BY Art Thiel 05:58PM 06/26/2017

City council to hire consultant to vet arena bid

In a letter to Mayor Ed Murray Monday, the Seattle City Council says it will hire an independent consultant to vet Oak View Group’s plan to remodel KeyArena.

Oak View Group’s plan for KeyArena will be vetted by an independent consultant hired by the City Council. / Oak View Group

The Seattle City Council will hire an independent consultant to examine the proposed offer from Oak View Group of Los Angeles to remodel KeyArena into a music-first venue that will also accommodate pro sports, according to a letter sent Monday from the council to Mayor Ed Murray.

The letter asks that Murray’s office complete by Sept. 12 the negotiation for a memorandum of understanding between the city and OVG, which won the rights with a bid of $564 million that is promised to be from private funds.

“We hope this MOU will establish a framework to resolve the questions and concerns raised during the (request for proposals) process in the final development and lease agreements,” the letter said. “To help us review your proposed legislation and MOU, the Council intends to retain an independent consultant with expertise in developing world-class municipal arenas, especially as it relates to risks associated with the financial terms and conditions, municipal financial protections, and the Oak View Group’s expertise and wherewithal to successfully complete the project.

“This independent review could include whether or not Oak View Group and its investors have the financial standing, creditworthiness, and corporate structure necessary to ensure that it can deliver on its commitments.”

The hire of an outside analyst will be the first independent look by a paid expert at the proposal, which was chosen after Seattle Partners (Anschutz Entertainment Group), citing a lack of transparency and responsiveness by the city, dropped out of the bidding June 3. Murray and other city officials have referred to the current relationship with OVG as a partnership, despite the absence of any agreement beyond the plan to negotiate.

When OVG CEO Tim Leiweke met with the Seattle Times editorial board last week, he was accompanied by Brian Surratt, head of the city’s office of economic development.

Murray, whose term of office will expire Dec. 31 unless he changes his mind about an earlier decision not to seek re-election, has said he wants the council’s response after the Dec. 3 expiration of the MOU between the city and Chris Hansen, who has spent five years seeking to build a sports-first arena in Sodo.

The council letter made no mention of Hansen’s revised proposal, which has been submitted for the council’s consideration. A council vote, not guaranteed, is not likely before September. The existence of Hansen’s new bid is believed to offer some leverage to the city as it negotiates with OVG.

The only outside entity to analyze the bids of OVG and AEG was Uptown Alliance. The  community group of residents and businesses in the lower Queen Anne neighborhood represents those most heavily impacted by increased sellout crowds at the revamped Key, which likely would not open before fall of 2021 at the earliest.

In a June 1 letter to Murray, the Alliance said it could not recommend one proposal over another because both lacked clarity and specificity. Of OVG’s bid, it said, “Oak View’s proposal, being arena-focused, (gave) little attention to its integration within Seattle Center and ignoring the community at-large, as well as sparse details on the newly formed operating company and its values.”

As a partial result of the criticism, the council letter listed five bullet points it about which it seeks more information:

City Investments: How municipal taxes generated by activities at KeyArena are used to meet City needs at Seattle Center and in adjacent neighborhoods, specifically public safety, parking and traffic enforcement, and the arena’s long-term capital needs.

Due Diligence: Whether financial protections sufficiently address the potential for cost overruns, bankruptcy, and other unforeseen circumstances; the financial viability of Oak View Group and their principal investors; and the reasonableness of the various financial models and forecasts prepared by Oak View Group.

Operations and Maintenance: Whether the proposal meets high quality, sustainable, day- to-day maintenance, facility management, and operational concerns.

Transportation: How area transportation management addresses neighborhood and city-wide needs, including specific measurable outcomes and performance reviews, innovative mobility strategies, and the impacts on adjacent neighborhoods. The Council will pay close attention to public/community benefits and may host a transportation charrette to give stakeholders an opportunity to influence the project’s transportation management plan.

Equitable Opportunities: How the proposal involves current and future workers at the facility, including employee protections and representation as reflected in a comprehensive labor peace agreement. Council will evaluate the project’s approach to business owners from under represented communities; the City’s Priority Hire policy objectives; and plans to involve small and locally-owned businesses in delivering concession and products and other similar services at KeyArena.

These details are deemed important because the re-done building will remain city-owned on city property, and thus subject to municipal standards of inclusion, openness and scrutiny. In that regard, Key will be unique in the NBA and NHL, where arenas are privately owned. Only six have third-party operators.

