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

 

Key Comparative Advantages of the SoDo Arena


Taxes

  • The only tax concessions we are asking for is a waiver of admissions taxes, the same waiver granted to the other pro sports teams in Seattle.
  • We estimate we will be paying sales tax on the construction of the arena (more than $40 million upfront), sales taxes on concession and merchandise sales ($4-5 million per annum), B&O taxes ($1-3 million per annum) and property taxes ($5-6 million per annum). In total the SoDo arena will pay more than $40 million in up-front taxes and $10-13 million in annual taxes. And these are year-one tax estimates that will rise with inflation.
  • These taxes all will be incremental taxes and will result in both upfront and annual windfall tax gains for the City, County, and State. We estimate $11-12 million of the upfront taxes and $4-5 million of the annual taxes will go to the City.

Financing

  • Put simply, the SoDo arena will be 100% privately financed. No redirected tax revenues. We will privately fund all entitlement, construction, maintenance, operations, and capital improvements associated with our arena. This is vastly different from both the SP and OVG proposals.
  • Unlike the KeyArena proposers, we already have invested the majority of the equity needed to finance the arena — more than $100 million in land and entitlement costs. We are and always have been prepared to put in more equity.
  • Given our level of equity investment in the arena and adjacent real estate we are highly confident that we will have no problem securing debt financing for the arena and would be happy to provide a commitment letter from a lender.
  • We believe our financing structure will allow us to be “team-first” as opposed to “music-first.” Virtually all revenue streams (naming rights, sponsorships, suite sales, etc.) will flow directly to support the acquisition of the NBA and NHL teams, without needing to compensate a third-party operator whose primary interest is the music business.

Risk to City

  • We believe the risks to the City from the SoDo arena are minimal and far less than those embedded in both the SP and OVG proposals.
    • No deposit risk — we are funding everything privately. 
    • No entitlement risk — we have funded the entitlement process.
    • No construction or cost-overrun risks — we are funding all construction costs, including cost overruns..
    • No capital improvement or maintenance risks — we are funding all capital improvement and maintain equal costs.
    • No operating risk — we are funding all operating costs and not asking for redirected taxes.
  • If the Street Vacation is approved and the entitlement process complete, we also stand ready to assist the City in finding an optimal solution that protects the City financially as it relates to KeyArena — just as we were under the MOU.

Timeline

  • We have completed all of our architectural drawings for permit and our plans have been reviewed and approved by the Department of Construction and Inspections, Design Review Board, Design Commission, and Department of Transportation.
  • The SoDo entitlement process will be complete upon approval of the Street Vacation — making the SoDo arena “shovel-ready” with a construction timeline of 22 to 26 months.
  • The Seattle Center arena plans are months away from even starting the entitlement process, so we estimate they are a minimum of 24 months away from being shovel-ready. The timeline likely will much longer given the City’s involvement as a partner and the fact that public subsidies are being requested. When compared to a similar construction schedule to ours, we think a new arena at Seattle Center is at least 4 years away, and a more accurate timeline is likely 5 to 7 years considering all the political, legal and entitlement hurdles involved in a project of this magnitude in Seattle.

Exclusivity

  • WE ARE NOT ASKING FOR EXCLUSIVITY. This is a critical point of differentiation. Both SP and OVG appear intent on blocking our right to build a competing arena, while we have asked for no such consideration. We are fine with Seattle being a two-arena market and the resulting competition. We have not tried to preclude the City or another developer from building an arena at the Seattle Center or any other location. Competition is good and fair.

Traffic and Transportation

  • We believe the parking and traffic considerations in SoDo are vastly superior to the Seattle Center. This is confirmed in the SoDo arena’s FEIS, which looked at the traffic and transportation impacts of both SoDo and the Seattle Center ( https://tinyurl.com/mqdlkdc).
  • We simply ask any constituent of Seattle, the review panel, or the City Council to do due diligence. Drive to and from events at both sites and consider the character of the two neighborhoods, the daily traffic patterns, and the availability of parking and public transportation.
  • In his presentation to the Council in 2012, Seattle Center Director Robert Nellams states that SoDo is a superior site for transportation (https://tinyurl.com/m49yad4). We believe the traffic situation surrounding KeyArena has worsened over last 5 years.

