BY Art Thiel 07:20PM 03/18/2014

Council: Arena deal won’t be re-done for hockey

City Council president Tim Burgess tells Sportspress NW that allowing an NHL team ahead of an NBA team won’t happen, because the financial risk is much greater.

Any Seattle arena won’t be welcoming an NHL team first. / 360 Architects

Despite comments from NHL Commissioner Gary Bettman that three groups expressing interest in owning an NHL franchise in Seattle have contacted him, there is little likelihood that the agreement between Chris Hansen and the city and county will be changed to accommodate hockey ahead of an NBA team.

Responding to an email from Sportspress NW, City Council president Tim Burgess wrote Tuesday that the memorandum of understanding is unlikely to be changed because the financial risk is too high.

“I don’t believe the MOU could be modified to allow an NHL team to go first,” Burgess wrote. “During our initial consideration of the MOU, it was quite clear that the financial risk to the city increased dramatically with the NHL-first scenario.”

A source within the group helping Hansen, the Seattle native who has proposed a $500 million basketball/hockey arena in SoDo, said Hansen has given no consideration to asking the city to change.

“Chris has not proposed changing anything,” he said. “He’s always said he’s a basketball guy.”

Speculation shifted to the NHL after Hansen’s bid to relocate the NBA Kings from Sacramento to Seattle was shot down in May by a 22-8 vote of owners. Later in the summer, the NHL Phoenix Coyotes threatened to leave if politicians in suburban Glendale didn’t give in to their demands for a subsidy. The team’s prospective owners went so far as to inquire about dates to use KeyArena for two or three seasons until Hansen could build an arena, but the subsidy demand won a close vote.

The increase in speculation about a Seattle expansion franchise was fueled by Bettman and NHL owners speaking positively about a team in the robust Seattle marketplace, but wasn’t grounded in the reality of changing Seattle politics.

Burgess last summer led the council’s successful modification of the MOU first struck by former mayor Mike McGinn with Hansen. Burgess helped negotiate Hansen’s assumption of greater risk while reducing exposure for the public contribution, which was primarily the borrowing of $200 million at rates far cheaper than those available to commercial developers.

The calculation of payback was based on assumptions from revenues of a league with a 41-year history in Seattle and a more robust national profile that included $1 billion in national TV contracts. The NHL has no modern history in Seattle, nor does it have a lucrative TV deal in the U.S.

Even though Hansen was willing to take on more financial risk than any previous owner in Seattle sports, opponents questioned whether the city’s borrowing capacity should take on any risk associated with a non-essential investment. Other opponents have objected to the location in SoDo, next to football and baseball stadiums already crowding the Port of Seattle’s congested transportation on the waterfront.

An environmental impact statement mandated by state law is under way comparing the SoDo site with two at the Seattle Center. The draft version was released in August for public comment. In January, the city’s department of planning and development issued a request for more information from Hansen’s ArenaCo organization largely about transportation and parking issues.

Hansen’s group has yet to respond, pushing back the release of the final EIS from sometime in March to sometime in September. After that, opponents have indicated their willingness to challenge in court a document whose draft version they deemed inadequate.

Since the EIS review has begun, the NBA saw the retirement of commissioner David Stern, long a Seattle antagonist. But his successor, Adam Silver, indicated he had little interest in the foreseeable future in expansion, leaving only relocation as a possibility. The only team possibly vulnerable is the Bucks in Milwaukee, where the arena is old and small.

But Hansen has expressed his reluctance to go through any battle similar to the experience with Sacramento, which became a bidding war for a free-agent franchise unprecedented in American sports. And the NBA is loathe to relocate a franchise, particularly after going through a lockout to obtain a new collective bargaining agreement that may allow every team to at least break-even in the next few years.

The city’s strong reluctance to re-open the MOU doesn’t mean it will never happen, because things change. Hansen and his partner, retired Microsoft CEO Steve Ballmer, could make an offer to change the MOU to reduce again the public risk.

