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Chris Hansen may be right

It's going to be tougher on sports franchise owners going forward in light of the current arena proposal from Chris Hansen that avoids creating new taxes (they exist when the business exists), and avoids taking from the city, county, state, general funds. This is new for Seattle, and tough to put together in other states.

Q. Regarding the public portion of the funding of the arena, you believe the value of the contribution has not been widely understood. Please review the proposal.

A. The basis of our understanding with the mayor was that we wanted the very direct, non-substitutable, tax revenues from the city generated by arena activity that otherwise would not exist. Everything that’s indirect belongs to the city — we don’t want a rental car tax, or an incremental increase in the local sales tax.

That means that coming to us would be the admission taxes on our ticket sales, property tax on the stepped-up value on which we’re building on the arena itself, taxes on sales and merchandise, as well as B&O taxes. A bond against these revenues is the public contribution. For that, we will sell the public the land at fair market value. It’s not as if the public contribution goes to some mythical place.

The city will own the real estate, and if the city decides to blow up the arena in 35 years, I’m pretty sure that land will be worth a helluva lot more than it is now, given its location.

The rest of the public contribution is going into the building shell, for which we we pay a negotiated amount of rent. In addition, we’ll put up the security to guarantee the revenue stream. Part of this deal that is not well understood is that ownership will have so much equity in the deal that we will not miss a rent payment. If somehow we did, someone else (another ownership) would step in and buy this (franchise) before it went into default.
Rather than us debate with the city about whether we think the tax revenues are X and the city thinks it’s Y, it won’t matter, because we will make up any shortfall in any year. Doesn’t matter about (tax revenue) projections. Doesn’t matter about rent. We will have so much equity, $300 million, in the project, why would we ever throw our arena into default over $2 million or $3 million in annual rent? It’s crazy.

The city has asked: What if revenues go to zero? Well, property taxes won’t go to zero, and people are going to show up for games and pay something. (The fear) is just not realistic.

Still, the city wanted more security, so we’re working on something for more funds to guarantee it. The levels of security for this transaction are unprecedented. Compared to any other arena deal ever done, the safety and the amount of equity we have in it, default is a near-zero probability.

It’s a new arrangement, and probably held up to the detriment of other cities (laughs) as the way to do arena deals. I think (the virtues) are under-appreciated. We could have come in with a deal for a free arena, and still some people would have objected. I think people forget what a great deal we’re giving the city.

HANSEN, PART 2: “THIS ARENA IS NOT A HOBBY”
, SportsPressNW.com

[emphasis mine]

The proposal in Seattle followed by the idea of a proposal in Minnasota puts pressure on all of these other proposals to stay out of general tax funds.

The whacky tax structures in Washington state actually allow for such incremental increase in tax revenues. Sports opponents have been successful in compartimentalizing taxes that could be used for such projects that we could have a fairly complete framework to move forward with from the point of announcing a proposal.

Minnisota has no idea how they are going to do this, but they know they will likely have to go to their voters. That's just something unessisary in Seattle, ironically, thanks to the sports haters.

More to the point, the NBA is putting pressure on franchises that will be taking in the profit sharing arrangement to perform in venues that are at NBA standard. I think Minnisota can pull it off, not so sure about the Maloof's proposal to remodel the Sacramento arena.

St. Francis - U.S. Sen. Herb Kohl, the owner of the Milwaukee Bucks, said Friday that the time is now to find a way to finance and build a new multipurpose arena to replace the Bradley Center.

And for the first time, he said he was willing to make a personal financial commitment toward a new facility, an amount he noted would not be insignificant.

"We're no longer talking about in terms of some point in the future," Kohl said at the team's Cousins Center practice facility. "We're talking about plans to get it done.

"The time to start is now."
. . .

Kohl says it's time for a new arena, he'll pitch in - m.JSOnline.com