City Council takes close look at arena financing
Seattle property owners would pay an additional $2 to $3 a year in taxes for the new sports arena proposed for Sodo, because it would be removed from the property-tax rolls.
Seattle Times staff reporter
Seattle property owners would pay an additional $2 to $3 a year in property taxes for the new sports arena proposed for Sodo, because as a publicly owned facility the site would be removed from the property-tax rolls.
"So it's not true that this is not costing the taxpayers of the city anything," Seattle City Councilmember Tim Burgess said Wednesday during a committee hearing on the arena's financing.
Deputy budget director Hall Walker acknowledged that city homeowners would pay slightly more in property taxes. But he said additional arena revenue, such as sales and admissions taxes, might return benefits to the city in the form of more money for schools, criminal justice, mental health, emergency-medical services and other programs funded in part through sales taxes.
"The important fact for the city is there is no impact to existing operations or revenues and the benefit to other programs is significant," Walker said after the hearing.
Both the city and King County councils are considering a proposal by hedge-fund manager Chris Hansen to build a new $490 million entertainment venue south of downtown.
Hansen and other yet-to-be-named private investors would contribute $290 million to the building as well as purchase a National Basketball Association team — a potential private contribution of about $800 million. Hansen also would try to lure a National Hockey League team to play in the arena.
The public contribution would be capped at $200 million, to be repaid through taxes and revenues generated by the arena.
Mayor Mike McGinn and Hansen have described the deal as "self-financing" and requiring no new taxes. The deal also contains a number of taxpayer protections, including nonrelocation clauses for the teams, operating and maintenance costs paid for by the investment group, and a reserve fund to cover any shortfalls in the city debt payments.
But council members said they are "playing catch-up" on a deal McGinn and Hansen have been negotiating for almost a year. The hit to city taxpayers was just one concern council members raised about the proposed agreement.
Burgess said that once the arena is built, the value of the building minus the land — about $400 million — would be added to the city's total property valuation. But because the city and county plan to buy the building, the arena owners wouldn't pay property taxes, and city homeowners would have to make up the difference.
"The rest of city taxpayers are going to subsidize this facility," Burgess said.
Council members Wednesday raised a number of questions about the proposal. Sally Bagshaw said she didn't understand why the city and the county planned to buy the land from Hansen for up to $100 million, when Hansen has paid about $40 million to acquire it.
"It's a good deal for him. I'm not sure it's a good deal for us," Bagshaw said.
Walker said the land will be purchased after it has received environmental approvals and construction permits for an arena, thereby increasing its value.
Bagshaw said after the hearing that she questions the Sodo location, not only because of its potential to hurt Port of Seattle and other freight operations, but because it will leave KeyArena at Seattle Center "a white elephant."
Construction of the waterfront tunnel and improvements to Mercer Street both would make the Seattle Center location easier for fans to get to. "We're investing billions in infrastructure. I want to capitalize on that," she said.
The council will take up the transportation issues surrounding the arena on Thursday.
Meanwhile, a recent report by a leading investment bank concludes that owners and fans benefit from public subsidies of sports arenas, but the facilities don't typically return broader community benefits such as economic development or long-term employment.
Thomas McLoughlin, managing director for UBS Wealth Management and one of the report's authors, said investors go after public financing because it's among the cheapest sources of capital for private developers.
But he said the Seattle deal, in which the bonds are repaid solely through arena taxes and revenues, poses less risk to the public.
"It becomes an easier decision for public officials. If bonds are secured solely by arena revenues, the public subsidy is smaller and the risk, to a greater degree, is transferred from the taxpayers to the investors," he said.
Hansen is scheduled to appear before the City Council committee June 20. He has announced a June 14 rally in Occidental Square to support the return of the Sonics. He's also bought ads on Google that direct readers to information about the arena proposal highlighting benefits such as "no new taxes" and "minimal effect on area traffic."
Council members say they won't make a decision until Hansen reveals the other members of his investment group and the city has a chance to vet their financial strength.
A spokesman for Hansen wouldn't say Tuesday when the names of the other investors might be made public.
Lynn Thompson: 206-464-8305 or firstname.lastname@example.org. On Twitter @lthompsontimes.