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Why SoDo is the Better Deal for Seattle

Recently, SoDo Arena investors Pete and Erik Nordstrom talked about the benefits of our plan vs. the plan put forward for KeyArena in the pages of the Puget Sound Business Journal. Benefits that include:

  • Private financing
  • Sizable tax revenues for the city
  • A more economically attractive location for potential team owners

You can check out the Nordstrom’s full piece from the Puget Sound Business Journal here: http://bizj.us/1p8xe3

— Sonics Arena Team

UW Evans School Compares Tax Revenues From SoDo Arena and KeyArena

A couple months ago, we funded a study by the University of Washington’s Evans School of Public Policy & Governance for a public finance analysis of the SoDo and KeyArena proposals. We wanted the Evans School to independently analyze how each proposal would affect the tax revenues of Seattle.

The final report is now out, and it has some interesting findings. As they write (emphasis ours throughout):

Under a “base case” set of assumptions applied to both proposals, the model suggests the following:

SODO’s estimated contribution to the City General Fund is three times OVG’s. The SODO arena would send an estimated $103 million (inflation-adjusted) of new tax revenues to the City General Fund over 35 years. Under the same base case assumptions OVG would generate just under $34 million. These estimates are also consistent across different scenarios. For example, under an “aggressive” set of assumptions SODO would send just short of $111 million to the General Fund, where OVG would send just short of $47 million. “Aggressive” in this context means more successful teams that could command higher ticket prices, higher attendance at games, and other assumptions that would increase revenues. By contrast, under lower ticket prices, lower attendance, and other “conservative” assumptions, SODO and OVG would send to the General Fund just short of $67 million and just short of $25 million, respectively.

Both plans redirect roughly the same amount of tax revenue. In the base case scenario, the SODO plan redirects approximately $205 million of City admissions tax. The City admissions tax has historically financed the public’s share of capital investments in publicly-owned Seattle sports and entertainment facilities. The SODO group’s position is that collecting that tax on a privately-owned facility puts team owners at a competitive disadvantage relative to markets that do not collect that tax. OVG asks the City to redirect to the City Arena Fund approximately $167 of new City retail sales tax, construction sales tax, admissions tax, parking tax, and the leasehold excise tax. If OVG asks the state and county to redirect their respective portions of those same taxes, then under the OVG plan the total taxes redirected exceed $200 million.

OVG’s impact on the City’s finances hinges on revenue sharing. OVG has said it will consider transferring some portion of the revenues from the City Arena Fund to the General Fund once the City Arena Fund has received $40 million of redirected revenues. Our model indicates the City will reach that threshold in approximately year 9, and it assumes an annual transfer to the General Fund equal to 10% of the revenues that flow to the City Arena Fund each year. Of course, the City could negotiate a much higher sharing rate and send more revenue to the General Fund as a result. This assumes, of course, that the Arena Fund revenues are more than adequate to cover the arena’s annual capital spending needs. It also assumes the City Arena Fund would not be the funding mechanism for a major arena renovation. Recent experiences suggest that even with a properly-funded capital spending plan, most NBA facilities require a major renovation 12-15 years after opening, with renovation costs ranging from $50 million (New Orleans) to $192 million (Atlanta). If the City Arena Fund is the funding source for a renovation, those costs would almost certainly exceed OVG’s contribution to the General Fund.

SODO would contribute approximately $100 million of property taxes to local governments other than the City of Seattle, especially schools. We focused on City of Seattle tax revenues because we can assume both proposals will advance the tax arrangements with the City outlined in their public statements to date. We are less sure about similar arrangements with King County, the Port of Seattle, Seattle Public Schools, and other overlapping local governments. However, we can be sure that: 1) OVG will not pay property taxes because the renovated Key Arena will remain publicly-owned; 2) SODO will be privately-owned; and 3) SODO has pledged to pay all applicable local property taxes. Seattle Public Schools’ tax rate in 2016 was $2.18 per $1,000 of assessed value, and the State School Fund rate was $2.17 per $1,000 of assessed value, for a combined schools rate of $4.35. At that rate, SODO would contribute $53 million (inflation-adjusted) to public schools over 35 years. Note also that after the state budget passed in late June, the State Schools Fund rate in Seattle will likely increase. Add to that an additional $3.51 per $1,000 for the ports, emergency medical services, and other local taxing jurisdictions, and SODO’s total property tax contribution to governments other than the City of Seattle is approximately $98 million.

