BY Art Thiel 06:12PM 10/25/2016

Thiel: Hansen offers to fund privately Sodo arena

In a letter to the city and county, Chris Hansen offered to fund privately his proposed Sodo arena. All he seeks from the City Council is the street vacation, and he’ll kick in for the Lander Street bridge.

Chris Hansen is putting his Sodo arena project all on his nickel.

Chris Hansen agreed Tuesday to do what liberal Seattle has wanted him to do for five years: Fund privately his $500 million proposed basketball/hockey arena in Sodo that he hopes will return the NBA, eight years gone, to his hometown.

To further charm the City Council majority that spurned the project in May, the San Francisco hedge fund manager has agreed to kick in perhaps as much as $20 million to the proposed Lander Street Bridge project, long sought by the Port of Seattle, the arena’s principal opponent.

Should the council, which by a 5-4 vote rejected the plan’s trigger event, the vacation of two blocks of Occidental Street south of Safeco Field, consider and then approve the new deal, all he would need is an NBA team.

Not exactly a trifle.

But if we have learned nothing else throughout this contretemps, we have learned that things change. But nothing happens unless Hansen can assure the NBA that an arena will be built.

Via letter to Seattle mayor Ed Murray and King County Executive Dow Constantine, Hansen seeks to petition the Council for a re-hearing on the project, which originally sought a public contribution of up to $200 million, via the city’s capacity to borrow money at cheaper rates, to help fund construction.

“We’re trying to control the things we can control,” said Wally Walker, a former Sonics player and team president who is a partner with Hansen and co-signed the letter.  “Nothing can happen to acquire a team until the arena is approved. Somehow that was lost (in the council vote) when it was said that a team must come first. So we’re going full speed ahead with what we can control.”

The new proposal would end the current memorandum of understanding signed by the parties in 2012, and replace it with a new one. No term was mentioned in the letter, but what Hansen most needs now is time to secure a team. The original MOU expires in 13 months.

Since franchise relocation is increasingly unlikely — nearly all NBA teams are making money, or nearing break-even, in current buildings — Hansen’s hope is based on expansion, which the NBA has steadfastly maintained was not on the horizon.

However, the NBA and the players union have been quietly negotiating a new collective bargaining agreement. Both sides want the deal,  expected to include significant new revenues from broadcast and digital media, concluded by a Dec. 15 deadline that would allow for an opt-out of the current CBA by either party.

When the deal is done, team owners will have firm revenue and expense numbers over the length of the deal that will tell them whether the 30-team revenue pie is large enough to cut in one or two more teams.

Hansen wants to be ready with an approved arena deal in hand.

After the council’s narrow rejection, Hansen insisted the project was not dead. Walker said Hansen re-assessed the arena construction and operations budget and concluded that revenue projections for the Seattle market, which he once deemed too small to make an all-private building work, were now sufficient to avoid going through the briar patch of Seattle resentment of public subsidy for a private enterprise.

From Hansen’s letter:

We have concluded that a changed economic climate makes possible the private financing of the arena. For that reason, and to address concerns expressed by city council members, we would consider revising the street vacation petition to eliminate public financing of the arena.

In such a case the MOU would be terminated and the rights and obligations of the parties under the MOU would end. The City and County would recoup the $200 million in debt capacity, and tax revenue streams generated by the arena would cease to be encumbered for arena debt service.

For our part, we have very few requests to make this possible:

  • Approval of the street vacation
  • Granting of a waiver of the City’s admissions tax for the arena, just as similar waivers have been granted for the other sports venues
  • Adjustment of the City’s B&O tax rate for revenue generated out-of-town. We have identified other traffic and freight mobility improvements in SODO to which we will direct contributions. Further, we will agree, following street vacation approval, to commit the future payment of compensation for the vacated street to the City’s financing package for the Lander Street Overpass.

The Lander reference is for a project that would resolve a long-lamented choke point for trucks leaving the port. In July, the project secured $45 million in federal funding, bringing to $100 million the amount raised for the $140 million project that would take vehicle and pedestrian traffic up over nine sets of rail tracks, similar to the Edgar Martinez Drive flyover next to Safeco.

