An Open Letter To Local Government/So, About Amending That MOU...



It certainly is amazing to think about how the "realistic hope meter" on the SODO arena's chances have changed from one week to another.

Sure, Mayor Ed Murray and City Council President Tim Burgess have said Council isn't open to the amending the MOU for an NHL-first scenario as the political landscape currently stands. But at least we know there's a stable (and hopefully big money) NHL ownership group led by real estate magnate Victor Coleman and MLS Founder Alan Rothenberg waiting in the wings and that group, along with the NHL, is still optimistic an "NHL-first" solution is possible in SODO according to Geoff Baker from The Seattle Times.

For the sake of getting a new arena up in Seattle, let's hope like hell this happens; because frankly, I'm tired of relying on the NBA to "help us" get a shovel in the ground. The reality is the NBA, like all other sports leagues, is a cartel. It's a cartel and country club that isn't going to go out of their way to do any special favors for municipalities unless they want to.

And the sad reality for Sonics fans is the NBA doesn't want to help us bring a team back to Seattle; at the very least, it looks like we're way down on their priority list at this point.

Now that Chris Hansen is a public figure whose intentions are known to all who follow the NBA, the league will not grant him a relocated franchise unless a team would be at the point of contraction otherwise with no new arena in the works and no local ownership prepared to build an arena or solidify the team's financial standing (i.e. Sacramento, Milwaukee, New Orleans, etc.).

From there, the NBA doesn't seem to be interested at all in expansion. In their world, they have 30 mouths to feed and they're about to get a record television deal without having the #12 TV market in its portfolio. Thus, they can easily fall back on the excuse of "if we add 2 more teams, the league will become more 'watered down' and 'less competitive' than it already is".

Now, this is just ONE person's opinion, mind you; but the reality seems to be this, it's time to start getting away from the idea that we need the NBA if we want a successor building to KeyArena in Seattle.

Sure, we could argue all day and night why it'd be a good idea for the NBA to commit to a Seattle expansion team contingent on a new arena being completed (i.e. new arena, Steve Ballmer ownership, #12 TV market, 41 years of history, more corporate sponsorship opportunities, expanded presence on West Coast and Pacific Northwest, etc.). But it sure doesn't look like it's happening any time soon barring a stunning reversal of fortune in Milwaukee.

At the very least, it's not necessarily going to happen when Chris Hansen snaps his fingers and says so on his terms by the MOU's expiration date in 2017.

Thus, it's likely time, as I've mentioned before, to start looking at a Plan B; which would mean either an NHL ownership group could play in a new arena first or building a new arena on spec. And now that a seemingly "pre-approved" NHL ownership group has come into town to meet with government officials, this would clearly be a good time to start talking about how to at least change the MOU for hockey.

Obviously at this point, any NHL group who'd like to play in Seattle before the NBA will need to reach a side agreement with Chris Hansen as it relates to splitting the private sector's arena costs first. But if/when that happened, I think there are a few ways to go about changing the MOU. What could they be? Here are a few of my thoughts as to what could be options to solve "we still want the arena, but can't get the NBA team" problem.

1. Build the arena with 100% private funding.
This would be the easiest way to solve the problem, but probably the least likely option at this time given the fact that it's been reported the NHL requested to Mayor Murray that the MOU be changed. The reality is as much as Seattle hates paying for new arenas and stadiums (hello, I-91), you're likely talking about a $300-500 million investment as it relates to building any new, modern North American arena. When you combine that cost with a franchise entry fee in either winter sport, you're unfortunately talking about a massive amount of private risk in a business where you won't get your money back unless you find a pot of gold in the form of a successful sports franchise.

And of course, this is a scenario where you'd be talking about building an arena in conjunction with a team (or teams). If you built the arena with the HOPE/EXPECTATION that sports leagues would then come to Seattle, then you're talking about $300-500 million of risk with no government help; which probably isn't a worthwhile endeavor unless you love having Miley Cyrus concerts and Disney On Ice fill your building every single night.