While tax revenues is just one of many factors the Seattle City Council needs to consider, we believe the findings of the Evans School — when combined with the clear traffic/parking/transportation benefits of SoDo, as well as the fact that our project will be entirely privately financed — highlight that our proposal for a NBA/NHL arena in Seattle Stadium District will benefit, rather than burden, Seattle and its taxpayers.

You can check out the full Evans School report at their website.

The Three Ts: Transportation, Timing, and Taxes

In response to recent questions raised by some, we would like to share a financing letter provided to us by JP Morgan Chase & Co, the largest bank in the U.S. and one of the pre-eminent lenders in professional sports. While similar in some respects to Oak View’s Goldman, Sachs & Co financing letter, a notable difference is that there is no mention of “tax rebates” in the JP Morgan financing letter. This is because no public tax money is required for the SoDo Arena project.

As we have highlighted on a number of occasions, with over $150 million in capital invested in real estate and legal and entitlement costs related to the arena project, we have already invested the vast majority of the equity necessary to build a world class sports venue. Accordingly, this letter should provide clear evidence of the ability of our group to finance the project — and do so without public financing from the City, County or State.

We continue to believe that an arena in SoDo is the best option for the City and the region as a whole. It is clearly the location with the best parking and transportation infrastructure. With a world-class design and an entitlement process nearly complete, the timing of our project is years ahead of any KeyArena redevelopment.

Finally, since our arena project will be completely privately financed — with our group covering all construction costs and cost overruns — there will be a significant tax windfall for the City, County, and State.

We believe that when you compare our plan and the plan for KeyArena, it all comes down to these three Ts: transportation, timing, and taxes. And on every front, the SoDo Arena offers a better solution for the City and its sports fans.

— Chris Hansen, Wally Walker, Erik Nordstrom, Pete Nordstrom, Russell Wilson
View the financing letter:

SoDo Arena Comparison with KeyArena Proposals

From arena design, to transportation and parking, to the need for public financing and funding, to city tax revenue generated — there are major differences between our arena plan in Seattle’s Stadium District SoDo and the proposals for KeyArena.

 

  • The RFP said no public financing. The Oak View Group (OVG) and Seattle Partners (SP) proposals both require public financing. We do not.
  • OVG and SP both offer “music-first” proposals that could make attracting a NBA or NHL team less likely.
  • Our SoDo proposal does not ask for exclusivity. If OVG or SP proposals are granted the exclusive right to build an arena in Seattle it could force prospective NBA or NHL owners to look outside the City to seek a better share of arena economics.
  • The OVG and SP arena proposals will cost the city — public financing, taxes, parking, sponsorships, exclusivity, etc. In contrast, our SoDo arena proposal will benefit the city: 100% private financing, no financial risk, $27 million in public benefits including $8 million in public art, and significantly more new tax revenue that flows directly to the City.
  • Is the Port of Seattle really considering spending $25-30 million of King County property tax money on a parking garage for OVG while investing only $5 million in the Lander Street Overpass that directly benefits the Port?
  • The OVG and SP proposals both ask for significant public subsidies — the present value of which we estimate is well in excess of $200 million.
Financing
OAK VIEW
GROUP
SEATTLE
PARTNERS
SODO
ARENA
Total Cost $564M $579M $600M+
Hard Owner Equity ? ? $200-300M (including $100M+ invested to date)
Synthetic Equity/Quasi-Equity ? ? 0
Private Debt ? ? Balance
Public Debt 0 $250M 0
Risks to City
OAK VIEW
GROUP
SEATTLE
PARTNERS
SODO
ARENA
Entitlement/Development/Deposit Cost Risk Yes Yes No
Cost Overrun Risk Yes ? No
Capital Improvement Cost Risk Yes Yes No
Exclusivity Risk ? Yes No
Public Subsidies
OAK VIEW
GROUP
SEATTLE
PARTNERS
SODO
ARENA
SODO ARENA
ESTIMATED TAXES*
City County State Total
Admissions Tax Waiver or Recapture Yes Yes Yes
Taxes on Arena Construction Yes Yes No 11.5 2.0 29.0 42.5 one-time
B&O Tax ? Yes No 1.6 1.6 year one
Sales Tax On Concessions & Merchandise ? Yes No 0.4 0.1 3.9 4.4 year one
Property Tax ? Yes No 1.5 0.4 3.2 5.1 year one
Lease Excise Tax Yes Yes No year one
Parking Tax Yes Yes No 0.6 0.6 year one
Utility Subsidy ? Yes No
Parking Revenue Subsidy Yes ? No
Seattle Center Sponsorship Sales ? Yes No
Landmark Designation Benefits Yes No No
Total One-time Taxes 11.5 2.0 29.0 42.5
Total Annual Taxes (year one) 4.1 0.5 7.1 11.6

