SEATTLE -– Chris Hansen on Wednesday again criticized a City Council analysis questioning whether his $490 million sports arena project complies with I-91, the Seattle law designed to restrict how the city uses taxpayer funds to land new sports franchises.
“They jumbled up the numbers,” Hansen said about the council report's conclusion that Seattle would not receive fair value in return for its investment, equal to or exceeding the yield on U.S. Treasury Bills -- a financial requirement that sits at the heart of I-91.
“There is no gap which needs to be filled," Hansen said.
Hansen said he believes his proposal, which includes $290 million in private equity up front, satisfies I-91. He said the land, incremental taxes not related to the project, and the $14 million a year he’ll pay in rent and debt service will give the city at least a 7 percent return for bonding up to $200 million of the project. The Treasury bond is currently trading at 2.7 percent.
“They aren’t putting in any equity,” said Hansen, “That’s the difference. If they (Seattle and King County) were putting in $100 million in equity in addition to the bonds, it would be a different story, but they’re not.”
Previous sports stadium or arena proposals, including the 2008 Key Arena renovation proposal, called for significant public cash. The Key Arena proposal called for $75 million from the city as part of a $300 million plan.
Then there is the question of whether the I-91 applies to this proposal. Sources at City Hall acknowledged the I-91 financing formula may not apply because the SODO arena would be “all loan”, and not a “cash-on-cash transaction” -- meaning the council could exempt the project.
Councilmember Tim Burgess, who has been reviewing the plan, previously acknowledged this possibility, but he hinted the council will make amendments to the plan to make sure the city has a “fair value” return.
It remains an open question whether land value or incremental taxes (gleaned from new restaurant, hotel, and other business revenues), should factor into the fair value equation. I-91's language, as approved by voters, says any sports deals “shall exclude all intangible, indirect, non-cash items such as goodwill, cultural or general economic benefit to the City...” when factoring in “fair value”.
“It should not hinge on I-91 in my mind,” said Hall Walker, Seattle’s Deputy Director of Finance. “ArenaCo (Hansen) is guaranteeing revenue flow. The revenues secured are substantially higher than a treasury return. That’s not indirect.”
The King County Council will hear from an expert panel on Thursday whose members could have a different conclusion. King County is being asked to bond a portion of the project. Councilmember Bob Ferguson suggested Wednesday that he will ask for an amendment to the deal that would require an economic impact study to be completed after the Arena Memorandum of Understanding is approved by the public and private parties.
Ferguson said the study would have to be paid for by Hansen’s group. The San Francisco-based hedge fund manager said Wednesday he had no problem with that amendment or with funding that study.
Burgess declined this week to suggest amendments to the MOU on the deal.
Hansen said Wednesday he was not frustrated with the tone of the discussions, but acknowledged a delay in a decision could lead to missed opportunities.
Seattle Arena proponents will point to Sacramento, where this week Mayor Kevin Johnson suggested he was giving up hopes to build a new NBA arena and instead would turn his attention to attracting an Major League Baseball franchise. The Maloof Family, which owns the NBA’s Kings, pulled out of an arena financing plan there, and many observers consider the franchise to be on shaky financial ground.
Sources told KING 5 that Bellevue is still interested in building an NBA/NHL arena if the Seattle deal falls through. Seattle Center Director Robert Nellams, who calls Key Arena one of his anchor tenants, has suggested to the council it would be better to be in “cooperation” with Hansen, rather than “competition” with Bellevue.
The SODO arena would not be constructed without an NBA team secured for Seattle. “We’re talking about making an $800 million to $1 billion investment here,” said Hansen.