Hansen proposes to commit to Lander the market value purchase of the street, estimated in 2015 to be between $18 million to $20 million, to the bridge. The maneuver could exert pressure on the port to end its objection to the arena location.

Several council members cited sympathy with the port’s argument about potential job loss as a principal reason to vote no. But the job-loss issue also was an easier way to get out from under the subject, rather than to take on the public-financing issue that would inevitably involve litigation against the city for agreeing to the MOU.

Seattle environmental attorney Peter Goldman, who has led the fight against the arena location on behalf of the longshore union, said that Hansen’s new offer changes things, but that public financing wasn’t the issue before the council in May.

“It’s a new ballgame,” he said, speaking as a citizen and not as a union representative.  “I still think the opposition is about location. That’s what the five council members said who voted no. They wanted to preserve middle-class wages and an industrial area. Did they not mean that?

“I also think the project’s EIS (environmental impact statement) could be challenged as inadequate for not giving consideration to a number of factors. I’m not saying it will be challenged, but it could. And if Hansen gets council approval and gets a new MOU, it likely would be the death knell for KeyArena. Is that what the city wants?”

Until the letter, Hansen’s only public statement since the vote was a post on his arena website saying his efforts were not done. Recently he and partners completed purchases of two parcels, including one that was part of his original Sodo plan, bringing his total Sodo property investment to $123 million, considerably more than the properties’ assessed value.

Making the project private has been in the public discussion for months, including a comment from council member Tim Burgess, who voted for the original project in May. He said in September that an all-private project with would be “worth considering.”

Tuesday evening, Port Commission president John Creighton sent a letter to the mayor and council reiterating its opposition to the arena location.

“During the Council street vacation debate, council members cited concerns over traffic, jobs and economic justice, noting that you can build an arena anywhere, but you cannot build a natural deep-water port,” Creighton wrote. “Seattle’s working waterfront continues to lift tens of thousands of families into the middle class. It is the City’s responsibility to protect industrial lands like these through the Growth Management Act.”

But Constantine, for one, cheered the development.

“Chris Hansen today demonstrated his continued commitment to building an arena, and to take advantage of an improving economy,” he said in a statement. “His efforts will strengthen our ability to compete for an NBA team. We won’t stop until we bring the Sonics home.”

By removing his hand from the public till, did Hansen do  enough to swing one vote on the council? And if it does, will anyone at the NBA besides Portland Trail Blazers owner and Microsoft co-founder Paul Allen care?

Once believed dead after five years, the arena drama is just now coming to life.

This story also appeared in Crosscut.com


YourThoughts

  • soundersfan84

    I saw this coming.

    Art, now that Hansen is offering to do sodo arena 100% private, how does that change in terms of a NHL group showing up with $$$ and interesting in getting it build for a NHL team while hansen waits for a NBA team. Its still under no guarantees that the NBA will expand anytime soon.

    • art thiel

      All privately financed makes it less attractive to a hockey owner. They’ll think Hansen is taking too great a risk to be his equity partner in arena construction.

      If you saw this coming, I’m sure you’re thanking me for writing the column about it last month. :)

      • soundersfan84

        I had that feeling for several months prior to your column. I figure if there was any way hansen was going to have a chance at getting a no and flip it to a yes. The arena had to be 100% privately funded.

      • emmakaye

        What about the NBA owners preference to have a least some – the more the better – public money when building a new stadium? Won’t all private money be a black mark as far as the NBA is concerned?

  • MarkS

    “death knell for KeyArena. Is that what the city wants?”

    Goldman you trustafarian idiot, Hansen was offering money to repurpose the Key Arena in the original proposal. Why not lament Sick’s Stadium while you’re at it?

    • art thiel

      Goldman wants the AECOM report that says KeyArena can be retrofitted to accommodate hockey/hoops to get a full vetting. Hansen proposed up to $7M in upgrades for a two-year temp stay. Based on what I know, neither was much of a solution for a building that has passed its time as a sports/major concert venue.

  • Gary

    “Oh Boy” the circus is back in town!!!!………….Wally Walker?…….Really?
    I guess every circus needs a clown.

    • art thiel

      John Kerry was Swift-boated. Do you propose to make Walker Swift-playered?

      • Gary

        Touché! Mr. Thiel, Touché
        At least he provides good material.
        .

