SEATTLE – A deal has been reached between the Seattle City Council and the investor group led by Chris Hansen on the financial terms that would put a new sports arena near Safeco Field.
An official announcement by city council members outlining the terms of the agreement was made Tuesday. Ahead of the announcement, the council released documents detailing the negotiated changes to the Memorandum of Understanding as well as an FAQ.
A key multi-million dollar concession by Hansen, which could see his investor group spend more out-of-pocket to build the arena, appears to have brought reluctant councilmembers onboard with the project.
- $40 million will go toward a transportation fund to improve traffic, transit and protecting Port of Seattle operations. $7 million more goes toward KeyArena.
- Hansen's group will take more responsibility for cost overruns or if the arena fails to be constructed.
- After the 30 year arena use agreement, Hansen's group can be required by the city to purchase the arena for $200 million. If the arena is torn down after 30 years, Hansen's group must pay those costs.
- The City Council says the new agreements satisfy Initiative 91.
- No construction begins until an environmental review is conducted.
Transportation lies at the heart of the revised agreement. In the Memorandum of Understanding entered into earlier this year with Seattle Mayor Mike McGinn and King County Executive Dow Constantine, Hansen pledged $290 million of private money to build the NBA/NHL facility in SODO. That original plan envisioned the city and county issuing $200 million in bonds to finance the remaining costs of the project (a one-team scenario would have involved only a $120 million investment by the city and county). Hansen pledged that arena revenue would be sufficient to pay off the bond debt, thus resulting in no risk to taxpayers.
To get that deal through the city council, Hansen has agreed to establish a $40 million transportation fund, which would come out of the publicly financed pool of money. The fund will go toward protecting Port of Seattle operations and improving freight mobility, pedestrian safety, and transit service and traffic management.
Two Port commissioners -- John Creighton and Tom Albro -- told KING 5 that the revised deal may not go far enough to address transportation issues, and both insisted that the environmental review is critical to the process.
Hansen has also agreed to spend $7 million on KeyArena, aided by revenue from an NBA or NHL team that would use the facility while the SODO arena is being built. The money, which would also support planning for KeyArena's future, would also come out of the publicly financed portion.
Since $40 million raised through city and county bonds will be shifted to transportation, Hansen's group will likely have to pay more than the $290 million they originally proposed to spend on construction.
To offset some of those extra costs to Hansen's group, the council will commit to financing up to $145 million in bonded debt rather than $120 million in a one-team scenario. Council leaders are said to believe that the transportation portion of the deal will help secure matching funds from the state, federal government or the Port of Seattle.
The agreement also puts more of the risk onto Hansen’s investment group, ArenaCo. The City Council says if the arena is not built, Hansen guarantees to buy back the land acquired by the city and county to ensure no public financial loss.
Hansen will be required to double his security reserves if Arena revenue does not perform as expected. ArenaCo must also keep a minimum of three months operating and maintenance cash on hand at all times.
When the arena use agreement ends in 30 years, the city and county can require ArenaCo to buy the arena and the land for $200 million. ArenaCo can also buy the land and facility at the end of the arena use agreement for no less than $200 million, but if that happens, ArenaCo must build a new arena on the site.
If the arena use agreement is not extended after 30 years, ArenaCo must pay for demolition and removal costs of the arena. The city would keep the land
A big hurdle was making sure the deal would not violate Initiative 91, forbidding the city from using taxpayer funds for a new sports arena unless the city is guaranteed to profit from it at the rate equal to or higher than the yield on U.S. Treasuries.
The City Council said that because some of the funds now go to improving transportation in SODO, and because the agreement means the city is guaranteed at least $200 million on its investment, the deal would satisfy I-91.
"The new and improved agreement with Mr. Hansen makes this a sound step for Seattle," said Council President Sally J. Clark in a press release. "We set out to make sure the general fund is protected, freight mobility is helped and that we have help in charting the future of Key. We achieved these goals."
Councilmembers said an environmental impact study must first be done before any construction can begin. That could take a year.
“It was the city council’s commitment and hard work that got us to this point," said Hansen in a statement Tuesday. "And even though I continue to believe that the initial transaction terms agreed to by the Mayor and County Executive represented a great deal for the region, and one of the best arena deals ever offered to a city, I also respect the role of the legislative bodies in this process.
“The process worked," he said.
Hansen has remained relatively silent on the negotiations ever since the King County Council approved an amended MOU back on July 30. The Seattle City Council’s approval was considered the last major stumbling block.
“I’m encouraged to learn that City Council leaders have found a way to get to ‘yes’ with Mr. Hansen on a revised memorandum of understanding," said King County Executive Dow Constantine.
Councilmembers Bruce Harrell and Sally Bagshaw, an initial arena critic, signaled their support. Chief negotiators Tim Burgess and Mike O’Brien are also on board. Council President Sally Clark signed on late Monday and councilmember Jean Godden said on Twitter she would support the deal.
Councilmember Larry Phillips, a critic of the original arena plan, signaled his support for the new deal. "We appear to have a slam dunk of a deal for the Sonics to return to Seattle," he said Tuesday.
The proposal will go before the City Council’s Government Performance and Finance Committee for a vote on Thursday. If approved, it will go before the full council next Monday or on Sept. 24. If passed by the City Council, it will go back to the King County Council for approval.
"I look forward to reviewing the revised agreement between the Chris Hansen and the City of Seattle. I am optimistic that the County, City, and Mr. Hansen will reach a final deal in the coming weeks," said County Councilmember Bob Ferguson.
"I welcome the news that the City Council has decided to support bringing basketball back to Seattle," said Seattle Mayor Mike McGinn in a statement Monday. "We haven't gotten a team yet, but Sonics fans have a reason to smile today."
KING 5's Chris Daniels and Travis Pittman contributed to this report.