The investor group trying to build an arena in Seattle to bring back the SuperSonics NBA franchise sent a letter to Mayor Ed Murray, the Seattle City Council, and King County Executive Dow Constantine today offering to take the project fully private. They also offer to contribute to the Lander Street overpass project in Seattle's SoDo neighborhood in exchange for the street vacation necessary to complete the project.
Since October 2012, the investment group, headed by Chris Hansen, has been in a partnership with the City of Seattle and King County established by a Memorandum of Understanding. The MOU contained a negotiated financial framework that included up to $200 million in public bond financing. That financing has been contingent on the investor group securing an NBA franchise first.
Chicken-and-egg rules have applied as the common wisdom has been that the NBA would not entertain an expansion or relocated franchise to Seattle unless an arena plan was firmly in place. The intended public contribution, seen as one of the most beneficial to the public side in any arena project, was met with praise in 2012, when it appeared that the Sacramento Kings franchise would be purchased and likely relocated to the Emerald City. In the years since that prospect fell through, public officials have seemingly soured on the public participating in the project.
So, the investor group is willing to abandon the MOU.
Per the letter sent to the mayor, council, and county exec:
In the five years since we began working with the City and the County on the Arena funding package the economic landscape has changed. The recession is behind us and we are deep into this new economic cycle. Interest rates have declined and the NBA has completed its new national television contract, creating more financial certainty in the industry.
These considerations lead us to suggest a new proposal. Our goal has always been to return the NBA to Seattle and to build a new arena to make that possible. Our partnership with the City and County started five years ago and was based on a recognition that private financing of a new arena in the prevailing economic conditions was not economically feasible. The goal of this partnership was to build the Arena and bring an NBA team to Seattle. Public financing was simply a mechanism that made that possible at the time.
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.
In addition, the investors state they have identified some traffic and freight mobility mitigation they would like to contribute to the public benefits they offer in exchange for the street vacation. They would also like to contribute to the Lander Street overpass project to help bridge the $27.5 million gap remaining on the project. The offer addresses some concerns that were expressed by councilmembers when the street vacation was denied in a 5-4 vote back in May.
Last week, councilmember Lisa Herbold introduced legislation to potentially fill the Lander gap using a combination of existing taxes and monies gained by the city selling off its ownership of the Pacific Place shopping center parking garage.
The investor group does make a few requests for consideration of their new offer. Approval of the street vacation is a given, but they also ask for a waiver of the city's admission tax on the arena, and an adjustment to the city's business & occupation taxes for revenue generated out of town.
Council president Bruce Harrell and councilmember Tim Burgess commented on the development to KING5-TV's Chris Daniels.
"I think this new proposal by Mr. Chris Hansen is a game-changer to build the arena and bring an NBA team back," said Council President Bruce Harrell. "The proposal should definitely be taken into consideration by all Councilmembers and I will look at reconvening a Council committee to discuss this new arena proposal."
Seattle Council member Tim Burgess told KING 5 after receiving the letter, "In order for us to reconsider we urged them to remove public financing from the project, and they've done that, so the ball is back in our court."
Read the investor group's letter of offer in full:
The Sonics Arena investor group -- Chris Hansen, Erik & Pete Nordstrom, Wally Walker -- have posted a statement about the offer on their site.
Walker has clarified that the contribution to the Lander project would be the amount the group pays the city for the vacated strip of Occidental Ave. As one of the amendments to the proposed legislation voted on in May, the city would have earmarked the payment for the street to go directly toward the overpass rather than to the city coffers. The investment group would like that proviso to be one of the public benefits in their new vacation application.