But for now, it seems that there is no sentiment on the council to do anything but wait on Hansen’s ability to deliver an NBA team, which would trigger public participation — if the SoDo proposal survives inevitable objections to the final EIS.


YourThoughts

  • Jamo57

    Well, I guess I will just continue to spend my hockey $$$ in Everett or Vancouver BC and my baseball $$$ in Los Angeles. Too bad. Seattle would be so much easier and I would love to support the Seattle and King County economies, but I have to assume they’re just not interested.

    • art thiel

      Easy solution is to finance the arena 100 percent privately. Most voters in Seattle don’t want to spend tax $ on sports stadiums.

      • Jim LS

        Given the $30 million Hansen lost to the Maloofs, the $50 plus million (or more) he was willing to overpay for the Kings, the $100,000 he threw into the anti-Sacramento arena campaign, and the amount of time and lawyer/legal expenses he incurred trying to push the MOU through – you have to wonder if it wouldn’t have been cheaper to just fork out the last $200 mil. Is there any traction in Bellevue for the NHL – or is that dead/never was?

  • Aaron Wilson

    Guess not getting my hopes up was warranted. Thanks council.

  • Billy bob

    What a joke Seattle has become.

    • Jeremy Kraft

      Nobody gives a shit about hockey. It’s the NHL that has become a joke

  • Tom

    What a joke. There’s going to be A LOT of empty warehouses in SODO in 5 years where Chris Hansen owns his land unless something changes. Build it in Bellevue.

    • art thiel

      Dunno about being a joke. As I-91 proved in 2007, a big majority of Seattle citizens don’t want to subsidize pro sports and their arenas. Seattle politicians know any public participation in such a project will produce much more criticism/hostility than pissing off sports fans.

      • Owen Bunstine Sr.

        Art, your reply is misleading. Under the MOU how much “public funding” is being used to build a new arena? How much more taxes will the average family pay for a new arena?

        • art thiel

          As I wrote, the $200M is public participation, not an increase in taxes, which I and others have pointed out steadily. It is using the municipality’s ability to borrow at cheaper rates. Opponents argue that the borrowing capacity could be used for public projects they deem more worthwhile. Opponents draw a bright line against any public participation in the project.

          In creating this funding plan, Hansen understood that it would never work if he asked for actual tax dollars. So he created what he and others consider the lightest touch on taxpayers. But as long as there is any public contribution, he opens the project to attacks from from the zero-tax-funds crowd.

  • Will

    Art, could you expand on, “An environmental impact statement mandated by state law …”

    • art thiel

      The EIS is a standard requirement for projects of this size and scope that ask for public participation. It’d been part of state law for many years. The EIS is supposed to advise electeds on the pros and cons of the designated site relative to other locations. By itself, the document has no authority, but is the primary tool that councils use to approve or deny the application.

  • Mike

    A financial risk?! Um fans have wanted an NHL team for years now and they are basically saying that an NHL team wont bring in money?! So fucking stupid!!!!

    • art thiel

      The question is whether NHL will bring enough money, and no one can prove it will be sufficient to make the $200M less risky to politicians. Some fans say soccer attendance wasn’t proven, either, but Sounders owners never asked for public money, and were given the Clink rent-free by Paul Allen in exchange for equity. Risk was all on the private side.

    • bluetwinbill

      See Phoenix

  • jafabian

    So what’s Hansen going to do with the land he acquired if the NBA never happens? IMO, they’ll leave him hanging for years in order to get cities like Milwaukee and Salt Lake to build a new arena. So if the NBA keeps being wishy washy and the NHL has a standing offer of millions he’ll still say no? Not good business sense to me.

    Were the NHL to come here, and right now its all speculation, IMO the support would be similar to what the Sounders get. If the NBA returned the support would quickly wane if the win-loss records followed the original Sonics. Fans would go “we’ve seen this before.” Can’t say that if the NHL was here.

    I am expecting this to be a long, drawn out process though. And no guarantee that it will happen.

    • art thiel

      Hansen’s land ownership is of no consequence. He can buy more or sell all with little impact on his finances.

