Messages from Chris
It’s been a while since I have posted anything here but hope you don’t take that as a lessening of my commitment or an indication that work on the Sonics Arena has slowed. My team and I have been working through the city’s environmental and design review processes and without getting into a lot of detail I can say that I am pleased with the progress we have made.
While we are focused on this important work our opponents continue to raise the same arguments and issues we have heard so many times over the past year. I guess they think that if you just keep saying the same thing over and over again it somehow becomes true.
For some reason, this seems to hold especially true for the editorial writers at the Seattle Times. With a history of completely fair and unbiased reporting on the Arena issue, is it really a surprise that a report that was not only paid for by the Arena opposition but was also rife with errors in legal interpretation, math, and basic reasoning qualifies as the basis for their latest sensationalistic criticism?
The Times Editorial Board apparently didn’t feel the need to consider the fact that our arena proposal went through a lengthy public process in which its legal and economic merits were completely and thoroughly vetted by both the City and County Councils. No need to take into account the fact that both Councils appointed independent committees of experts who analyzed and concluded that this was a good deal for the City. No need to weigh the fact that both Councils employed inside and outside legal counsel to advise them on the legal aspects of the deal (including I-91). And certainly no need to consider the parade of local and national experts who called this amongst the best arena deal any city has ever received.
Based solely on the apparent legal expertise of the Times’ Editorial Board and a biased report paid for by the opposition, the MOU is apparently illegal and our group is apparently receiving over $700 million in illegal subsidies. Great work. I guess everyone else involved just missed this.
While we have covered the MOU’s compliance with I-91 in numerous past posts and writings, in the interest of sanity I thought it would be helpful to point out a couple of the more significant miscues in the so-called report by Private Valuations.
- Above all else, alarm bells should clearly sound on the credibility of a report that is paid for by the opposition and which claims that the subsidy we are receiving ($773 million) is nearly four times the amount the City and County have agreed to invest in the project — especially with all the public sector vetting and guarantees we have put in place. As the saying goes, if it walks like a duck...
- Having said this, the first major mistake the report makes is NOT basing the I-91 calculations on the “net cash-on-cash return” of the project. This is the exact language from the I-91 legislation — and language the writers of the report “conveniently” fail to consider or address.
- Under the definition of “cash-on-cash” returns (from the finance textbook of your choice!), the return is calculated by dividing the net cash returns (after deducting financing costs) from the project by the “cash” equity invested (EXCLUDING debt borrowed). Thus the City is either financing their entire investment and investing ZERO cash in the project (which would make the calculation infinite) or the City is considering the entire investment as “Cash Equity” under which the financing costs must be excluded in calculating the cash return BY DEFINITION. Under this latter interpretation the City would generate a return that exceeds Treasuries by a very wide margin. It is a blatant error to count the $200M investment as equity and then turn around and treat the funds as if they were borrowed and count interest expense as a reduction in the cash return to the City. It is simple double counting. This is an obvious error that Private Valuations should publicly acknowledge as it renders the bulk of their I-91 subsidy conclusions in the report invalid.
- In much the same manner, the second significant error the authors make is the absolutely ridiculous argument that we are not paying taxes since the incremental taxes generated by the arena go to repay its investment in the project but that same tax money paid by us to the city also doesn’t count toward bond repayments as it is not secured. Huh? So by their math we don’t get credit for either paying our taxes or the bond repayment — and both are cited as a subsidy. Clearly this makes no sense. I guess they are assuming the money we pay the city just vanishes into thin air once it is collected by the tax authorities. Rest assured Seattle, we will be paying taxes to the City and County as defined by the MOU. And we have secured those tax payments with collateral and guarantees that would result in any major lender in the world considering them “secured.”
- The final major miscue in the report is a claim that the City and County will be denied its share of property taxes by purchasing the land and arena as part of this transaction. While I-91 in no way prohibits the City from purchasing land, the analysis is also 100% factually incorrect. The City and County will see no reduction in their gross property tax receipts as a result of purchasing the property and leasing it back to us.
So when we see our opponents and the Seattle Times Editorial Board raising the same issues time and again I would just encourage you all to keep in mind that the arena MOU was approved by the Seattle City Council and King County Council after a thorough vetting process, numerous public hearings and close scrutiny by two independent review panels.
In closing I want to wish you and yours a very Happy Thanksgiving Holiday. This is a time to put aside our disagreements and focus on family, friends (and maybe a little football). Go Seahawks!
Click on an image to embiggen.
For more on the latest designs, check out this story at the Seattle PI.
In conjunction with the proposed settlement with the FPPC, I wanted to take the opportunity to give a more detailed explanation of the circumstances surrounding my contribution to the Sacramento Arena Opposition.
• Prior to the May 15th NBA Board of Governors vote concerning the relocation of the Sacramento Kings, I engaged Loeb & Loeb to conduct background research concerning the viability of a new arena in Sacramento. This research involved an assessment of legal, economic, environmental, and political issues surrounding past and present efforts to build an arena in Sacramento. During this process (and again prior to May 15th), after being approached by Loeb on behalf of opposition members, I agreed that a portion of the funds paid to Loeb could, in the future, be used for political purposes if a broad-based political committee, consisting of other donors and independent of STOP, were established to oppose the effort to build an arena in Sacramento. It was never my desire or intent to either directly fund signature gathering or to be the primary financial sponsor of the opposition’s efforts.
