Thiel: Hansen makes a compelling arena case

Print
Email
|

by Art Thiel

SportsPressNorthwest

Posted on March 10, 2012 at 8:00 AM

For 45 minutes at City Hall Wednesday night, would-be arena mogul Chris Hansen calmly answered questions from politicians, bureaucrats and agency heads who reflected Seattle’s pain from repeatedly getting kicked in the bicuspids by pro sports owners, starting with the loss of the Seattle Pilots in 1970.

In the sometimes lame give-and-take, he made a point lightly understood but significant for grasping why his idea is different than those of his sporting predecessors more practiced in the art of shoe-leather dentistry.

“Our equity in this project is larger than the city (and county combined)," he said. “Are we going to risk a $600 million investment over a $2 million annual shortfall?”

Unlike the Kingdome, unlike KeyArena, unlike Safeco Field, unlike Century Link Field, this project proposes to put the privates’ privates at greater risk than the public’s privates.

That’s a new one for Seattle.

Not saying there isn’t some public risk. Not saying that some people, businesses and industries aren’t going to feel pain. Not saying it’s going to work.

But putting $290 million in private money up front is something no other enterprise has done in the modern sports history of this town.

It changes the whole dynamic. It takes government off the motorcycle and puts it in the sidecar, where it belongs.

Each of the four Seattle sports buildings mentioned all were driven by public grants of tax money that put government in a position to do what it is not trained to do – manage an entertainment facility.

It isn’t necessarily a fatal flaw, but in the cases of the Kingdome and the Key, it was. Both were built by a conservative public entity, forced by public accountability to choose the least expensive option when it came to creation, maintenance and upgrading of the enterprises.

The Kingdome lasted 24 years, partly because no King County Executive wanted to write the big check for the preventive fix to the roof that ultimately failed, dooming the building.

The Coliseum remodel that became KeyArena lasted 13 years before the anchor tenant moved away --seven years short of the construction-bond debt retirement --  unable to survive because the funding mechanism made the building economically obsolete for the bloated needs of its main income source.

The football and baseball stadiums were better deals, but if the Mariners owners were given truth serum, they would admit being bitter to this day that they had to pay $120 million on cost overruns mandated by the Legislature.

The public-private deal that worked best was the last one, the Seahawks stadium that won a 51 percent majority in statewide voting in 1997.  The team owner, Paul Allen, picked up a chunk of the tab and has continued to spend on the building and the team, because he can. Watch what happens with free agent quarterback Peyton Manning.

Sports spending is a Hansen passion too.  That’s the deal with rich guys. They can do what they want, unconstrained by the limits of government or, hey, even good business judgment.

Hobbled by a brace protecting his right knee, whose ACL and MCL was torn up by a ski accident, Hansen limped into City Hall to submit to questions from several members of the government-appointed Arena Review Panel.

His first public explanation of the plan to build a 20,000-seat area south of the stadiums not only wasn’t adversarial, it was uncommonly polite for such things. It’s what happens when government is offered money, instead of being asked for it.

In several different ways, Hansen was asked by panelists the same thing: Why won’t we get screwed in this deal?"

“I’m trying to put this (deal) in a (situation) where it won’t blow up,”  Hansen said. The easiest, and only, way to do that is to make private capital more responsible for success than government. The public portion is limited to using the combined bonding capacity of the city and county for what amounts to a $200 million loan, and a return of tax revenues generated by the arena that would not otherwise exist, plus an admissions tax (a user fee). No new taxes, no diversion of current revenues, only a reduced capacity to borrow for other projects.

“We will pay for (any construction-cost) overruns,” he said. “And the owners will backstop any (annual operating revenue) shortfalls with increased rent.”

No current or former Seattle pro sports owner has come within miles of those remarks.  As he reads those quotes, hot coffee will burn its way through the nostrils of ex-Sonics owner Howard Schultz.

Who “we” is, remains an open question.  Hansen dodged questions about his fellow investors, other than to say they would be from Seattle and his current home of San Francisco, where he is a hedge-fund manager.  He was not asked about what return he is promising investors, other than to say they understood that they are not getting into pro sports ownership “to make money.”

He avoided talk of targeted franchises to poach, and the nature of his talks with the NBA. He repeatedly made a point that he didn’t have answers to the issues of traffic mitigation and infrastructure upgrades, but will listen to those who know better. But he was firm in his commitment to the SoDo parcel in which he has already invested more than $20 million.

"This is where I want it to be," he said, "and where it should be."

That will be a point of argument for some, as will many other aspects of the project. That's what the panel and the city and county administrations are going to hash out over the next year. But first:

“My job is to explain (arena financing)," he said.  "I think it’s a fair deal. Am I biased? Probably.”

After Hansen departed, his bias was buttressed by a consultant hired by the city, Justin Marlowe, whose expertise is public-private partnerships. He used the phrase "remarkable thing" to describe the financing.

"I've talked to people all over the world regarding public-private partnerships," Marlowe said. "These deals almost always come down to a feeling of trust between the partners.

"This seems to feel right."

After decades of mistreatment by the barons of ball,  the taxpaying public has every right to its skepticism. Pick apart the consultants as house organists, the investors as charlatans, the site as unworkable and the politicians as desperate. Feel free to question -- in fact demand to know -- who picks up the tab for overpasses, condemnations and litigation and that 10,000 other questions that will take at least a year to answer.

Some or all may prove valid. Also be open to the notion that there remain people who mean what they say, and say what they mean. Even in pro sports.

More Art Thiel

Print
Email
|