      Your guess about support is as good as anyone’s. But no politicians dedicate public money to a guess.

  • j1012

    I guess it is up to Ballmer to reduce the risk to the city… maybe that is why he emerged as a potential NHL owner.

    • art thiel

      That is a solution. I have no idea whether that will happen.

  • Matt

    This sounds like a fair amount of posturing folks, which is not necessarily a bad thing. Hansen intentionally slowing down the EIS. The Council making a statement NOW about no hockey first when that’s been going on for months. They both know something is up (probably the NHL is ready to go) and now it’s time to come back to the table. Hansen wants his arena. The City wants something more now that the NBA will not be first. Roll up your sleeves for renegotiation time!

    • jafabian

      I believe it when I see it but I do agree the Council needs to be more flexible. The NBA thinks it’s in the drivers seat on the arena deal and they should instead be trying to mend fences. Because the Sounders more than replaced them and if the NHL puts a team here before the NBA that leaves very little in Seattle’s sport dollars for the NBA.

      • art thiel

        The NBA isn’t worried about Seattle one way or another. Owners would like to be here someday, but don’t feel a need to lift a finger to help.

    • art thiel

      Possible about posturing, but the city council and new mayor are not eager to fight for a luxury item when larger issues loom. With McGinn’s exit, I don’t see any politician wanting to risk political capital for a project that hasn’t even cleared the EIS hurdle.

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  • RadioGuy

    Somehow, I don’t envision Kshana Sawant sitting quietly if the MOU is renegotiated because she’s not quiet about anything. If anything, she’d probably try to kill it altogether.

    As for Hansen owning that property, does anyone think its value is going to decline anytime soon? Even if the arena is never built (and I’m beginning to wonder), he could probably sell the property for a profit tomorrow. If anyone is going to come out ahead in all of this no matter what happens, it’s Chris Hansen.

    • art thiel

      You’re right that council members don’t want to advocate a benefit to private investors while debating a $15 wage minimum.

      And yes, Hansen can resell the property, and gain or loss for a man of his wealth is negligible.

      • RadioGuy

        Didn’t even consider your first point. Well taken, and I’d even agree (quietly) with Kshana on that one.

    • SUDS

      She’s got extremely strong supporters in O’Brien and Licata on the council. That’s not good news for the long term viability of the MOU.

  • NotAGuest

    Look no further than the Coyotes.

    Don’t worry Seattle, this franchise will be coming to a (Key) arena near you, sooner rather than later.

    Who will blink first – the City of Glendale declaring bankruptcy or IceArizona invoking their $50 million in losses/5-year outclause?

    • art thiel

      Glendale struck a deal with the devil, but did so believing that losing the arena’s anchor tenant would create a worse civic financial disaster. I’m not sure who blinks first, but I do know that five years is later, not sooner.

  • Bob Edwards

    Pretty impressed that Art actually answers these comments – he doesn’t have to and his tone is pretty civil despite some of the vitriol. (Newsflash – fans don’t like hearing bad news.)
    Seems pretty obvious to me what is going on here – Ballmer either has to step and assume the necessary risk (more $$$, maybe not ALL the $$$ but certainly more than the existing NBA-type city share) or this thing is dead for the time being with the NHL.
    My speculation – if Ballmer doesn’t step up, this arena will not get built and this whole thing comes crashing down. Much easier for the NBA to look our way in a year or two if the arena is being built. Come on Ballmer, what else would you want to do with all those billions?

    • art thiel

      Time permitting, Bob, I think my attempts to be an impartial explainer help advance the discussion. Fans are fans because they are passionate, not because they are public policy experts. They’re entitled to their anger and disappointment. I also think they’re entitled to reasoned response, insofar as any of us knows what the hell that is.

      Regarding the private-side offer, this deal does offer more protection for the public side than we’ve seen in this market, and it’s among the best anywhere. I know I enjoy spending Ballmer’s money as much as you do, and it would be great if he agreed to a 100 percent privately funded arena. I also get why he would look at the difference between borrowing at four percent versus eight percent over 30 years is a much better deal for him, and sees it as an infinitesimal risk to the city.