Arena Design

  • Our detailed arena designs were vetted by the NBA during our bid to purchase the Kings, and we are committed to making sure the designs meet both NBA and NHL standards at our cost.
  • We believe our arena design is vastly superior to that of both SP and OVG. It truly will be a world-class arena:
    • We had the benefit of starting from scratch and not having a site that was limited in size, by the landmark status of the roof, or the lack of adequate ingress and egress to the building.
    • Our Sonic rings will provide us with flexible capacity of over 2,000 and will allow us to offer a low-priced option to our fans of lesser financial means.
    • We believe the sightlines from the arena will be the best in the NBA or NHL given our innovative design incorporating the Sonic rings.
    • Our Gopher suites will be the first of their kind — allowing spectators the ability to see NBA games from their suite in the eighth row, and even closer for hockey! We believe our other premium suite and seating options are also a significant level above what is proposed by OVG and SP.
    • We believe our concourses and entry and exiting options will be more expansive and comfortable than the SP or OVG plans given the limitations caused by the roofline and current dimensions.

Objective

  • Perhaps most importantly, our objective first and foremost is civic in nature. To date, our partnership has privately funded all of the costs based on our strong commitment to bring the NBA and NHL to Seattle. Our primary motivation is not profits, the music business, or enhancing a corporate network of arenas. It is returning pro sports to Seattle. We think our commitment and goals are fundamentally different from those of SP and OVG.

 

Seattle Partners (SP) Arena Proposal


Summary of Key Considerations
  • The SP bid appears to ask for significant public subsidies.
    • $250 million in public bonds to be repaid from a combination of taxes, new facility fees, and rent.
    • $47 million in upfront taxes (e.g. sales tax) and fee waivers relating to construction of new arena.
    • Utility cost protection subsidy — apparent subsidy on utilities for new arena to be covered by the City.
    • Property tax subsidy — increased property tax from improvements appear to be passed on to all Seattle property taxpayers instead of paid by SP.
    • Potential parking subsidies resulting from taxes on (and potential revenues from) new and existing City arena parking lots.
    • Exclusive right to sell all Seattle Center sponsorships and premium seating.
    • Land subsidy — rent payments for the arena site appear to be substantially below market rates for similarly valued properties. What would the value of this land be if it were sold to a private developer?
    • In total, we believe the present value of these subsidies is likely in substantial excess of $200 million.
  • SP’s proposal appears to conflict with several provisions of the RFP including: D.1 of the RFP — posing “no financial risk to the City”; E.3 — confirmation “the proposer will bear all costs of development and operation of the arena”; and E.6 — there be “minimal City financial participation.”
    • Significant public subsidy request outlined above.
    • Risk of default on public bonds.
    • Deposit and development risks — the deposit is not due until the signing of the Development Agreement and has an approval contingency requirement whereby it is refundable if all approvals for the arena are not received. This exposes the City to the risk the entitlement costs are not recouped if the project does not go forward.
    • Lack of clarity on actual guarantors behind SP partners. Are AEG and Hudson Pacific backing the financial guarantees with the full faith and credit of their companies, or will the newly created JV with more limited financial resources be the guarantor? The language in SP’s proposal indicates the latter.
    • Potential lack of adequate guarantee to do capital repairs to keep the arena in “first-class condition” — potentially exposing the City to future capital repairs. Annual minimum contributions of $500,000-$1 million appear inadequate and the language of contributions beyond this amount is vague.
    • Potential lack of adequate guarantee to ensure new arena will meet NBA and NHL standards, exposing the City to the risk it will be required to bring it up to such standards.
    • Exclusivity request blocking the City’s right to “directly or indirectly finance, subsidize, provide any incentives for, or otherwise assist any “alternative venue” for the next 30 years.
  • Risks of Proposal for Attracting NBA and NHL Teams
    • We believe the public financing request and EIS and construction timeline will likely push the arena opening date out 5 to 7 years — and demolition of KeyArena means there is no adequate facility in the City or immediate vicinity for a team to play in the interim.
    • Exclusivity request would prevent competing arenas from being built and would make negotiations with SP difficult for an NHL or NBA team because SP would have a monopoly in the City. This could push prospective NBA and/or NHL owners to look outside the City.
    • Facility fees are essentially a private tax SP would be collecting from an NHL or NBA team (and fans).
    • Lack of clarity around what happens to admissions taxes for NBA and NHL team owners. Are they waived, redirected to the building, or used to offset SP operating costs?
    • “Music-first” focus of SP could create issues with the flexibility of the sports calendar, operating priorities, and the fair sharing of building sponsorship revenues, premium seating, and parking revenues — all of which are essential to the viability of NHL and NBA teams.
Detailed Considerations and Questions From Review of SP Proposal

Outlined below are additional considerations and questions from review of the Seattle Partners Proposal.

