 suites, and a new arena with about 90 suites leased by two different teams, that would amount to about 455 luxury suites for lease in our area, or twice as many as back in 2006, when the report said our area was “overbuilt” with luxury suites.  The Sonics at the time the report came out were only able to lease about 45% of the suites at KeyArena.

    So, if the Sonics could only lease 45 % of the 50 or so suites at KeyArena, how are they expecting to least 90 or so suites in a new arena, with the NHL team also trying to lease all those suites, and the Sounders trying to lease 90 suites at their stadium and the Huskies trying to lease the 25 suites in their new stadium?

    And the same thing holds true with club seats and in-stadium advertising.  Where is all the money to support all these stadiums and teams going to come from?

    And why isn’t this being studied in depth as it was back in 2006?

    • http://profile.yahoo.com/FYV2WPA4AWNEKTWFD34L4THJW4 yahoo-FYV2WPA4AWNEKTWFD34L4THJW4

      Leon just admit that you hate sports and go back to you World of Warcraft.

      • RadioGuy

        Way to refute Leon with the WoW line…why waste time building your own argument (and perhaps swaying people on the fence about the arena) when you can throw out some snappy one-liner that says nothing about the issue?

    • Artthiel

       The “overbuilt” characterization was a fair assessment then. What it will be in five years is anyone’s guess. Given the tech wealth in the hands of a growing minority in 2012, lots more suites could be bought by individuals and less by corporations, law offices, hospitals, etc..

      I wouldn’t worry about NBA/NHL suite rivalry. The ownerships will work in tandem, because to do otherwise risks failure.

      Hansen has done his study, but the risk to the public is much less here than on the private investors. And the deal is the reverse of any previous one in Seattle. Hansen put his stake in the ground with cash and asked questions later. There isn’t time before the MOU vote, but there’s no risk to the public until a team has been poached. Could be 5-7 years.

  • Bo Peltier!

    FREE LEONARD ‘BO’ PELTIER! NATIVE AMERICAN INDIANS AGAINST THE ARENA! Peace 2U, Bobblehead fanz. PS. What would Tonto do, Kemosabe?

  • Bo Peltier!

    FREE LEONARD ‘BO’ PELTIER! NATIVE AMERICAN INDIANS AGAINST THE ARENA! Peace 2U, Bobblehead fanz. PS. What would Tonto do, Kemosabe?