by Ann Davison
Are you happy hockey is coming? It’s great we’ll have an NHL team, but what’s not great are the financial terms our city council accepted to get it. As an attorney who has negotiated sports contracts, and someone who worked in professional sports for nearly a decade on both the team management side and athlete representation side, I have specific experience in this area. I know what a bad deal looks like.
Don’t get me wrong: hockey is fascinatingly inexplicable to me. To ice skate, knowing where that little, fast-flying puck is while dodging collisions is incredible. But sport aside, the deal made between the city council and team investors was not negotiated in Seattle’s best interests.
First, hockey wanted to be in Seattle. No one went out and got them to come. The deal is described to the public as 100% privately financed. Sure, Oak View Group investors pay their money up front, but public money will primarily pay that off, estimated at over $460M.
This is sports–so let’s keep score.
Venue naming rights are often split between a sports investment group and city when using city property. For KeyArena, the Sonics and the City split naming rights 50-50. For context, the recent T-Mobile Park deal was $87.5M. But no split will occur in OVG’s deal. OVG investors will keep all the naming rights funds.
Seattle: 1 (NHL team)
OVG: 1 (millions of dollars)
Under the 39-year lease (with the option to renew for another 15 years) rent is limited to a maximum of 3% annual incremental increase despite inflation—meaning possibly no increase some years. Previously, KeyArena’s annual revenue grew well above 3%. Granted, it is some payment but it’s not market rate like many other tenants are paying and Seattle’s costs grow faster than 3% annually, so no points for Seattle on this one.
OVG: 2 (greatly reduced rent with a cap)
With little transit in the KeyArena area parking will be crucial. For the first decade of their lease, OVG keeps 100% of the revenue for one of the taxpayer-built garages, and 75% of revenue for other garages built.
OVG: 3 (revenue from taxpayer asset)
What about when we buy tickets at Seattle Center for NHL and entertainment events? Prices include 5% admissions tax to support the arts. OVG will receive 100% of this tax revenue, giving them easily over $100M during their lease. Our city council waived an ordinance to make sure OVG wouldn’t have to pay this. OVG will (1) collect this money from customers and keep it, to the (2) detriment of artists and consumers.
OVG: 5 (+1 for over $100M during their lease term, +1 for their special ordinance waiver and the arts losing funding)
Construction sales tax deferrals, excise tax rebates, rent deductions to offset other taxes for OVG. These are other public subsidies going to repay OVG’s upfront money. OVG effectively pays nothing and the city doesn’t get the tax benefit.
OVG: 7 (multiple public subsidies for millions of dollars)
For venue scheduling, there is not a big incentive for OVG to have an NBA team at the renovated Key because it would interfere with live entertainment bookings they’d want to schedule. On the other side, the NBA would go to another city before coming to the Key as a third tenant.
One last note on practice facilities—because I worked in one. A professional team needs a dedicated space to practice obviously. The Northgate mall, with its massive overhaul, will have three ice rinks. With the SoDo Arena, the Sonics would have their own built-in practice facility, lessening further building impacts on our city.
Now, let’s compare this financial deal to the SoDo proposal. SoDo Investors want a conditional permit to vacate part of Occidental, if or when, Seattle gets an NBA franchise. Investors owning the land have offered to pay all arena construction, including cost overruns. Wait – what? No public subsidies, no admissions tax waiver, they’ll simply pay for the entire arena? So, unlike the OVG deal where investors keep city revenue, the SoDo arena will pay all its taxes.
The SoDo arena would be next to our largest transit hub, making green travel easier for Seattle and regional fans. It would biologically treat 4M wastewater gallons for reuse plus other energy saving features.
It would contain an NBA practice facility not included in the OVG deal. Plus estimated conservatively, $11M in annual property tax dollars. This would result in $429M over the same length of time as OVG’s lease of 39 years, for example—with over $200M going to public schools. What could our schools do with $200M?
Well, what’s the score for the SoDo proposed arena?
Seattle: 6 (over $400M tax revenue, dual purpose facility that has beneficial environmental aspects, huge step to getting the Sonics back!)
SoDo investors: 2 (eco/dual purpose venue)
There are issues like port traffic and Occidental Avenue. Traffic can be mitigated and Occidental is already severed by the Landers Street overpass. The SoDo Arena would take one block off of a non-arterial that is five blocks long, yet would turn most of it into a city park. And with the current city policy regarding public camping, gallery displacement has already started to occur due to safety concerns for employees along with other safety concerns.
Financially speaking, the SoDo Arena offer is better for the city and we’d have real hopes of getting the Sonics back!
The final tally between the two financial deals is…
Seattle: 1 OVG: 7
Seattle: 6 SoDo Investors: 2
So why did our city council approve a poor deal to let a hockey team come but vote against a smart deal to bring back Seattle’s iconic team?
Being good stewards of public funds is paramount and that means putting the city’s best interests at the forefront. Let’s make sure that next time Seattle is involved in critical financial negotiations on behalf of taxpayers, there is accountability and transparency on the council.