*Based on two team building (NHL & NBA)

 

For Reference: KeyArena RFP Redevelopment Submissions to City of Seattle

SoDo Arena Project Updates

On April 6, the Seattle Design Commission approved the urban design and public benefit of the proposed SoDo Arena and recommended the conditional street vacation of a one block segment of Occidental Avenue South be approved by the Seattle City Council.

This video is a condensed version of our presentation to the Design Commission, highlighting how the new proposal addressess the concerns raised by the Seattle City Council, including additional public benefits, mobility improvements for the Seattle freight community, and importantly, the SoDo Arena project is now 100% privately funded.

The next step is for the Seattle City Council to vote on the street vacation. If approved, we stand ready to get to work bringing the Sonics and the NHL back to Seattle!

To the Sonics Faithful

We’re excited to announce that we just submitted a new petition to the Seattle Department of Transportation (SDOT) requesting the vacation of a portion of Occidental Avenue South to allow construction of the SoDo Arena.

If approved by the City Council, this conditional street vacation will finally put us in position to work with the NBA and NHL to acquire teams for Seattle.

This is the piece of Occidental Avenue S. we’re asking the city to vacate.

Since we last submitted a street vacation petition, we have reworked our proposal to address the concerns raised by Seattle City Council members.

This new petition incorporates all amendments to the previous petition considered by the City Council, and builds on it with several important differences:

  • The Arena Will Be 100% Privately Financed – The Arena requires no public financing – it will be 100% privately financed.
  • Traffic Improvements – We are contributing an additional $1.3 million to implement several SDOT projects in the 2016 Freight Master Plan – on top of the benefits recommended by SDOT and Seattle Design Commission.
  • No Team Means No Arena Means No Vacation – There will be no vacation unless and until an NHL or NBA team is acquired and the arena is under construction. If a team isn’t acquired and the arena project does not get built in this location, the street will not be vacated.
  • Joint Scheduling Agreement – An agreement has been made with the Seahawks, Mariners, and Sounders, ensuring no major event will occur at the arena at any time that overlaps with major events at Safeco Field or CenturyLink Field.

Also, since the City Council considered the previous street vacation petition last year the long-stalled Lander Overpass project is close to being fully funded, with the SoDo Arena making a contribution to that important freight mobility project.

In addition, the Community Benefit Agreement and Labor Peace Agreement remain in place.

Recent rendering of the arena — picture a sea of green and gold as tip-off approaches.

All told, the new benefit package totals almost $27 million, not including the mitigation that will be required by the Master Use Permit approval or the cost of purchasing the section of Occidental.

The years-long Environmental Impact Statement for the arena proved that this little-used section of Occidental will have minimal effect on the flow of traffic through the stadium district. Just like the vacation of Occidental that was approved for Safeco Field two blocks north of the Arena site, the public benefits of the new venue will far outweigh the minimal effect.

As we’ve said before, approving the street vacation will not interfere with the City’s RFP process for Key Arena. Any Key Arena renovation plan will take 5-7 years to complete. Our plan, on the other hand, can be ready to go quickly with the street vacation. This puts the city in the best position to take advantage of any franchise opportunities.