  • 1coolguy

    I agree with Burgess: The city backing an arena where the primary (and only, for the foreseeable future) tenant is NHL hockey IS a higher risk that should not be undertaken by the city.
    Hockey has no history of consequence in Seattle and does not have much of a media contract. There are a number of NHL teams with financial problems.
    This is a case where the private sector needs to step up and do it: If they don’t, it’s because they also realize the risk is too great.

    • art thiel

      The MOU is structured with much more private-side risk than we’ve seen in Seattle. But there is always some public risk, and council/staff believe the risk increases with NHL first. So they are neither crazy nor leaderless, but cautious, knowing how averse the Seattle taxpayers are to what appears to be another public subsidy for a pro sports team(s).

  • HARTFORD WHALER HOCKEY

    I have to laugh at all the people who told me Seattle was a shoe in for the NHL over Hartford. The short answer: NOT! Who the heck knows where the NHL is going, right now in the sun belt they are going nowhere. Those teams need to move to markets where hockey can actually grow.

  • Jared S.

    Disappointing to hear, but I’m not sure why people are blowing up at the council over this. If the numbers don’t work for NHL-only, they don’t work. And if Hansen hasn’t even asked about altering the deal, it’s a moot point. You’d have thought by the popular reaction that they’re pulling the plug on the whole agreement.

    • art thiel

      Fans typically aren’t about facts, they’re about passion. And they think there is some kind of workaround that will get the NHL first. But you said it well — if the numbers, don’t work, they don’t work.

  • Cameric

    On one hand you have the sports fans who are focused on getting hockey in Seattle, full speed ahead and damn the torpedoes. On the other hand you have the City Council that is focused solely on the nuts and bolts of the Memorandum of Understanding and don’t really care about hockey.

    Few seem to be looking at the big picture, that one could do both with a little flexibility and creativity. A strong executive who cared (calling Mr. Mayor…) could be the ambassador to get it done.

    • art thiel

      The council doesn’t need to care about hockey. They need to care about whether $200M of public credit is at risk of not being repaid. Their risk tolerance is low, which is probably smart, but won’t help the arena get built.

    • RadioGuy

      I wouldn’t hang too much hope on Ed Murray. Mike McGinn was very much an arena supporter and where’d that get him last November? Meanwhile, Nick Licata, who supported I-91 in 2007 and voted against the MOU in 2012, is still on the City Council. While those in favor of the arena have been nothing if not vocal about it, there haven’t enough of them to determine any real consequence one way or another for politicians involved and that’s the real bottom line here. Pols rarely move forward on anything unless they feel they have to.

  • RunningRoy

    I still marvel how stunned people around here continue to view the Sounders juggernaut of support. Not only is there a 40-year lineage of the team at various levels, but much more importantly, a couple generations and tens (perhaps hundreds) of thousands of locals play the game, even at advanced ages. There is passion for the sport in large numbers.

    Hockey, on the other hand, has a tiny participation level in the NW. Virtually all sports fans and weekend warriors here only use ice in their favorite beverages. Yes, there are decent followings of the T-Birds/Silvertips/Winterhawks. But I have a real hard time comprehending an NHL fan base at anywhere near the same critical mass as the Sounders. What guarantees Seattle does any better than Phoenix?

    • art thiel

      Hockey folk here will tell you that the market has the largest senior-hockey league participation in North America. Haven’t checked that out. But what I want to check out is the expressions on those people’s faces when they see the ticket price scale in Seattle’s potential NHL arena.

