The Seattle Arena Opposition: How to Parry a Billionaire

There aren’t many cities that would seriously consider turning their backs on an investment of nearly $300 million in private capital within their boundaries, particularly during trying economic times. However, if a cobbled-together coalition of strange-bedfellow opponents get their way, that’s exactly what could happen to hedge fund manager Chris Hansen’s $490 million arena proposal.

The Arena Plan

The investment group, led by Seattle native Hansen and including Microsoft CEO Steve Ballmer as well as Erik and Peter Nordstrom, has pledged $290 million in cash toward the arena, as well as upwards of $500 million in additional capital to buy both an NHL and NBA team. To garner public and political support, Hansen’s group has established the web site SonicsArena.com.

The arena would be multipurpose in nature, built to house approximately 18,000 fans for a single event, and designed specifically to acquire both an NHL as well as NBA team. The emotional quotient for Seattle is the potential return of the Sonics, who left for Oklahoma City after the 2007-08 season. In a politically expedient (yet wholly unsatisfying) settlement to a lawsuit that paved the way for the team’s departure, Seattle retained the rights to the name “Sonics” and, if the plan were to be successful, would acquire and rename an existing NBA team to serve as anchor tenant. Although the Sonics are the rally point to the movement, the entrance of the NHL to the nation’s 12th largest market is an intriguing lure, as the area has a hockey history going back over 100 years, with the former Seattle Metropolitans being the first American team to play in (1915-16) as well as win (1916-17) the Stanley Cup.

After receiving blessing by both the mayor as well as King County Executive Dow Constantine, an MOU (Memorandum of Understanding) was executed between the City, County and the new group to build an arena in the “SoDo” region of Seattle, subject to due diligence and approval by the two councils. Hansen’s discussion of the MOU can be seen here.

Political Opposition

Politics in Seattle, much like many other cities across the country, seems to suffer as much from paralysis and divisiveness as any other affliction.

Hansen patiently answered questions by the King County Council on June 19th, as well as another two-and-a half hour session in front of the Seattle City Council the very next day. A central theme brought up by King County Councilmember Pete von Reichbauer, along with Seattle City Councilmember Nick Licata, was the question of the necessity of a public vote. “We did it for the Seahawks, we did it for the Mariners and I think we should do it again for the Sonics,” he said during the council meeting. Hansen was ready with his response: “I think, Pete, that the public already had a vote and it’s called I-91 (an initiative passed by voters requiring a certain minimum profit for government involvement in public/private partnerships). “Government would be dysfunctional if we had a public vote for every single issue. That’s why we elect representatives.”

Although they have not officially declared their opposition, von Reichbauer and Licata are considered likely adversaries, as Licata was a vocal foe when the Sonics were threatening to leave in 2007, and von Reichbauer has already attempted to advance the notion (since debunked) that the arena would violate current city codes. Despite the project having been deemed the third-most equity-rich of its type in the U.S., political opponents are challenging the assertion that the arena is truly self-funded from user fees and adequately protects the taxpayers. Deep down, the mere notion of governmental assistance of professional sports, even if the repayment source is user-generated, may be the driving factor.

Other Opposition

The Seattle Times’ editorial board came out against the proposal, citing traffic, the region’s capacity to support more sports teams and the ubiquitous naysayer mantra that city funding — even in the form of bonding capacity — should not be used for such purposes. They declared the site to be “a fundamentally bad location” and called the arena “a luxurious amenity.” A searing rebuttal to the Times’ missive can be seen here.

The Port of Seattle and Seattle Mariners have also gone on record as against the proposal, citing traffic as well as tossing in this year’s political hot button — jobs — as the primary factors. “Basketball, good. That siting, without massive mitigation, bad,” Port of Seattle Commissioner Tom Albro said. “Siting an arena there is a job killer for us.” An explanation of exactly how the arena would “kill” jobs, with a traffic impact that has been estimated to add five minutes to a potential commute on game days, has yet to have been adequately proffered by the Port. Meanwhile, the Mariners have come out against the proposal, stating in a letter to Mayor McGinn and other political leaders: “The proposed Sodo location, in our view, simply does not work. It would bring scheduling, traffic and parking challenges that would likely require hundreds of millions of dollars to mitigate.”

The Risks

Certainly, no project of any significant scope is undertaken totally devoid of risk. Although protections have been built into the proposal to greatly minimize exposure to Seattle taxpayers, and the combined financial strength of Ballmer, the Nordstroms and Hansen further reduces the chances that the general fund would be impacted, it cannot be stated that risk has been completely eliminated. The same could be said, of course, about the Seattle Center, Benaroya Hall, or other public projects built in recent memory. Furthermore, there is an additional risk rarely discussed by the opposition: opportunity cost. By not doing something that arguably should be undertaken, the economic impact of lost jobs and tax revenues has to be assigned a cost. This is a quantifiable, significant risk arena opponents must consider.

Summary

In the end, nobody knows whether or not the Seattle City Council and/or King County Councils will approve the plan. Both entities have stated they are working to bring it to a vote sometime during the month of August, or at the latest, early September. For sports fans as well as hundreds of thousands of proponents, the risk/reward tradeoff of nearly $300 million in new equity capital, hundreds of new construction and staffing jobs, the secondary multiplier of potentially thousands more, tax revenues and civic pride is more than worth the “risk” that a user-repaid arena, along with the financial guarantees of area-stalwarts Hansen, Ballmer, Nordstrom and the like will not adequately ensure that $200 million in bonds will be repaid.

Will the struggling, mercurial Mariners, the Port of Seattle and a few closed-minded politicians parry a billionaire or two trying to right a wrong perpetrated on the city back in 2008? Stay tuned.