At the end of the day, our #1 goal is bringing the NBA and NHL back to Seattle, and we look forward to working with the Mayor and the City Council as they consider the revised petition.

Let’s Bring ‘Em Back!

— Chris Hansen, Wally Walker, Erik Nordstrom, Pete Nordstrom, Russell Wilson.

Sports City

2008 was a big year for me.

It was my first year as starting QB at NC State. My first trip to a bowl game. And the honor of being named first-team All-ACC.That year was also a big one for Seattle sports fans, but not for a good reason. It was the first year without NBA basketball in our city.

Growing up in Virginia, the Sonics were one of my favorite teams to follow. Gary Payton, Shawn Kemp, Sam “Big Smooth” Perkins — on the basketball courts near my home, these were the players I often pretended to be.

The younger me could only dream of one day being a professional in any sport, let alone win a Super Bowl. Now I get a chance at fulfilling another dream. Being part of an NBA ownership group.

I have joined and partnered with the Sonics Arena Investment Group because I believe in the plan Chris Hansen, Wally Walker, and Erik and Pete Nordstrom have put together. And I believe building a privately funded, state-of-the-art arena alongside Seattle’s other great stadiums is the best shot for bringing the NBA and NHL back to the city I now call home.

Recently, our group sent a letter to the Seattle City Council outlining a new proposal to privately fund the arena. In the letter, we provide details about our commitment to improving freight mobility in the area, and emphasize that the street vacation wouldn’t go into effect until an NBA or NHL team is secured. We also make clear that by approving the conditional street vacation the Seattle City Council will not interfere with the RFP process proposed for Key Arena, but rather put Seattle in the best possible position to take advantage of franchise opportunities that could become available.

One thing not emphasized in the letter, however, is something I know the City Council shares my passion for: How the return of the NBA can benefit Seattle youth, particularly those in traditionally underserved communities.

Obviously, I’m a big believer in the power of sports to improve lives. Not only do they teach kids critical lessons like the importance of teamwork and commitment, they also provide much-needed structure and activity outside of school.

Sports — and sports idols — can also inspire kids. Like a lot of you, this is something I experienced first-hand when I was young. And it’s something I experience first-hand today, as my fellow Seahawks and I visit young people throughout Seattle communities.

For years, the Sonics were an inspiration for the kids of Seattle. Local heroes our youth could look up to. Even thousands of miles away, I looked up to Gary Payton, Shawn Kemp, and Ray Allen — I can only imagine what it was like being able to watch them in your hometown.

Bringing the NBA — and the NHL — back to Seattle will provide our youth with a new set of local heroes to look up to. Kids who love football have a pro team to follow. Same with baseball fans and soccer fans. Now it’s time to inspire the kids who love basketball and hockey.

Approving the conditional street vacation makes the Arena shovel-ready, and sends a loud message to the NBA and NHL that Seattle is ready and eager for teams. That we want our Sonics back to accompany the Storm, and a hockey team to pick up where the Seattle Metropolitans left off nearly a century ago. All we need is for the Seattle City Council to make this one last nod of approval.

I’m excited to be a part of the Arena Group, and I look forward to watching the Sonics and the NHL play in my adopted hometown.

One lasting memory that I know correlates with every Seattle fan is when we won the Super Bowl and were able to bring home the Lombardi trophy, the millions of faces and hearts and souls that were, are and will be forever connected to our team is what can help to continue to bring a community together.

This is what our society and our generations to come all need because it brings all different races, socioeconomic statuses and demographics together under one roof. We do not want to just win on the court and the ice, but also in our beloved community.

— Russell Wilson

Moving Forward

​​Following the Seattle City Council’s vote last May to deny the vacation of a portion of Occidental Avenue South we reiterated our commitment to bringing the NBA and NHL back to Seattle. We said we would take time to step back, evaluate our options, better understand the Council’s concerns and find a path forward.