• On June 21, 2013, I paid a legal bill from Loeb & Loeb that consisted of all legal fees incurred from March 2013 through May 2013 for the aforementioned background research and my prior commitment of up to $100,000 that could be directed toward the Sacramento Arena opposition assuming that certain conditions were met (a broad based political committee was set up with substantial other donors). On the same day (June 21, 2013), and without my knowledge or consent, Loeb & Loeb advanced $80,000 to GoCo consulting to collect signatures to qualify an initiative that would require a public vote on a new arena. At this time, a broad-based political committee had not yet been established, and I neither directed nor authorized Loeb & Loeb to make this expenditure on my behalf. During this entire process, I never spoke with, emailed, met, or had any correspondence with GoCo, Brandon Powers, STOP or Taxpayers for Safer Neighborhoods.
• Additionally, at the time they made the payment to GoCo, Loeb & Loeb did not inform me of either the payment to GoCo or of the need to file a major donor report. The first time I learned of the payment to GoCo was on August 10, 2013. It was only after a complaint was filed with the FPPC demanding an investigation into the source of the $80,000 payment that Loeb & Loeb informed me that some of my funds had been advanced to GoCo. Again, this was the first time I learned my funds had been directed toward signature gathering.
• After discussing the matter with Loeb over the weekend, I retained separate counsel on August 13. After having just three days to assess the situation with my new counsel, I filed a major donor report on August 16th. It is also important to note, that I was never informed of the FPPC’s intent to file a lawsuit on August 15th and had already taken steps to file my major donor report before the suit was filed.
These facts were confirmed by Loeb & Loeb, which is noted in the settlement stipulation.
While I believe this explanation should go a long ways in clearing up many of the misconceptions surrounding my involvement with Sacramento Arena opposition, it should not be taken as an attempt deflect criticism from the mistakes I clearly made. I take a lot of pride trying to do things the right way in my life, and I simply should not have allowed myself to get caught up in the competitive dynamics of this situation and never should have agreed to commit any funds to the Sacramento Arena opposition — under any circumstances. I also should have taken steps to rescind my financial commitment following the outcome of the May 15 Board of Governors vote. Finally, although I’ve never made any political donations or contributions in my life prior to this (including contributions to PAC’s), with the benefit of hindsight I also should not have relied solely on Loeb’s expertise and discretion in handling this matter and clearly should have asked more questions earlier in the process.
But most importantly, I would again just like to reiterate my commitment to stay out of Sacramento’s Arena efforts. In this regard, I would also like to highlight that I will take steps to prevent any signatures collected by GoCo from being submitted to the opposition. As it was never my intent to directly fund signature gathering efforts, I completely agree with the numerous Kings fans who have taken the time to write me and suggest this course of action. It is also important to note that this decision is not part of my proposed settlement with the FPPC, and is one I am making completely voluntarily. It’s clearly the right thing to do given the circumstances and I wish the City of Sacramento and the Kings the best in their efforts going forward.
— Chris Hansen
I made a mistake I regret.
When our binding agreement to purchase the Sacramento Kings became a competitive situation and we were faced with both the prospect of seeing our transaction fail and losing our $30 million deposit, I engaged Loeb & Loeb to canvas the various opposition groups to gain an understanding of their efforts and the prospects of their success.
During this time I was approached through Loeb by the opposition about making a contribution to the opposition’s efforts as part of a broader group and agreed to make a donation.
In this regard I would just like to highlight that I have never directly engaged with or even had any conversations or contact with STOP, Taxpayers For Safer Neighborhoods, or any the various consultants engaged in the Sacramento Arena opposition. It was also not my intent to be the primary financial sponsor of the opposition’s efforts. I merely agreed to make a donation to the opposition in what had become a competitive and heated process.
I have not agreed to provide any further political contributions and do not intend to make any further contributions.
I would also just point out that the contribution was made in my personal capacity and not on behalf of our ownership group or my partners. In fact, I have never discussed the contribution with them to date.
While I'm sure everyone can appreciate how easy it is to get caught up the heat of battle, with the benefit of hindsight, this is clearly a decision I regret. I wish the city of Sacramento and Kings fans the best in their efforts and they have my commitment not to have any involvement in their arena efforts in the future.
— Chris Hansen
Messages from Chris
I’d like to start out by congratulating Mayor Johnson and the fans in Sacramento for the tremendous effort they put together to keep their team. Given what our community went through in 2008, if there is any silver lining in this for Seattle it is seeing Sacramento’s dedicated fan base successfully rally to keep the Kings. This was never about Seattle fans versus Sacramento fans, and it goes unsaid that there is a mutual respect given the circumstances we have both been through. This process was instead about our group and our city putting our best foot forward in an honest and transparent way to return basketball to Seattle, and in that regard our efforts remain undeterred.
