The reality of a new Seattle arena to support both NBA and NHL got a fair bit closer on Thursday.
The proposed Memorandum of Understanding between the Oak View Group and the City of Seattle over KeyArena redevelopment was voted out of committee and sent back to the full city council for consideration of approval. A vote by the council is expected on December 4th.
The council’s Select Committee on Civic Arenas met to hear public comment on the MOU, review a presentation on the independent financial analysis of the arena deal, and to hear and vote on proposed amendments to the MOU.
Seven of the nine councilmembers attended, and by the end of the ultimately three-hour meeting, five remaining members unanimously voted the amended MOU out of committee. With five total votes of the full council needed to approve the MOU, it’s very likely it will pass in December.
One of the amendments considered by the committee would’ve eliminated language in the MOU regarding the city not contributing in any fashion to any other proposed arena. The amendment was not approved.
It was considered by many to reference the competing SoDo arena proposal by investors Chris Hansen, Wally Walker, Pete & Erik Nordstrom, and Seattle Seahawks quarterback Russell Wilson. Though many public comments at the meeting spoke in favor of the Seattle Center arena, a few insisted on the SoDo proposal being given due consideration. That proposal still requires a street vacation.
“I’ll be real frank with you: the street vacation is yesterday’s news,” committee chair Debora Juarez told reporters, per Geoff Baker of the Seattle Times.
“I really don’t know what to tell you about that. This is about looking forward. This is about Seattle Center, KeyArena and hopefully bringing back a hockey team and a basketball team. I don’t care about what happened in the last 18 months. That’s the past, and I’d really like to leave it there.”
When asked about the council considering the new SoDo proposal, which includes its own plan to renovate KeyArena into a three-venue concert hub, Juarez said:
“I have no idea about that. I’m not here to talk about that. I voted on that 18 months ago, and I voted ‘No’ on that. It’s done. It’s over. I’m looking forward. That’s a failed MOU. That’s the past.”
Looking towards the future, David Stone, president of the Stone Consulting Group and the independent consultant hired by the council to analyze the financials of the arena deal, reiterated that OVG and the city are highly incentivized for the new arena to house both NBA and NHL teams.
For concerts and entertainment only, OVG would gain $119 million in incremental tax revenues over the 39-year term of the initial lease. OVG has said this amount alone is enough to make the investment worthwile. The city would get about $50 million in incremental tax revenues.
By contrast, OVG stands to make about $614 million in incremental tax revenues with both NHL and NBA. The city would garner $153 million, in addition to $304 million in guaranteed payments from OVG to match historical operations and tax revenues. OVG also guarantees $40 million towards transportation over the 39-year lease.
After paying city's expenditures spoken for from current KeyArena revenues, with redevelopment the city looks to net around $33 million with concerts & events only, $86 million with an NHL tenant, and $136 million with both NHL and NBA tenants. With no redevelopment, Stone says the city should not expect to maintain its current revenues and would likely lose money because of necessary capital improvements to the existing building.
Per Chris Daniels of KING5-TV, councilmember Rob Johnson asked about the U.S. House of Representatives passing tax reform legislation Thursday that would eliminate the historic tax credits that OVG has planned to take advantage of for the project. The legislation must still obtain Senate approval.
Carl Hirsch, an arena consultant who was also brought in by former mayor Mike McGinn to aid in crafting the original SoDo MOU, assured Johnson that the 10 percent of the project cost covered by the tax credits would be filled by equity and private financing on OVG's part if needed. The Madison Square Garden Company, one of OVG's financial backers, has previously said it would guarantee the money if the tax credits proved unavailable.
What about the NBA?
The expediency of the Seattle Center arena process is largely seen to take advantage of a potential opportunity to gain an NHL expansion club by 2020.
Hirsch was specifically asked by councilmember Sally Bagshaw if the revenue streams of the deal proved appealing and beneficial to potential NBA team owners, seeming third in line behind the OVG-Live Nation partnership and an NHL ownership group. He was emphatic that it would be attractive to an NBA owner.
"The way they, OVG, has proposed this and has designed the financing is that both of the team owners can be owners in the building as well. So, whether it's a third, a third, a third, or 50% to the building and 25% each to the teams -- whatever that economics turns out -- there is enough money in there, in the overall big pot, to attract a team. On top of that, OVG has been in touch with both leagues and commissioners, so they are well aware of [...] what they're doing, what we're doing, and how it all comes together. So, there is a pot big enough -- despite what you may have heard -- for ownership. They wouldn't just be a tenant, they would be an owner, have the opportunity to be an owner in the building as well. So, they would share in all the revenue streams that are available to everybody else."
The council will work with OVG on the voted on amendments to the MOU from now through November 27th. They will consider the legislation on the MOU at the full council meeting on Monday, December 4 at 2:00 pm. As always, public comments are welcomed and encouraged at every full council meeting.
By the end of the year, we should have a framework deal ready to kick off a furious 2018 that could finally make the arena a reality.
Watch video of the Nov. 16th Select Committee on Civic Arenas meeting here: