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The Mayor has sent the Seattle City Council a Memorandum of Understanding (MOU) for a basketball and hockey arena in SODO, along with an Interlocal Agreement between Seattle and King County. Both the City and County Councils would need to approve the MOU.
The MOU generally follows the outlines of the original proposal in February. There are some important changes, however. First of all, language in the MOU states that it is intended to be binding and enforceable. Secondly, the MOU would allow for an arena to be built with $120 million in public funds if only an NBA team is attained. The February proposal stated a $200 million public contribution (of the $500 million total cost) would not be made until both an NBA and NHL hockey franchise were acquired, along with a 30-year non-relocation agreement.
The MOU says public funding would proceed as follows:
- Once the site is permitted for an arena, Seattle would purchase the land for an amount determined by an independent appraiser, with a cap of $100 million
- Once the arena was completed, if only an NBA team were acquired, the public contribution would be a total of $120 million, with Seattle’s total contribution rising to $115 million (e.g. the land cost $100 million, Seattle would pay $15 million more), and King County putting in $5 million
- If both an NBA and NHL team were acquired when the arena is completed, Seattle’s total contribution would be $120 million, and King County’s would be $80 million
The public contribution comes in the form of general obligation bonds. Taxes over 30 years would fund the bonds. According to an estimate from the March 30 meeting of the Arena Review Panel, roughly $237 million in City taxes, and $12 million in King County taxes, would be used to pay off the bonds, along with approximately $156 million in rent. The difference in the figures is called “net present value”, adjusting future dollar values to the present value. I wrote about the taxes in UP #318.
The time period between when Seattle would purchase the property, and when the arena opens and tax revenues start to come in, represents a possible danger. If a deal were to fall apart then, Seattle would be left with property worth a lot less than we paid.
The Council will begin its review in the Government Performance and Finance Committee on May 31.