The letter said that meeting the Sept. 12 deadline will allow the council to have at least one public meeting on the subject.


YourThoughts

  • Jamo57

    As your reporting points out, no mention is made of the SoDo proposal. Hmmm…….I hope this isn’t the beginning of a rubber stamp process.

    • art thiel

      As playhouse pointed out, they are on separate tracks. But the council is at least trying for the appearance of independence.

      • Jamo57

        And legal cover, perhaps.

        • art thiel

          Hansen is on the record saying he won’t litigate an adverse outcome.

          • Jamo57

            True that, though I would think comprehensive legal representation would recommend keeping all contingencies accounted for.

            Besides, any decent irrational sports story must also have a good conspiracy to fall back on as we pour the second pitcher.

            At least my comprehensive legal representative says so. :-)

  • Tom G.

    So wait, does this mean SODO basically has to sit quietly in the corner until there’s finality with OVG?

    • Playhouse

      SoDo is on its own track, awaiting the report and recommendation from SDOT to be submitted to the city council so that they can begin their legislative process with the street vacation.

      • art thiel

        I believe that’s correct. SDOT should approve, as it did the first time through.

    • art thiel

      Nothing will be done for Sodo until the MOU is created and delivered by Sept. 12. After that is only a guess.

    • The mayor said the street vacation is something the council is doing. It was his predecessors thing. He is all about KeyArena. Any illusion you have that the mayor has an interest in SoDo is pure fantasy.
      http://www.seattlechannel.org/askTheMayor?videoid=x78438

      • Tom G.

        Well, yeah.

        That’s definitely a given that Ed won’t be of any help.

        • art thiel

          But unless Murray changes his mind about not running, there’s a new mayor in six months.

  • SoDo Slayer

    Thank you, Art. You are on top of it. Appreciate the fine work.

    • art thiel

      Odds favor the Seattle Center because all the electeds and staffers are emotionally invested in it. That’s why a consultant is needed.

      • SoDo Slayer

        Don’t I count ? I’m emotionally invested, too. Oh, well. Logic, reason, facts, truth, the future . . . all complicated words and notions requiring a philosopher such as Art Thiel and the consultant to figure out. Above me.

        • art thiel

          Above? No. Beside? Yes.

  • Tyler D

    Most likely outcome is the remodel for Key Arena will happen to get the elephant off the backs of the politicians in regards to fixing part of the Seattle Center black hole. They still need to figure out how to develop the surrounding Seattle Center area as it’s been under utilized and developed. There was a time when Disney wanted to come in and spend money to upgrade it, but our politicians I believe didn’t want those California carpetbaggers to come in and “ruin” Seattle.

    Based on statements by Leiweke, the Key remodel seems more directed towards creating a world class music venue with sports being secondary; mainly hockey and NBA an afterthought. I bet the NBA will once again say that the Key Arena remodel is still substandard for “today’s” NBA model. I don’t think Leiweke or the group care much for the NBA, but give lip service to sell the project. I don’t buy the “there won’t be expansion argument” as I think it will be a team from another municipality that will move into the market.

    I see no reason why the council will not only approve the Key Arena remodel, but also give Hansen the go ahead to build SODO with his own money. That’s a lot of tax revenue to line their pockets, votes to be gained, and future city government jobs/salaries to be secured.

    I would like to see the SODO area made into an entertainment district (LA live) much to the chagrin of the Port. There is so much potential in that area to draw dollars and people due to better transportation infrastructure/nightlife.

    I think the Port has greatly mismanaged business development for port traffic with a dubious hat tip to the city of Seattle for re-allocating money for the overpass to other uses among other issues. I think it was Sawant that said the Port is a cess pool of corruption during the Occidental vote. I’m definitely not a fan of hers at all, but that was a cutting statement. Also, the future for port traffic, from what I’ve read, is pointed towards Tacoma and Vancouver as the logistics, facilities, and scalability are much better in these locations. They’ve seem to have done a better job allocating funds and selling their advantages to draw business.

    This is just my opinion as I definitely don’t have as much insider knowledge as maybe you Art or the major movers and shakers in the city.

    • LarryLurex70

      As it turns out, Leiweke apparently cares more about the NBA than anyone in Seattle thought. According to Tim Daniels today at Bleacher Report, Leiweke will “advise and work with (New York Knicks GM) Steve (Mills) on an interim basis to help develop a go-forward plan”, now that Phil Jackson is out of the picture.

