Urban Politics #206: Key Arena Lobbying Resolution


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By City Councilmember Nick Licata.  With assisistance from my LA Newell Aldrich.

Urban Politics (UP) blends my insights and information on current public policy developments and personal experiences with the intent of helping citizens shape Seattle’s future.

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CONTENTS:

  • Key Arena Lobbying Resolution
  • Council Role 
  • 1994 Remodel And Bond Payments 
  • Resolution Details

 

Key Arena Lobbying Resolution

The City Council unanimously passed a resolution on October 24 stating that no city funds will be used to lobby the State Legislature for a remodel of KeyArena unless both the Council and Mayor jointly agree such action is appropriate.

The resolution was sponsored by me and Councilmember Della. The Mayor agreed to support the legislation after we negotiated some changes which clarified that the Council and the Executive wished to work together on this issue.

 

Council Role

It appears the Seattle Sonics will return to Olympia to lobby the state legislature in 2006 in pursuit of taxes to remodel the KeyArena. They sought around $180 million for a remodel in the 2005 legislative session; Mayor Nickels supported their efforts. The Council was not involved. Under the terms of probably any State legislation, the Council would need to vote to issue bonds and revise the KeyArena lease.

Thus, a key question arises: should the Council have a substantive role in this issue before it goes to the state legislature? If the Council does not act before the beginning of the state session, it could face a “done deal,” and tremendous public pressure to spend public dollars to “save the Sonics”, without a clear policy position.

In this spirit, the Licata/Della resolution was designed to get the Council to a policy position by requesting the executive to submit the information necessary for the Council to reach an informed decision before the state session

Some background on the taxes involved is available in UP 190 at: http://www.seattle.gov/council/licata/up_190.htm .

 

1994 Remodel And Bond Payments

The former Coliseum was remodeled in 1994. The City issued $73 million in bonds to pay for the remodel. The Sonics contributed $20 million. Payments on the bonds continue through 2014. Under the plan, payments to cover the bonds would come from suites, club seats and naming rights, thus the new name, KeyArena.

The repayment plan worked for 5 years, but has fallen short since then. Because of this, the City has had to pay $12 million from other sources. The Sonics lease expires in 2010, magnifying the question of how payments would be made to cover annual bond costs of $5.9 million from 2011-14.

In 1993, before the remodel and the bonds were issued to support it, the Seattle City Council expressed concern that the Sonics’ lease ended prior to the debt repayment schedule. But in a letter to the City Council, the Seattle Center Director assured the Council that conservative projections showed “commercial business in the new Coliseum, even without the Sonics, will be more than enough to pay the remaining debt”.

Thus, it is important to explore uses of KeyArena other than a professional sports facility, to find out what the revenue stream would look like to the Seattle Center without the Sonics as a tenant. This is a critical exercise before the City assumes that if the Sonics move out of the KeyArena, and possibly Seattle, there were would be a significant financial impact to the public treasury.

In my previous work in evaluating the public subsidies provided to our baseball and football stadiums, I came across studies undertaken by independent economists and academics that concluded that publicly financed sport stadiums do not produce the economic benefits frequently claimed in reports commissioned by privately owned sports organizations.

The Sonics are lobbying for a remodel of the KeyArena in order to make the facility profitable for them to play there. While recently built baseball and football stadiums within Seattle may have had some negative impacts on attendance at Sonics games, other variables, such as team performance, ticket pricing, different playing seasons, and local economic conditions also influence ticket sales, and ultimately the profitability of the KeyArena to the Sonics. Consequently, it cannot be assumed that remodeling KeyArena for the Sonics will provide an overall economic benefit to the City of Seattle.

 

Resolution Details

The resolution states that before agreeing to request state financing to remodel KeyArena, the Mayor and City Council are interested in exploring and evaluating other tenant and event options for KeyArena that could occur when the Sonics contract expires in 2010.

The Mayor and City Council will make a joint decision whether to support efforts to lobby the State Legislature to provide public funding for any future extensive remodel of KeyArena upon the City Council receiving the necessary information to conduct an open and transparent decision-making process in which it can evaluate the pros and cons associated with such action.

The resolution also states the Executive shall provide to the Seattle City Council the following information by November 15, 2005:

– All plans, architectural drawings, and proposals that have been developed since 2003 regarding options for remodeling KeyArena, broken down by major proposed improvement and cost.

– Any analysis, reports, findings, and conclusions related to the redevelopment or revenue generating abilities of KeyArena that have been prepared over the last five years by private consultants, Seattle Center staff, or Executive staff.

The Executive shall provide to the City Council by December 31, 2005, reasonable and realistic options for operating KeyArena without the Sonics, including type of activity, costs, projected attendance, revenue, estimated number of events per year and supporting details for the financial assumptions. The Mayor recently appointed a review committee to examine what changes are needed to KeyArena for the Sonics; and how KeyArena would perform, operationally and financially, after 2010 without the Sonics.

In addition, the Executive will provide to the Council any analysis it undertakes regarding any legislation to be introduced in 2006, including impacts such legislation would have on the City of Seattle, before the Mayor and Council decide whether to lobby the state legislature to obtain financial support to pay off the outstanding debt on the Key Arena 1995 remodel and/or remodel the facility a second time.

Finally, the Mayor and the Council agree that no City resources will be used for lobbying the state legislature for public funding to remodel KeyArena unless and until the Executive and the City Council have arrived at a joint position on the future of KeyArena that indicates such lobbying would be appropriate.

Keep in touch…

 

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