For the past five months, we’ve been doing just that. We have carefully considered the various concerns expressed by Council members and identified steps we could take to address those concerns. In a letter to the Mayor and King County Executive — both of whom share our goal of bringing the Sonics and NHL back to Seattle — we described the steps we are willing to take to move the Arena project forward.

First, we will direct contributions to a package of additional SODO traffic improvements, which will improve freight mobility through the area.

Second, we agreed to commit future payment of compensation for the vacated street to the city’s financing package for the Lander Street Overpass, thereby helping to close the funding gap for that important project.

Finally, we have agreed to revising the street vacation petition to eliminate public financing of the Arena. Terminating the MOU would allow the city and county to recoup the $200 million in debt capacity and free-up Arena tax-generated revenue streams.

To make this all possible we have asked for approval of a revised conditional street vacation, a waiver of the city’s admissions tax, which has been granted for the other sports venues in Seattle, and an adjustment of the city’s B&O tax for revenue generated out of town.

We are hopeful these additional steps will address the concerns of the Council so the Arena project can move forward – which remains the critical first step to bringing the NBA and NHL back to Seattle.

Go Sonics!

— Chris Hansen, Erik Nordstrom, Pete Nordstrom, Wally Walker

Statement from Chris Hansen on behalf of the Arena Investment Group

​​Today’s City Council vote was disappointing but we don’t believe it is the end of the road in our quest to bring the NBA and NHL back to Seattle. We know all the fans who have stood solidly by us these past years share our disappointment but it is important that we all stay focused on our shared goal.

We now need to take a little time to step back and evaluate our options, better understand the council’s concerns and find a path forward. We will keep you posted.

Investment Team Letter to City Council Urging for Street Vacation

​Yesterday Sonics Arena Investment Team members Erik Nordstrom, Wally Walker and Pete Nordstrom sent a letter to the Seattle City Council, urging the Council to approve the Occidental Avenue street vacation on May 2nd. Here is the letter:

A Great Night For Sonics Fans!

We wanted to take a moment to thank everyone who came down to City Hall yesterday to show their support for making Sonics Arena shovel-ready. Our team was once again humbled by the dedication Sonics fans, hockey fans and civic leaders have displayed throughout this long review process.

We’d like to especially thank the 13,711 people who signed our petition and Cooper for delivering them. A big thank you as well to KJR, Softy, Lenny Wilkens, Brandon Roy, James Donaldson, Donald Watts, Jaci McCormack from Rise Above, Kevin Calabro, Mayor Ed Murray, Mike McGinn, the Seattle Sports Commission and Unite Here Local 8, among many others for your support last night. And we’d like to thank the City Council, for providing a public forum for people to weigh in on this work.

Last night was a critical opportunity for fans to voice their approval. Now it’s time to keep the pressure on before the City Council votes late April or early May.

Over the next several weeks the Council will hold more meetings to review specific aspects of this proposal before the final vote. So please email the entire City Council at council@seattle.gov to remind them how much community support there is to approve the street vacation. Here are some talking points you can consider using:

  1. After a lengthy environmental review process the Seattle Department of Transportation recommended the street vacation.
  2. The Seattle Mariners received street vacations for Safeco Field and the Mariners Parking garage.
  3. The street vacation is the final step of the EIS process and will give the investment team the green light to build an arena which puts Seattle in the best place it can be to take advantage of opportunities that will come up.
  4. Approving the street vacation will show the NBA and NHL we are ready to welcome professional teams to our city.
  5. The Mayor and the Seattle City Council deserve our thanks for all the hard work they’ve done over the past three years to bring us to this exciting moment.

There’s still much more work to do, but with your support, we are now closer than ever to welcoming the NHL to Seattle and BRINGING BACK OUR SONICS!

Thank you!

— The Sonics Arena Team

An Update on the Arena Approval Process

As we wait for the City Council vote on the street vacation we wanted to remind everyone of the long and involved process we’ve been through the past three years. We are proud of the work we have accomplished with the public, transportation and economic experts, civic and elected leaders as we move forward with our shared goal of returning the Sonics to Seattle and welcoming the NHL back to our city.

