Behind Closed Doors with the City Council and Pro Sports
by Ann Davison
UPDATED October 27, 2020:
We are nearing the end of an incredibly difficult 2020. From the global pandemic to race relations in America, I am hopeful that we will find new ways to thrive and function while helping where we can to make positive societal changes, both locally and across the country.
For the subject of this op-ed, so far in 2020 we’ve witnessed OVG’s naming rights announcement, with KeyArena renamed Climate Pledge Arena under an agreement with Amazon and subsequently the naming of the hockey team itself. With that in place, I wanted to review this op-ed in light of what we now know in regards to the financial aspects and what it means for Seattle and in “bringing back our Sonics.”
Arena naming rights was the first item reviewed in my op-ed written over a year ago () I noted then that under the MOU between Oak View Group corporation (OVG) and the City of Seattle, OVG takes 100% of the revenue from selling the naming rights of the City-owned arena to Amazon. Sports Business Daily originally stated in its January 23, 2020 articlehttps://www.sportsbusinessdaily.com/Daily/Issues/2020/01/23/Facilities/Seattle.aspx that the “annual ask” by [OVG] for the naming rights would be around $14M. But a couple months ago, Sports Business Daily published https://www.sportsbusinessdaily.com/Journal/Issues/2020/08/03/Opinion/FORUM.aspx that the deal is actually for a term of 20 years and for nearly $400M (approximately $20M/year).
You may recall that the City Council had an impression that the price tag for the naming rights to the city’s asset would be considerably less per year. We can watch that discussion via the Seattle Channel archives from the November 16, 2017 hearing. http://www.seattlechannel.org/mayor-and-council/city-council/select-committee-on-civic-arenas?videoid=x84894&Mode2=Video In that hearing, the Council’s consultants informed them about the intricacies of such sports deals with municipalities. Starting at one hour and ten minutes in, the Council questioned the amount the City would be relinquishing, as well as whether it should be foregoing any at all. The consultants advised the Council that the naming rights would likely sell for about $5M a year. The consultants also told the Council that because Seattle would not be contributing directly to the arena expenses (although, read that accurately– the City would not be receiving the tax revenue owed), it should follow that Seattle should not receive any of the naming rights revenue. The executive director also told the Council that no formal forecast of the naming rights revenue was conducted because it would have “depend[ed] on the market.”
As it turns out, however, OVG sought, and has obtained, nearly $20M a year for the rights to name the City’s asset–none of which goes to Seattle even though it technically is “contributing” to the payment for the new Climate Pledge Arena in the form of millions of dollars in tax subsidies to the OVG corporation. Even if we had the former arrangement for KeyArena and OVG was receiving 50% of the naming rights’ revenue, Seattle would still lose nearly $10M each year over the next twenty years, totaling $200M. Meanwhile, the City is very publicly going through a budget crisis and continuing internal debate about where to find desperately needed revenue. Any number of approaches that would have allowed the City to retain a fair share (or any) of the naming rights money could have provided the City some relief and flexibility right now.
And ostensibly a priority in the City’s current budget discussions are greatly needed investments in our communities of color. Such investments always were a priority the SODO Arena had from the outset. Their proposal was, and is, highly supported by the black community in Seattle and would provide many quality jobs under Community Benefit Agreements and Labor Peace Agreements already reached with such organizations.
But back to the financial aspect, now that we know that OVG retains about $20M a year from the naming rights revenue, it is interesting to contrast that with the much-celebrated “transportation contribution.” Under this, OVG is paying only around $1M per year over forty years to mitigate the traffic issues the City expects to see with the existence of this scale of arena in the lower Queen Anne neighborhood, a mile from the interstate.
Speaking of traffic, we’ve also recently seen the opening of the Lander Street Bridge. We all recall that a key argument used against the SODO Arena in 2017 was port traffic congestion concerns. Not only have those concerns been alleviated with the opening of Lander Street Bridge, which allows vehicles to get from 1st Ave. to 4th Ave. unimpeded with rail use below, but the Bridge dead-ends the alley that is Occidental Avenue, held up by SODO Arena opponents as a “vitally important traffic release valve.” The traffic concerns have been mitigated with the Port being able to conduct its business more efficiently, others who do business in and through SODO being able to travel more consistently and safely, with environmental impact lessened. There really is no reason why the SODO Arena footprint–in the zoned sports stadium district–cannot be well-used for that purpose now.
Still, we all know sports is a business. I didn’t write the original op-ed and this update to bash any sport or corporation. Hockey coming to Seattle will be tremendous and keeping Seattle Center vibrant is great. I used to live and work right there and believe that revitalization will be important for our city. Having a new sport will be fantastic and improves our city overall. My analysis of the deal negotiated by the Seattle City Council for city-owned property, and the results to date, examines the financial aspects, especially in light of what we’re going through now. It is to offer a “check and balance” to see if the council’s deal is moving us toward accomplishing what all arena discussions and efforts were intended to do: Bringing Back Our Sonics. Unfortunately, I still say no, it isn’t. Climate Pledge Arena alone won’t do that.
To bring the Sonics back we need to look at the trend for NBA teams, which is private NBA-only arenas. The NBA will never agree for a franchise to be third in line for scheduling. While some say “it’s only an additional 41 dates,” remember that the NBA requires team venues to hold double that, or more, in order to maintain scheduling flexibility, not to mention dates needed for playoff games. Such flexibility is clearly integral as we have seen during this pandemic and now with the NBA’s recent news of its tentative plans for the 2020-21 schedule.
We’ve seen the trend in Brooklyn, where the Nets’ buyer also bought the building and the hockey team will no longer play there. In San Francisco, the Warriors have moved to a truly brand-new, private arena for themselves. In Los Angeles, Steve Ballmer has paid fortunes to get out of being a secondary tenant in Staples Center so that he could build his own private arena in Inglewood. Even Las Vegas–a likely competitor with Seattle for a franchise–has a relatively new hockey arena but plans are well under way for a separate basketball arena to attract an NBA team. If Seattle is truly to be competitive to get the Sonics back here, we likely still need an NBA-only arena option. Critical to remember: the ask for the SODO Arena to the City is for a conditional permit to vacate part of Occidental Avenue. If it turns out a SODO Arena is unnecessary for the NBA to send the Sonics home, no arena will be built. But having that approval in place shows the NBA, and the team owners, that Seattle is serious and ready.
Whether the NBA surprisingly elects to place a team in Climate Pledge Arena, or if it indeed prefers a franchise in a private NBA-first, SODO Arena, we would have twice the chance to get them back by pursuing both simultaneously. With only one option, I fear we are destined to lose them forever. I’d rather double our odds than gamble on just one option to try to get them here. We want the NBA to be able to easily say those sweet words we long to hear, “yes, Seattle, you brought the Sonics back!”