Transaction Details
Memorandum of Understanding (MOU) between the City, County and the Investment Group caps public participation at $200 million, which will be fully repaid by Arena generated revenues.
- Taxes include incremental property tax on increased property value of the Arena, B&O taxes on Arena and team operations only, sales tax on merchandise and concession at Arena events only, and Admission tax on Arena events only.
- Insures only those attending Arena events will pay for its cost.
- While there is unquestionably a “substitution” of entertainment dollars in the region that will be re-directed toward Arena events, there is minimal substitution of the taxes in question as the property tax is on the incremental value of the property created, the B&O tax is on businesses that would not exist (NBA/NHL), the admissions tax does not apply to most other forms of entertainment, and the city does not collect admissions tax on Seahawks', Mariners' or Sounders' game tickets.
- Security reserve fund will be increased if Arena does not meet minimum profitability thresholds.
The MOU includes many important taxpayer protections, including:
- No new taxes being sought for construction or operations.
- Binding non-relocation agreements in place for duration of lease.
- Security reserve fund established to provide additional level of taxpayer protection.
- Security reserve fund will be increased if Arena does not meet minimum profitability thresholds.
- Annual debt service guaranteed by investors.
- Private investors solely responsible for any cost overruns and operating revenue shortfalls over the life of the facility.
- Investors will contribute $2 million per year into a capital expenditure fund and will pay for building maintenance and capital improvements.
- While investors will pay for any tax shortfalls, tax surpluses will go into a Capital Reserve Account used to make capital improvements to the building or pay down the public debt.
- If only an NBA team is acquired, public contribution is capped at $125 million until an NHL team is acquired.
- City will own the land and Arena structure outright.
- City and County have priority repayment position from Arena revenues.
- The Investor Group’s equity investment in the Arena and NBA franchise will serve as collateral against the City’s contribution.
Prior to any public financing the following conditions must be met:
- Acquisition of NBA franchise and NBA acknowledgement of the Arena lease and non-relocation agreement in place.
- Successful completion of all land use processes, environmental reviews and permit acquisition.
- Construction financing secured and Arena and NBA Team domiciled in Seattle for tax purposes.