      • Tyler D

        Interesting. Leiweke is developing good relationships with NBA insiders, which would bold well for coaxing team via move or other (not the Knicks, of course). I’d say Leiweke is better at the political game than Hansen; not to say Hansen is bad. However, Hansen hurt himself relationally with the NBA in regards to the Sacramento situation throwing money towards the citizen proposition against the arena.

        That, on top of Seattle and State politicians just being their typical incompetent selves cold shouldering moneyed interests and the NBA. Thus, causing the Napoleonic Stern to use Seattle as a pawn for leverage against other municipalities as an example of what happens when you mess with the Don Corleone of the round ball league.

        • MarkS

          Everyone who points out what went on in Sacramento seems to forget that Ballmer was involved as well. That didn’t seem to stop him from buying the Clippers.

          • art thiel

            Ballmer is why Hansen had the chance he did. But he can’t get another whale to join him until he gets Occidental vacated.

          • LarryLurex70

            And he likely won’t get Occidental vacated without another whale. And, without another whale he won’t get Occ…
            Poor guy. Caught in the spin cycle. Russ is a shrewd addition to the squad, but he’s not the missing whale.

        • art thiel

          Stern always leaves the gun and takes the cannoli.

      • art thiel

        Gee, I wonder why. Larry Dolan owns the Knicks via his Madison Square Garden enterprise that is a primary backer of Oak View Group.

    • You are dead right about the Port of Seattle, and there are growing neighborhoods around them and more traffic coming whether the Sonics build an arena or not.

      Not developing SoDo isn’t a choice, how it develops is. Whether it’s light industry or an arena is the only real question. Every day traffic could be a bigger impact than event traffic. At least with event traffic it is on a schedule.

      • MarkS

        More office buildings are likely coming to SoDo. SLU II but at least they have transit connections.

        • LarryLurex70

          At least Hansen and his investors will recoup the money they’ve spent buying up all that land in SoDo when they flip it to commercial developers. That 5-4 SCC vote feeling is seriously creeping in. Sad. Very sad.

          • art thiel

            Hansen will be fine. If he sells to developers of retail/residential, the port won’t be fine. Worse than with the arena, whose peak traffic can be known ahead of time.

          • LarryLurex70

            Great point. Someone in this discussion or one just like it made mention of the fact that, other than SoDo, there’s nowhere else left downtown to develop projects that might require an unusual bit of land mass. I’m paraphrasing. But, if Hansen’s detractors think they’ll sleep soundly at night after Key Arena gets the nod – a mere formality at this point unless Gary Bettman gives it the thumbs down – SoDo will look like Georgetown on steroids after his group finishes flipping their properties.

        • Roads are still likely to be congested for truck traffic, if that is what the Port is truly concerned about.

          • art thiel

            The port for years has asked for the Lander Street bridge to clear the nine railrioad tracks. The $140M project has $100M in funding. Once built, the port’s freight mobility will be as good as can be gotten for a poor set-up without dockside rail.

      • art thiel

        Good point. It’s not a choice. Sodo is the only place for downtown to grow. A whole lot of cheap housing could be built in spaces that have nothing to do with maritime or industrial use.

        • Additionally, that choice has really been made already with Comprehensive Planning and Zoning. I would be very surprised if it was zoned to leave Occidental in place to bisect any development.

    • art thiel

      You’re tracking developments well. The council hid behind the port’s unproven job loss claim because they wanted to buy time for the Key proposal to gestate.

      Regarding NBA relocation, I don’t think that’s likely simply because no team is in any crisis regarding its arena/market. Each team is getting huge revs from the new TV deal that dwarfs all other revs, so it matters less about the gate.

      • Tyler D

        Thanks Art and it makes sense in regards to TV revenues being the main driver. The Pac-12 could of used some those experts on their TV deal. Of course, College Football is not quite the religion that it is in the South, but Larry Scott from the outside really screwed up that deal to gain more exposure for the conference.

        One possible problem is if these TV deals become a bubble as eyeballs shift away from live sports due to quality of product, public macro economic factors, etc. It’s a big if, but we see the NFL mulling over less commercials between breaks to address the lower ratings trend among other solutions to gain ratings back. They still rake in billions, but nothing goes up forever. Internet streaming and cutting the cord is the trend, although the exception with sports is people want to see it live and not miss the party…or wake depending on the score.

        • art thiel

          Live game broadcasts will have great durability, TV’s only programming that is must-see when it happens. But the rights will eventually go to the highest streaming bidder. In 10 years, few will be watching NBA/NHL or any other sport on TV.