Full private financing, zero exclusivity, a significantly smaller tax benefit request, and little risk to the city are key advantages of the Seattle Arena project in SoDo, according to a comparison by the SoDo group of the three arena projects the City of Seattle is currently entertaining.
Following prominent media outreach by the group this week -- Chris Hansen sat down for an interview with 710 ESPN Seattle's Mike Salk and Brock Huard on Tuesday; Wally Walker was in studio with 950AM KJR's Dave "Softy" Mahler on Wednesday -- they released a comprehensive comparison on their website Thursday to make the case why their project offers the best opportunity for the city.
Seattle Partners (AEG, Hudson Pacific Properties, et al.) and Oak View Group, the two groups with opposing bids to renovate KeyArena, had representatives at an open house at the KEXP offices on Thursday evening to present the proposals to the public. At the open house, Seattle mayor Ed Murray told Chris Daniels of KING5-TV that his recommendation for KeyArena bid winner could come sooner than the previously announced June 30 deadline.
The comparison is quick to point out that both KeyArena proposal don’t meet the publicly stated objective of the RFP to have no public financing. They stress at numerous points that the SoDo project is fully privately financed, including the entitlement process, any construction cost overruns, and operation & maintenance of the facility.
An argument could be made that OVG’s proposal does not ask for public financing for the arena, but the parking garage that features prominently in its proposal is contingent on financing from a public entity other than the city.
The Port of Seattle has been rumored as the targeted source for the garage.
The comparison also identifies the potential of $200 million or more in public subsidies that each of the KeyArena projects is requesting through tax breaks and incentives. These include sales & lease excise taxes, parking garage revenues and taxes, utility subsidies, sponsorship sales, and landmark designation benefits.
The SoDo group is asking for an exemption on admissions taxes akin to what both CenturyLink Field and Safeco Field currently receive. In their previous letters to the city regarding their new offer, they had also asked for a reduction in business & occupation taxes levied on revenues made outside of the city of Seattle. That ask does not appear in the comparison.
They estimate they will pay over $40 million in sales taxes during construction of the arena and $10-13 million in annual taxes, including sales, B&O, and property taxes. This could generate the $300 million in tax revenues that Walker recent wrote of in an open letter on the benefits of the SoDo arena.
The group argues that its “Team First” approach speaks to its civic minded motivation behind the project. The intimation is that the focus on “Music First” with the two KeyArena approaches could make it less likely to attract either NBA or NHL teams.
In particular, they note the ask for arena exclusivity in Seattle Partners’ bid as a possible deterrent or cause for concern for potential team owners. If a team owner is unable to negotiate favorable terms, the potential exists for the team owner to look outside the city of Seattle for alternatives. The comparison also posits that OVG’s request to redirect taxes into operation and maintenance could put an unfair financial burden on team owners.
Risk to the city
When speaking about risks to the city, the SoDo group points out that their private funding presents no deposit risk, no entitlement risk, no construction or cost overrun risk, no operating risk, and no capital improvement or maintenance risk to the city.
By contrast, they look to the request for public financing as risk to the city. At first blush, this would appear hypocritical given their original ask for up to $200 million in bond-backed financing in the 2012 MOU with the city and county. That provided risk to the city, as well, but was backed by layers of guarantee for the bond repayment. The comparison argues the guarantee isn’t as clear in SP’s proposal.
OVG’s language on responsibility for cost overruns in the proposal appears to offer potential that the city could be at risk for significant overruns depending on how the development and lease agreements are negotiated. Because the breakdown of OVG’s financial offering was redacted from public view, the comparison notes that there is no clear amount offered for transportation mitigation, potentially putting the responsibility on the city.
All told, it’s a compelling comparison. While it is sure to energize the fanbase and supporters, it will be interesting to see how it reads with politicians, civic leaders, and average citizens.