  • MrPrimeMinister

    I happen to believe that the most effective predictor of what someone will do in the future, is what he has done in the past. Seattle, watch out, don’t let the bright lights and confetti affect your judgment. This is a con.

    • art thiel

      If that were true, any no answer would never turn into a yes. Think of all the single men that would make . . .

      • MrPrimeMinister

        Hanson is on record, consistently, insistently, and adamant, that his project numbers did not play out without that $200 million of public money. This has been his position for YEARS. Now come to find, awe shucks, wait a minute, oops, he was wrong, it actually does work out. Art, you actually buying that nonsense?

        • Pixdawg13

          And of course there’s obviously no way in hell that the economic picture of the region could possibly change over the span of 4-5-6 years, right? Oh. Wait–you’re just a long-retired thoroughbred race-horse from Hastings Park; what could you know?

          • MrPrimeMinister

            I can appreciate the horse reference, there being too few racing fans in these parts. But, it’s not about me, its about a guy with a checkered past trying to weasel public money.

        • Sonics79

          It’s a good time to be in the hedge fund business, with the stock market at record highs. He’s made a lot of money since the MOU was first written, and alludes to that in his letter to the city when he talks about just coming out the recession.

  • Topcatone

    Great article Art. The Port is so so selfish. Think of the city, not just yourselves. Hansen already owns the land, so it is not going to be “industrial” unless he chooses to make it so. It is not THAT much land, and puts all the arenas together, which is JUST what you want to make mass transportation the main way of getting there. It is on bus line, walk from ferries, light rail, main rail. No city in the USA has ever had such a terrific offer that Hansen is putting up. A Gift Horse indeed, which will create hundreds of construction jobs for a couple of years, and then hundreds of other service jobs after that. Hansen is bending over backwards and seems to me that he will work with the port to solve any truck movement issues, but the Port is stuck on NO. First we have the selfish union which crushed Washington’s economy with the strike (causing the loss of many many jobs as businesses went under), and now the stubborn Port Management. Vote them all out.

    • art thiel

      The port is fighting a defensive battle on multiple fronts for survival. The irony is that none of the businesses occupying the land Hansen owns has a marine/industrial character that is improved by proximity to the port. Unless one counts the strip club.

      • Topcatone

        Yes, agree. The strike was probably a huge blow. I know if I ran an export business and had been badly hurt by the strike, I’d be looking at every possible way to avoid using the port in the future. The unions are SO stuck on never giving an inch, resisting the reality of globalization, technical improvements to their operation, etc., to remain competitive. They are slowly killing themselves, rather than working as partners with the Port and the City. Sad. But, back to the arena! I want NHL!

  • Tonic99

    I’m still quite concerned, as a Sonics arena supporter, this won’t quell the Seattle Council concerns and interests. The Port arguments about loss of jobs, however baseless they might be, still exist and I would figure the Council still agrees. Another thing is I think the Council has a preferred end-game in mind and this won’t conform with it. Again, however unrealistic, they want the Key Arena to work or for the team to be located outside of downtown (Tukwila, Bellevue, for example). And, given they are the progressive Council they are, this Council wants a piece of the monetary action. They want some control over how the building is constructed and where, public spaces, safeguards in place for keeping a team here long-term, and a distinct revenue stream like rent paid. I would think a lot that goes away under a privately funded construction.

    I realize these obstacles kind of overlap and some don’t make sense, I’m just trying to go in the Council’s head based on what I read after the May vote. On the edge of my seat once again. Please tell me I’m way off Art. And, can we get some Wikileaks on what the Council might be saying about this right now?

  • Sonics79

    The Port’s argument is ridiculous (and so is Goldman). Can someone explain to him that, on weeknights, the arena gets used in the evening, hours after the port is shut down for the day? The two operate on opposite schedules. Jobs are not “going to be lost”.
    Ironically, this deal is worse for the city than the prior one. Hansen was going to give the arena to the city after the $200M was recovered, now he’s giving them the finger, forcing their hand while keeping it all for himself. Well played.
    Key Arena can be downsized to an intimate 7,000 seat concert venue and exhibition space quite nicely. It’d be used more than it is now if they did that.

    • LarryLurex70

      I’d actually like to see the land where it sits repurposed as a soccer-specific stadium for the Sounders, ‘though Allen has zero incentive to pay for such a thing.

  • Chad

    Hansen is not “removing his hand from the public till.” He still wants the admissions tax revenue.

    According to another blog, the original deal gave Hansen “all the tax revenue from the new stadium—about $259 million over thirty years in admissions tax, sales tax, B&O tax, property tax, lease tax—to cover the debt.” Now, Hansen just wants the admission tax, which is the biggest tax, which would amount to about $176 million over 30 years, according to that other article.

    So, Hansen has just reduced his hand in the public till from $259 million to $176 million. He still wants about 2/3 of the public money he wanted before.

    And that does not include whatever part of the B&O tax he wants to keep now.

    • MarkS

      Both the Seahawks and Mariners are exempt from the admissions tax.
      The B&O exemption is for games that are played out of state.

      These taxes are not being currently collect so how are the tax payers losing money?

      • Chad

        The first argument is a child’s argument: “Billy gets to do it, so why don’t I?” There are a lot of businesses in Seattle which do pay admissions tax, so why shouldn’t a new arena? With that argument you could say that no business in Seattle should have to pay admissions tax, because the M’s and Seahawks don’t pay it. So, why should any business pay the admissions tax?

        The second is a stupid argument for 2 reasons:

        1) Much of the money that would be spent on tickets at a new arena is being spent on other things that are taxed, like drinks and meals at restaurants, so the city is collecting taxes on some of the money that would be spent on tickets at a new arena.

        2) You could make that same argument for every new business in the city. For example a new restaurant could say, “you are not currently collecting taxes on this restaurant we want to build, because it is not built yet. So, if we don’t pay any taxes on sales in this new restaurant we want to build, the city is not losing any money.” Every new business in Seattle could make that same argument — the city is currently not collecting any taxes on our proposed new business, so if we don’t pay any taxes on our new business, the city is not losing any money.” Then why should any new business in Seattle ever pay any taxes?

  • Chad

    What does this mean — “Hansen proposes to commit to Lander the market value purchase of the street, estimated in 2015 to be between $18 million to $20 million, to the bridge. The maneuver could exert pressure on the port to end its objection to the arena location.”

    So, Hansen is going to pay the city $18 million to $20 million to buy that street from the city and then give the city an additional $18 million to $20 million for the Lander overpass?

    Or, Hansen expects the city to give the street to Hansen for free, and then Hansen will give $18 million to $20 million to the city for Lander st. overpass?

    Or, Hansen is going to buy that street from the city for $18 million to $20 million and then Hansen is going to tell the city that the city has to spend that money on the Lander overpass? So, Hansen thinks he can tell the city what the city has to do with money the city gets from selling a street to Hansen?

    Which of these three things does Hansen mean? Or does he mean some other thing that I have not mentioned?

  • DJ

    Art
    I’ve long believed that Wally Walker was as much to blame for the loss of the Sonics as the NBA, the OKC trifecta, or Shultz, because of his alleged brokering of the deal from Ackerly to Shultz et al (including Walker) with known escape argument of Key Arenas inadequatecy. If that is indeed the case, then I would look poorly at his involvement now, after having profited greatly from their exit. I believe the man is all about filling his coffers and nothing about loyalty to Seattle, as opposed to Hansen, whom I believe is loyal as the day is long. Thoughts?

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  • 1coolguy

    I am shocked Hanson has Walker on his team – the guy was a HORRIBLE GM and it was a sad, sad history of stiffs that he drafted. The list is ugly and year after year, the trades he made were so bad, that coupled with the draft choices, led one to believe he wanted the Sonics to lose, then devalue, so he could buy them. By Schultz keeping Walker on through the years told me that he must have a person at Starbuck’s that ran the place.
    Anyway, hopefully Harrell can actually do his job and get the council to vote YES on the Occidental vacating. We know the fool Murray won’t do jack.

  • Niems

    So it appears that this has transitioned from a public-funded project to a new company wanting to bring jobs and tax dollars to the region. If the Sonics group was Silicon Valley startup that was moving to Seattle, would the county and city councils still oppose it? It seems that it would be important to know each of the council members position on this before we vote for them in November.