“This agreement increases revenue to the City from KeyArena, realizes a great private investment in a Seattle landmark and will add to the vibrancy of the Seattle Center by helping bring the Sonics home,” said Mayor Mike McGinn. “I thank my staff and Council staff for their work to help ensure a strong and united City voice in these negotiations. And I thank Chris Hansen and his team for their commitment to crafting a fair deal that contains public benefits and protects existing jobs.”

“I am excited the Sonics may be coming home and am looking forward to the increased revenue, jobs, investment and vibrancy that they will bring to Seattle Center and our surrounding neighborhoods during their stay here,” said Seattle Center Director Robert Nellams.

Guaranteed increase in revenue to City General Fund

2012 was the best year in recent history for the KeyArena, with the City realizing $640,000 in revenue after expenses from the facility. The agreement with ArenaCo will guarantee the City at least $2 million in use fees annually. The City may also receive additional use fees from ArenaCo resulting from strong ticket sales. An additional $750,000 would be paid to the City annually if a National Hockey League team is brought to KeyArena.

Private capital investments in KeyArena

ArenaCo is committing to make capital investments in KeyArena. A minimum of $3 million of these capital investments will remain at the end of ArenaCo’s tenancy at the Key. Potential investments include seating upgrades, modifications for television broadcast infrastructure, technical upgrades to security systems and audio/visual equipment, renovation of locker facilities and club facilities, miscellaneous service upgrades for the concourse areas such as new flat screen televisions and kitchen equipment, and suite upgrades.

Support for existing jobs and union contracts

City employees who perform work at the Key will continue to do so and will remain City employees. ArenaCo will reimburse the City for these costs. ArenaCo will fully cooperate with the City to ensure that all collective bargaining and other obligations are fulfilled.  ArenaCo may assign non-City employees to perform work and functions at KeyArena that are not currently being performed by City employees.

“As members of the KEXP Community, we wholeheartedly support efforts to bring additional energy to the Center campus,” the artists wrote. “New vitality at Seattle Center benefits all the nonprofit campus tenants.”

Today Mayor McGinn and King County Executive Dow Constantine signed legislation moving the new arena project forward. We gathered at the Rainier Boys and Girls Club to celebrate this important milestone. Thank you to all our partners, including Chris Hansen, for helping us get here.

Executive Constantine and Mayor McGinn detailed important taxpayer protections within the agreements in a joint letter to their respective Councils:

• No new taxes are being sought for construction or operations;
• The project will be self-financed by using revenue that would not otherwise exist but for the operations of the arena;
• Binding non-relocation agreements for the NBA and NHL teams will be in place covering the full term of any public financing;
• A security reserve fund will be established to provide an additional layer of taxpayer protection for the duration of the public debt;
• Revenue sufficient to support annual debt service is guaranteed by the investors;
• The private investors will be solely responsible for any cost overruns and operating revenue shortfalls over the life of the facility, including funding a capitol improvement fund;
• No public funds will be committed until franchise acquisition and all environmental review and permitting processes are completed.

The City and County will be in a first priority payment position from Arena revenues and in the unlikely event of a financial default, will have a security guarantee in the equity of the parent company for the teams and the Arena operator.

“The commitment to invest upward of $800 million of private capital in the arena and purchase of two teams represents a strong vote of confidence in the future of our city and county, especially in this challenging economic climate. It is one of the largest commitments of private capital ever made for a project like this in North America,” the Executive and Mayor wrote in their joint letter about the agreements.

“This proposal also represents a unique opportunity in our region’s history,” they wrote. “The existing football and baseball stadiums in the Stadium District were developed as part of a community effort to keep our sports teams from relocating to a different region. With this proposal we have a positive opportunity to embrace new professional sports teams and a significant new private investment into our community.”

On transportation, the Executive and Mayor noted that “while there are challenges in the SoDo neighborhood, including freight mobility issues, let us not forget that it is the largest transportation hub in the region. Link light rail, a Sounder train line, three bus rapid transit lines, 21 Metro bus lines, nine Sound Transit Express bus lines, four ferry routes, two interstate freeways and a future deep bore tunnel converge in this neighborhood. There is no other site in the region that possesses the transportation assets that are unique to this area, which is a major reason the existing sports facilities are located there.”

The Executive and Mayor will transmit the proposed Memorandum of Understanding and the interlocal agreement to the Metropolitan King County Council and Seattle City Council, respectively, for review and adoption.

Photos by: Aaron Fishbone

Chris Hansen with Mayor McGinn and County Executive Dow Constantine

While the study will be conducted in collaboration with the Seattle and King County Departments of Transportation, Hansen will assume financial responsibility for its completion. Hansen announced the study in a letter to McGinn and Constantine on Wednesday evening. Hansen’s letter can be found at http://www.seattle.gov/arena.