In May 2015, we shared an update on the Environmental Impact Statement work to celebrate the completion of the Final Environmental Impact Statement (FEIS). The FEIS, after careful analysis, supported by the initial positive input from an Expert Review Panel, confirmed that there will be no significant adverse impacts standing in the way of completing the permitting process for a new arena. We shared a summary of the FEIS findings as well.

We believe that this project is stronger because of the public involvement and expert analysis of our initial proposal. Just how far have we come? Let’s take a quick look at our shared work as we prepare for the City Council’s review of the necessary street vacation to construct the new arena in the Stadium District:

December 2011

After months of negotiations, the Mayor of Seattle and King County Executive reach agreement with Chris Hansen on a Memorandum of Understanding for the development of the SoDo Arena.

March 2012

An Arena Review Panel appointed by Mayor of Seattle and King County Executive convenes to examine the arena proposal.

April 2012

After numerous public meetings, the Arena Review Panel issues its favorable report.

“Based on their review, the Panel believes that the proposal is favorable, has promise and is generally consistent with the principles set forth by the Mayor and County Executive…”

May 2012

King County Council Expert Review Panel undertakes comprehensive review of the arena proposal.

May 2012

A Seattle Department of Transportation-commissioned multimodal transportation access and parking study is published.

“Arena event traffic is well within the existing parking, traffic and transit capacity of the area.”

July 2012

County Council Expert Review Panel issues favorable report.

“The proposed public-private partnership is one of the most favorable to the public of any recent partnership. The public investment carries little or no risk to the county’s financial well-being, its bond rating or its general fund….”

May – July 2012

King County Council Budget and Fiscal Management Committee and Seattle City Council Government Performance and Finance Committee consider the proposal in multiple public meetings.

July 2012

Joint City and County Council public hearing on proposal.

July 2012

Full County Council consideration of Arena MOU, approved with conditions.

September 2012

City Council makes additional changes and approves the MOU.

October 2012

City and County Councils both approve amended MOU. The King County Council approves the MOU 9-0 while the Seattle City Council approves 7-2.

October 18, 2012

MOU signed by Chris Hansen, Mayor of Seattle, and King County Executive.

November 2012 – September 2015

After 7 meetings over 3 years the Downtown Design Review Board grants unanimous approval of final design of the arena project.

December 2012 – September 2015

After 10 meetings over 3 years the Seattle Design Commission unanimously recommends approval of the vacation of Occidental Avenue for the arena project.

July 2013

Economic Impact Analysis published.

The new analysis of the SoDo Arena shows the facility would have “a total net positive economic benefit” of between $230 million and $286 million a year to the economy of King County, with most of the money flowing through the City of Seattle’s economy.

— Puget Sound Business Journal

August 2013

Draft Environmental Impact Statement (DEIS) issued.

September 10, 2013

Draft EIS public hearing.

September 19, 2013

Draft EIS public hearing.

May 7, 2015

Final EIS issued.

While a number of potential transportation impacts, and associated mitigation measures to address those impacts were identified, no significant adverse impacts in any other area were identified.

October 29, 2015

Addendum to FEIS issued.

The Seattle Department of Planning and Development re-analyzed pedestrian traffic numbers used in the EIS following concern expressed by the Seattle Mariners. Upping the Safeco Field game attendance from 13,000 to 40,000, the addendum certified that “the changes do not create additional significant impacts.”

November 30, 2015

SDOT report and positive recommendation for street vacation submitted to the City Council.

“The FEIS shows that this portion of Occidental does not serve as a critical function to the street grid.”

“The FEIS shows that this portion of Occidental does not serve a critical function to maintain freight mobility.”

“The segment proposed to be vacated is not included in the Port’s important Heavy Haul Network. This is a clear sign that Occidental is not necessary to freight movement or Port Operations.”

“The SDOT does not find adverse land use impacts associated with the proposed vacation.”

We are humbled by the amount of support we’ve received for returning the NBA and NHL to Seattle, but we also know that we must be patient and transparent as the arena process moves forward. There’s still work to be done, but as you can see, we’ve come a really long way.

— The Sonics Arena Team