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Monday, February 13, 2006 - Page updated at 12:00 AM

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Sports Business

KeyArena could be profitable without Sonics, study finds

Seattle Times staff reporter

Sonics officials and fans expressed outrage when City Council President Nick Licata recently said Seattle would suffer little if team owners followed through on their threats to leave the city.

But Licata isn't alone in thinking KeyArena could survive the Sonics' departure. The city-owned arena could turn a profit without an NBA team by hosting more concerts, ice shows and college and high-school games, according to a study by a city consultant.

"Non-Sonics options pencil out, and that's the finding of sports-industry experts," Licata says of the recent study funded by Seattle Center.

Sonics Vice President Terry McLaughlin, who has been stressing the Sonics' economic value to the city while pressing for a $200 million subsidy to expand KeyArena, doesn't dispute the study's conclusions. But McLaughlin notes that the findings hold up only if the Sonics were to leave the region.

If a new NBA arena is built in Bellevue — an idea the Sonics have floated — that facility likely would take away concerts from KeyArena and doom its finances.

Seattle Center officials also say that for KeyArena to become a more attractive concert venue, it would need costly renovations — and those improvements would make a Sonic-less KeyArena less profitable.

The study adds a twist to the KeyArena debate as the City Council plans to spend the next six weeks analyzing scenarios for the arena with and without the Sonics. Yet many key players in the debate say the decision whether to support the Sonics' subsidy won't be made on strictly economic grounds.

Instead it's likely to come down to more subjective values, such as the hard-to-quantify pride and joy that Seattleites get from having an NBA team.

Bryce Seidl, a member of Mayor Greg Nickels' Seattle Center Task Force, agrees.

"If you expect an answer to KeyArena's future in a spread sheet you probably won't find it," said Seidl, president and CEO of Pacific Science Center.

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With or without the Sonics, KeyArena is projected to lose money until 2015, when the city pays off debt from the arena's 1994 remodel. Arena revenues have fallen $12.5 million short on scheduled debt payments, which has been a "major drain on the finances of Seattle Center" and the overall city budget, said Councilman David Della, chairman of the parks committee.

That deficit led the city to sell 12 acres of prime Seattle Center property to the Gates Foundation last year. It also played a part in the elimination of 50 jobs at the center in recent years.

The Sonics are seeking the $200 million subsidy to expand the arena with amenities, such as restaurants, that would hopefully generate more income. The Sonics also want a public subsidy to pay off the $68 million in remaining KeyArena debt.

If state lawmakers do not approve such a deal — which would be funded mainly by extending hotel, rental-car and restaurant taxes now used to pay for Safeco Field and Qwest Stadium — Sonics Chairman Howard Schultz says the owners might sell the team or move it out of Seattle when the team's KeyArena lease expires in 2010.

In response to that ultimatum, Licata told Sports Illustrated this month that the Sonics' departure would amount to a negligible loss for the city. "On an economic basis, near zero," Licata said. "On a cultural basis, close to zero."

As part of its own review, Seattle Center hired a consulting firm, Convention Sports & Leisure of Minneapolis, to study options without the Sonics and the WNBA's Storm, which are owned by the Sonics.

The Sonics and Storm use KeyArena 62 days a year, accounting for about 40 percent of the arena's annual events.

The consultants looked at three scenarios without the Sonics and Storm.

One assumed KeyArena would book 28 additional concerts, ice shows, and other sports events — such as college basketball and professional wrestling — a year without Sonics or Storm games.

The second scenario mirrors the first but adds eight Arena Football League games to the mix.

The third option considers KeyArena without indoor football or the Western Hockey League's Thunderbirds, who now play 40 games a year at the arena. That scenario leads to even more concerts and ice shows but fewer total events.

Under all three scenarios, KeyArena would turn a profit — once the 1994 debt is paid — ranging from $1.9 million to nearly $3.1 million per year. But that's only if a new NBA facility is not built in the area.

Seattle Center staff told the mayor's task force that KeyArena needs $20 million in renovations to attract the mix of events that would produce a profit. Fixes would include improved dressing rooms, catering areas, technology upgrades and a $3 million curtain system that would help convert KeyArena into a 5,000- to 7,000-seat concert hall.

Although the cost of renovations would make the non-Sonics options less rosy, Licata thinks payments could be spread over time, allowing the arena to still operate at a profit.

Even if that is the case, Seidl says that the Sonics and Storm bring about 600,000 visitors a year to Seattle Center. Losing those visitors would probably hurt restaurants, parking lots and other businesses. How much is hotly debated.

"Those are not easy numbers to put a finger on," Seidl said.

Schultz has touted a Sonics' study, which shows the team adds more than $200 million to the local economy through spending by fans, players and the team.

Seattle Center has hired economist Bill Beyers to check the Sonics' claim and conduct his own study. Beyers recently told the task force the Sonics' analysis overstated the team's impact and was "not a good study."

Beyers is scheduled to present his report to Della's committee on Wednesday.

Della says his committee will try to vet competing contentions about the Sonics and KeyArena. "We're going to do a thorough and balanced review of all options," he said. "The bottom line is that KeyArena and Seattle Center have to be financially solvent. We have to be prepared for life without the Sonics."

Bob Young: 206-464-2174 or byoung@seattletimes.com

Copyright © 2006 The Seattle Times Company

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