      • Hockeypuck

        Art, RunningBoy – there is a following for hockey in Seattle, Roughly 1300 players in the GSHL (myself included). You mention that perhaps “hundreds of thousands” of locals play soccer. That is an exaggeration, but fair enough. It’s relatively easy to participate in soccer – participation is cheap, the sport is ridiculously easy to play as a newcomer, and the fields are plentiful. Hockey costs $600 per year to play, the initial investment in equipment runs about $1000 and to play – even as a novice – requires probably 12 months of SERIOUS training. There are a half dozen (or so) rinks in the Seattle – which consigns many teams to 10-11 pm games on weeknights. Subject adorable little Skippy and Sally to such conditions and they’d turn Goth overnight. Hockey and soccer are polar opposites in terms of their dynamic. Hockey incredible difficult to participate and play as a youth, but exciting and dynamic to watch as an adult. Soccer – easy to play as a “lad” but suffocatingly boring to watch as an adult.
        With regards to “passion” for soccer in this region – give me a break. This pubescent fascination with the “beautiful game” exists in Seattle and Portland, and literally no where else in the country. There’s a reason the league has an smothering salary cap – it’s to ensure the league doesn’t shrink to two teams. The other 90% play before 15,000 for there once a week games in glorified high school stadiums.
        The real proof of the pudding is franchise values. Art – if the fairy-god mother/galactic commissioner of all sports offered you a franchise free of charge – Boston Bruins or New England Revolution, Chicago Blackhawks or Chicago Fire – which would you choose? Not fair to choose two of the NHL’s original six? Okay lets choose warmer weather metropolises. San Jose Sharks or San Jose Earthquakes? Anaheim Ducks/Los Angeles Kings vs. LA Galaxy? We all know the answer to the above. Our smug little metrosexuals in their fashionable green scarfs are simply to oblivious to see this.

  • Hockeypuck

    I’ve been a hockey fan since the Seattle Totems days. Dad was (tangentially) involved with the team and we attended 40 games a year. As Art stated, I’m about passion, not facts. I simply don’t understand why anyone would invest in a product as putrid as the NBA. Come January half (or slightly more) of the teams actively attempt to tank their seasons to gain a favorable draft pick. Stir and repeat next season. Having said that, I fully understand that we live in an entertainment, icon-driven culture. NBA sells Kobe, Lebron, Carmelo, and the sycophantic hangers-on slobber at their sight. NHL cannot compete with our (infantile) star-driven, immediate-gratification culture the NBA appeals to. Why wait ten (10) minutes for a score when the NBA will deliver your polyester thrill in 24 seconds!! Conventional wisdom says that the NHL will not come, unless the NBA and our prerequisite glitter-box precedes them. The truth is, if the NBA comes first there will never be an NHL team in Seattle. It requires certain amount of dignity and maturity to develop an affinity for a counter-culture sport like hockey. With a competing NBA team there are not enough aficionados open to supporting this curious new enterprise. The only chance a for an NHL team would be if someone with large dollars would buy a team, work out something with the City for a (relatively) low cost, but legitimate refurbishment of Key Arena – with the understanding that the facility would NEVER be used for basketball. Pull a reverse Barry Ackerley, if you will. BTW, next time you’re in hell, say hello to Barry for me. Geez, maybe even Nick Licata could get on board for this – especially given Seattle’s obsession with civic landmarks.
    Sadly, the above scenario will never play out. After enduring a generation in purgatory, Ed Murray, Seattle City Council, Port of Seattle, Seattle Mariners, Chris Hansen, Ron Silver (aka David Stern’s sock puppet) will FINALLY figure out a way to bring the 33rd best team in the NBA to Seattle. Oh GLORIOUS DAY!. Until will grow bored and complacent at the Tues-Thurs-Sat frivolity. Read Decline and Fall of the Roman Empire if you want to see how this plays out. Meanwhile, I’ll be at Showare watching the Thunderbirds play. Center ice tickets, $24… Goodbye.

    • art thiel

      Well, then, we take your name off the list for the Vin Baker appreciation dinner.

  • Jeff Shope

    Don’t know why Hansen and Balmer would even bother with Seattle it’s too full anti sports liberal/socialists. Hawk fans don’t live in Seattle. Go to Bellevue or somewhere not no nuts

    • Ryan L

      Hawks fan here, been living in Seattle my entire life.