But hey, you never know.

2. Use tax breaks as a means to encourage private investors to build the arena themselves.
This an idea that I advocated for a little while ago and I still think it could work as a solution to this problem. In fact, it's probably my favorite/preferred solution to this "NHL-first" conundrum.

The straightforward premise would be this:

  • You'd have no upfront risk for the City and County in the form of cash or bonds.
  • No raised taxes.
  • Very little forfeited tax money from the general fund due to substitution effects.

In this scenario, you'd just simply let the private investors of the SODO arena keep the tax money from admissions taxes (City), B&O taxes (City) and property taxes (County) to give ArenaCo approximately $220-225 million in risk mitigation over 30 years. From there, a naming rights deal could reduce the private risk even more and then the private arena investors could decide what to do with the remaining private risk (i.e. Hansen could take on 100% of the risk by building the arena on spec or split the costs in the form of a lease agreement with a potential NHL owner).

Now, the one drawback under this scenario would be the City and/or County may not be too thrilled about losing out on $45 million in SODO transportation funding and/or the $100 million they could use to buy land in SODO. But at least tax breaks would take away a big excuse for the City to not build an arena for an NHL-first or Sprint Center model; which is there'd be no legitimate financial risk to the City or County if the arena and/or arena tenants ended up failing financially.

3. Create a "pay-as-you-go" model for the City and County's arena expenditures.
As much as people on this site or anywhere else in the Seattle area may not fond of how Oklahoma City stole our basketball team, they could serve as a model in terms of how to pay for a new "non-NBA first" arena in Seattle. When OKC introduced their Metropolitan Area Projects (MAPS) program in 1993, the premise was simple. Future "quality of life" improvement projects, such as the basketball/hockey arena where the Thunder play, would be funded with a small sales tax increase but projects would not be undertaken they were fully paid for in cash.

This could end up being a good "government-friendly" solution for the City and County by allowing them to spend money on transportation improvements and land when taxes from the arena end up raising enough cash to make those expenditures possible. But then you could face the problem of trying to persuade private investors to be patient and wait to recoup their money for the arena land rather than get it back right away through a bond as they would under the current "NBA-first/NBA-only" scenario. Still, if the City and County don't want to be exposed to any upfront risk from bonds but still want to invest money for public purposes through the arena project, this could potentially be a good compromise for all parties involved.

4. If bond money is used to pay for the arena, make sure the City and County get their money back.
If private investors insisted on using bond money for an "non-NBA first" deal, they'd obviously need to assure a very skeptical City Council and Mayor that they'd get every dollar of their bond money back even if the arena and/or arena tenants went bankrupt.

This idea, believe it or not, really isn't that hard to put in writing for an NHL-first proposal. You'd just simply make the lease say:

"This executable, non-relocation lease for the NHLSeattle team will expire after all debt and interest on City and County issued bonds has been paid back/retired or 30 years have passed, whichever comes last."

Simple as that. The only question from there would be who pays back the City and County in case everything goes wrong. Would it be Chris Hansen? Victor Coleman? The NHL? A bank? An insurance company?

The answer to that question isn't clear right now, but it could probably be sorted out in due time if you still wanted to use debt as a means to pay for expenditures related to the arena.

So there you have it; there a few reasonable alternatives to help solve the "no NBA-first"/"NHL-first" problem. Obviously if Seattle is going to be awarded an NHL expansion team, an "NHL-first" investor will need to pony up and open his wallet to help pay for an arena; that's a given. But the reality is local government will more than likely need to be in a position of assistance if this idea is going to happen too. So hopefully one of these ideas, or maybe an idea that hasn't even been thought of yet, can help us get a shovel in the ground sometime soon for the sake of improving the Seattle sports landscape, enhancing Seattle's quality of life and delivering closure after the betrayals of 2008 and heartbreak of 2013.

FanPosts are written by members of the Sonics Rising community and do not represent the opinion of site management.

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