 

Oak View Group (OVG) Arena Proposal


Summary of Key Considerations
  • Bid appears to ask for significant public subsidies:
    • While Sections J (Redevelopment Financing Plan) and K (Operational Financial Terms) were completely redacted, leaving citizens and the Arena Advisory Panel in the dark about many of the key financial and operational considerations of the OVG proposal, based on the limited disclosures available we believe the OVG proposal could entail even larger public subsidies than the SP proposal.
    • In section 6 on page 32 of its proposal, OVG proposes the City “Reinvest back into the property” its portion of admissions taxes, sales tax on construction goods and services, leasehold excise tax, parking tax, and potential landmark incentives. 
    • While such annual “revenue streams could first be applied as credits against base rent,” OVG requests that excess funds go into an interest-bearing “operations and maintenance account” (“City Arena Fund”). The key word here is “operations.” If OVG is asking that all incremental taxes can be used to pay for its operating expenses, these taxes would fall directly to OVG’s bottom line. As such, it appears unlikely that OVG would ever pay rent and taxes collected by the City from the arena.
    • Land subsidy — rent payments for the arena site appear to be substantially below market rates for similarly valued properties. What would the value of this land be if it were sold to a private developer?
    • Parking development subsidy — OVG is asking to secure both approval for and public financing of a new 850-stall parking garage adjacent to the arena. We believe the cost of this garage is likely to exceed $30 million and the annual revenues likely would be in excess of $3 million — implying an additional significant subsidy would be required.
    • Parking management subsidy — OVG is asking for the right to assume “operational responsibility for all three existing Seattle Center parking garages.” While details of the proposed “Revenue Sharing Agreement” with the City were not provided in the redacted document, we believe these lots currently generate revenues of in excess of $4 million per year for the City and go directly to the Seattle Center operating budget.
    • In total we believe the present value of these subsidies is in excess of $200 million, and potentially even higher than those requested by SP.
  • As with the SP proposal, the OVG proposal seems to not meet several important requirements of the RFP including: D.1 — posing “no financial risk to the City,” E.3 — confirmation “the Proposer will bear all costs of development and operation of the arena” and E.6 — there be “Minimal City Financial Participation.”
    • Significant public subsidies outlined above.
    • Proposed deposit/financial risk during entitlement process — OVG proposes a deposit of just $100,000. Per page 31 this deposit is not due until the entitlement process is done and lease is signed. Therefore, the City appears to bear the risks and costs associated with the entitlement process.
    • Cost overrun risk — The City appears to be at risk for all cost overruns associated with “risks beyond the reasonable control” of OVG. Similarly OVG states it will not be responsible for cost overruns for enhancements or changes that are “for the benefit of the City.”
    • Capital improvement costs — The City appears to bear significant cost risk for capital improvements if OVG’s $1 million annual contribution to the “Reserve Fund” does not cover such costs. We believe it is impossible for $1 million per year that is not adjusted for inflation to cover the cost of maintaining the new arena in a first-class manner for the next 35-85 years.
    • Potential lack of adequate guarantee to ensure the new arena will meet NBA and NHL standards, exposing the City to risk needing to bring it up to such standards.
    • Financing risk — How much hard equity is OVG putting into the project as opposed to debt or quasi-equity linked to future revenue streams from the new arena? While the redacted sections (J and K) make it difficult to assess the financing plan, it appears OVG may be relying heavily on its request to have City taxes funneled back into the City Arena Fund (to offset operating expenses) and parking subsidies.
    • Transportation mitigation expenses – there does not appear to be a quantified and/or guaranteed financial commitment in the document to cover transportation/traffic mitigation imposing the risk of such costs. We believe these costs will easily run into the millions of dollars.
  • Risks of Proposal for Attracting NBA and NHL Teams
    • We believe the public financing request and EIS and construction timeline will likely push the arena opening date out 5 to 7 years — and demolition of KeyArena means there is no adequate facility in the City or immediate vicinity for a team to play in the interim.
    • Is OVG asking for exclusivity with its bid? Or that the SoDo arena also not be able to move forward?
    • Request to redirect NBA and NHL admissions taxes toward an operating and maintenance account that may be solely for the benefit of OVG could put an unfair burden on NHL and NBA team owners, forcing them to consider other arena options.
    • The “music-first” focus of OVG could create issues with the flexibility of the sports calendar, operating priorities, and the fair sharing of building sponsorship revenues, premium seating, and parking revenues — all of which are essential to the viability of NHL and NBA teams.
Detailed Considerations and Questions From Review of OVG Proposal

Outlined below are additional considerations and questions from review of the Oak View Group Proposal.


 

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