When we began our efforts in 2011, we went into it knowing that above all else it would take patience. The process involved in getting an Arena built in our city is without question a difficult and time consuming one. Likewise, with the prospects for expansion unclear, the path for returning an NBA franchise to Seattle was likely to prove even more difficult and require even more patience. Thus, even as we are disappointed with the developments related to our efforts to purchase the Kings, we would just like to reiterate our dedication to bringing the NBA back to Seattle. We will continue to press forward with our Arena plans with the same commitment and effort we have over the last two years, and look forward to working with the City and County to see the project through the hurdles that remain. Likewise, we plan to continue to work with the League regarding opportunities that may arise to return an NBA franchise to our City.
I would like to again thank everyone who helped us get to this point. To Mayor Mike McGinn and County Executive Dow Constantine and their incredible staffs for their leadership in getting our Arena proposal off the ground and seeing it through to this point. To the City and County Councilmembers for taking so much time and effort to vet our proposal and work with us to come up with solutions that made the deal work for their constituents. To our Arena Business Advisory Committee for all their help in rallying political and community support. And to our entire legal and professional team for the countless hours and dedication they put into this process.
But most of all I would like to thank all of the fans and community groups that rallied behind our efforts. You have shown beyond a shadow of a doubt that Seattle has great fans and deserves to have an NBA team back. Keep the Green and Gold alive… and just know that we remain as dedicated as ever to seeing Sonics Basketball return to the Emerald City.
Messages from Chris
While we are obviously extremely disappointed with today’s relocation vote and truly believe we put forth both a significantly better offer and Arena plan, we do thank the league and the owners for their time and consideration and look forward to hearing back on our agreement to join the Maloofs as Limited Partners in the Kings.
But most of all I would like to thank everyone in Seattle who has been a part of our effort and supported our cause. Words simply can’t express how much your support has meant to me personally and to our City. I truly believe we did everything possible to put our best foot forward in this process and you all should be proud and hold your heads high today.
Our day will come...and when it does it will just be that much sweeter for the struggle.
I love you Seattle!
Messages from Chris
In an effort to further demonstrate the extent of our commitment to bring basketball back to Seattle, we have elected to voluntarily increase our proposed purchase price for the Sacramento Kings NBA Franchise by $75 million — from an enterprise value of $550 million to $625 million. In conjunction with our revised offer, we have also guaranteed to the NBA that the Franchise would be a revenue sharing payer in all years in Seattle.
We would also like to take the opportunity to again point out just how far ahead our Arena project is:
- The ownership group has acquired 100% of the property necessary to construct the Arena.
- We have 100% of our private financing for the Arena committed and in place.
- After being approved by the City and County Councils the Arena MOU/legislation was signed into law by the Seattle Mayor and King County Executive on October 16, 2012. The referendum period expired 30 days later.
- We engaged our Arena architects two years ago and have completed our detailed design schematics and costing.
- We have filed for our Master Use Permit and are well underway with the Environmental Review Process, which we expect to conclude late this year.
While we appreciate that this is a very difficult decision for the league and owners, we hope it is understood that we really believe the time is now to bring the NBA back to Seattle, and that it is paramount that we do everything we can to put Seattle’s best foot forward in this process.
— Chris Hansen
Messages from Chris
While we are disappointed with the relocation committee’s recommendation, we just wanted to let you all know that we remain fully committed to seeing this transaction through. As you are all well aware, we have a binding transaction to purchase the Kings for what would be a record price for an NBA franchise, have one of the best ownership groups ever assembled to purchase a professional sports team in the US, have clearly demonstrated that we have a much more solid Arena plan, have offered a much higher price than the yet to be finalized Sacramento Group, and have placed all of the funds to close the transaction into escrow. As such, we plan to unequivocally state our case for both relocation and our plan to move forward with the transaction to the league and owners at the upcoming Board of Governor’s Meeting in Mid-May.
When we started this process everyone thought it was impossible. While this represents yet another obstacle to achieving our goal, I just wanted to reassure all of you that we have numerous options at our disposal and have absolutely no plans to give up. Impossible is nothing but a state of mind.
“Impossible is just a big word thrown around by small men who find it easier to live in the world they've been given than to explore the power they have to change it. Impossible is not a fact. It's an opinion. Impossible is not a declaration. It's a dare. Impossible is potential. Impossible is temporary. Impossible is nothing.”
We would like to announce that we have reached an agreement with the Maloofs to raise the price we are offering to purchase the controlling interest in the Sacramento Kings NBA franchise by $25 million — from an enterprise value of $525 million to an enterprise value of $550 million.
While we already have a binding purchase agreement to purchase the controlling interest in the team, the Seattle Ownership Group has elected to voluntarily raise its purchase price as a sign of our commitment to bring basketball back to our City and our high degree of confidence in our Arena plan, our financing plan, the economic strength of the Seattle market, individual and corporate support for the team and, most importantly, the future of the NBA.
— Chris Hansen
Page 1 of 8 pages 1 2 3 > Last ›