Thiel: Council hears arena help is loan, not gift

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by Art Thiel

SportsPressNorthwest

Posted on June 29, 2012 at 1:30 AM

After a presentation by staffers of the King County Council's finance committee staff Thursday morning, Julia Patterson was the  first of the council to recognize publicly that Chris Hansen's proposed $490 million plan was . . . well, let her tell it.

"As a member of the state Legislature, I voted no on two different stadium proposals," she said. "This feels different."

While making no commitment on her vote -- there are multiple reports and hearings to come -- Patterson after the presentation understood that the cost to property-tax payers in King County was pennies annually, and protections to the general fund were large. She seemed impressed.

"I voted no (on previous sports stadiums) not because of sports but because of the (public financing)," she said during the session, describing her remarks as thoughts out loud. "If the intentions (of this project) are good and the impacts mitigated, we must decide whether the remaining risks are worth it for basketball, knowing that nothing is risk-free.

"The question was whether this was a subsidy, but if it is a loan, governments make loans all the time. If the risks are that small, we may well look at the risks and and say (the project) is worth doing."

Council member Bob Ferguson asked staffer Mark Melroy, whose presentation included a review of the national and local analyses of public participation in sports stadiums and arenas, if he could answer the question of whether Hansen's ask of a maximum $200 million from the city and county in the form of tax abatements was a subsidy or a loan.

"You could call it a subsidy," he said, "but it's different than a direct cash infusion or the creation of new taxes."

That speaks to the pivotal aspect of Hansen's unusual pitch for funding: Debt from the municipal bonds used to help build the arena will be retired on a 30-year schedule of payments that include rents from the teams as well as a forgiveness of taxes on property, sales and admissions, as well as the city's B&O tax and a leasehold excise tax -- tax revenues that would not exist if the arena were not built and operated.

For the first time, the tax revenues were presented under the $200 million scenario: The city's share of tax revenues put back into the arena would be about $6.7 million annually, and county's share about $370,000, based upon a previously agreed-upon inter-local ratio between the governments.

That $7 million total in the first year would be combined with $7 million in base rent and additional rent paid by the NBA and NHL teams to cover the estimated $14 million first year cost of the bonds.

Melroy's testimony disclosed for the first time that Hansen originally asked for a debt schedule that was backloaded, so that the early years were less expensive. The county said no.

"The county did good job negotiating a more even distribution," Melroy said. "The deal is that the payments escalate one percent a year for 10 years, then level off. That (backloading) was a described in the (sports-stadium) literature as a danger to be avoided."

The tax revenue figures are based on several assumptions, including a starting price of a $55 average for regular season NBA and NHL tickets, and a 1.67 percent annual ticket price growth, and no playoffs nor lockouts. County staffs have worked out scenarios that include playoffs and lockouts as well.

Other information showed that city and county direct taxes would cover 57 percent of the project's cost, while team and concert and other event rentals would account for 43 percent of debt retirement.

Regarding risk, Council staffer Wendy Soo Hoo presented an analysis for the public funding claimed to support the proposal as well as its safeguards. She was asked by Ferguson for a summary of her findings.

"While there are economic factors that should be investigated further, this deal as proposed already accounts for a lot of the cautions" that grew from the experiences of building stadiums elsewhere, she said.  "It gave me some comfort. That said, the deal needs to be scrutinized well."

Because this meeting was of the finance committee, there was no discussion of the project's most controversial aspect -- its location in SoDo, just south of Safeco Field, where Hansen has already spent $40 million acquiring property.

Earlier this week, council member Larry Gossett told supporters that, based on information received so far, he was "favorably disposed" to voting yes on the memorandum of understanding between Hansen and the governments.

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