“The review panel report presents important questions about traffic and transportation in the Sodo area. I’m pleased Mr. Hansen has stepped up to get answers to those questions, and to get them in a timely fashion,” said Executive Constantine.

Last night, the Arena Review Panel published its report on the Arena proposal, with the formal recommendation that the City and County move forward with consideration of Hansen’s proposal. The report concluded that ”the proposal is favorable, has promise, and is generally consistent with the principles set forth by the Mayor and County Executive.” While noting that more work needs to be done, the report said the proposal warrants “serious consideration of the City and County policy makers.”

“I thank all the members of the Arena Review Panel for their work,” said Mayor McGinn. “I also thank Chris Hansen for his commitment to fund a transportation study to analyze the impacts of constructing a new arena in our Stadium District. The Panel’s report contains additional insight and recommendations on how to strengthen the proposal for all parties. In the coming weeks, we will work to incorporate these concepts into agreements between the City, King County and Mr. Hansen. These agreements will be transmitted to our respective Councils, where there will be additional opportunities for public review and comment.”

The Arena Review Panel’s report and further information on the proposed Arena can also be found at http://www.seattle.gov/arena.

Photo by: Aaron Fishbone

Click to watch Executive Constantine and Mayor McGinn’s press conference

In his letter, Mr. Hansen proposes to raise $290 million in private investment for the facility. In addition, he and his investor group would bear the costs associated with acquiring an NBA team and seek a partner who would recruit an NHL team to the new facility. The remaining arena development and construction costs would be financed by a combination of tax revenues generated by the facility, and property and rental income paid by the teams.

Executive Constantine and Mayor McGinn said that any agreement eventually reached by the City, County and the private investor must adhere to the following principles:

• A new arena must be self-funding, and not rely on new taxes;
• Existing City and County funds and services would not be adversely impacted;
• Private investors would bear risk against revenue shortfalls;
• Any project cost overruns will be the responsibility of private investors;
• Private funding should be provided for a study of ways that Key Arena can be modified to keep it a financially successful part of Seattle Center.

“This is great news for Seattle,” said McGinn. “On first look, we have an exciting proposal that, if successful, would mean hundreds of millions of dollars of private investment in our city – an investment that means even more during our city’s fragile economic recovery. And I think that the work by City and County staff, combined with outside expertise on arena financing, have resulted in a proposal that protects our city general fund from any negative impacts and protects the city into the future, should there be any revenue shortfalls. And more work needs to be done. I look forward to the Review Panel’s report to our respective legislative bodies as they bring their financial experience and expertise to bear on this proposal.”

“When someone comes forward and offers to put up nearly $300 million of private money and bring the NBA back to the city of his birth — that’s something you have to look at very seriously,” said Executive Constantine. “I strongly support returning NBA basketball to King County and, particularly these days, such a proposal would need to be self-funding. On first read, it appears Mr. Hansen’s proposal meets that requirement, but we’re asking our review panel to make sure.”

“If successful, we believe our effort would represent one of the largest private investments ever made in a new arena in North America and would provide a significant source of job and economic growth for the region,” said Hansen in his letter.

Mayor McGinn and Executive Constantine have directed the Arena Advisory Panel they appointed to review the financing and other details of the proposal to ensure that the proposal is in the best interest of the public. The Panel is asked to submit its findings and report to the County Executive and Mayor in March. The Panel will be comprised of the following members:

• Jan Drago, co-chair – former Seattle and King County Councilmember
• Maud Daudon, co-chair – CEO and President of Seattle Northwest Securities Corporation; former Seattle deputy mayor and chief of staff
• Lenny Wilkens, co-chair – NBA Hall of Famer and former SuperSonics coach
• David Freiboth – executive secretary of the ML King County Labor Council.
• Doris Koo – former president and CEO of Enterprise Community Partners
• Karen Lee – CEO of Pioneer Human Services
• Estela Ortega – executive director of El Centro de la Raza
• Greg Smith – founder and CEO of Urban Visions
• Anthony R. Miles – partner in the Seattle law office of Stoel Rives LLP
• Dr. Jill Wakefield – Chancellor of Seattle Community Colleges

Background information for each panelist, the Panel’s charter and other associated media materials regarding today’s announcement can be found at seattle.gov/media.

If a memorandum of understanding can be reached between Mr. Hansen, the City, and the County, a proposal could be considered by the Seattle City Council and the Metropolitan King County Council respectively this spring.

For more information on the proposal, visit seattle.gov/mayor/media/.