Saturday, April 14, 2012

Metropolitan King County Council Briefing: Arena Review Panel Report, Monday, 4/16/2012, 9:30 am

This is a Briefing to the Committee of the Whole, not a Hearing, or Executive Session. This is how and where proposals are introduced to the council. Somebody would sponsor a bill and refer the bill to a committee that addresses the topic. In that sub-committee the work will be done in collecting data, information, testimony (that is staff, expert, and public testimony) etc, and then the bill could be voted on in Executive Decision to recommend back to the Committee of the Whole for them to move forward (or not), referencing their reasons based on the facts gathered in their committee.
That is how our legislative bodies work. If you have kids, this is a very public example of civics in action.

Briefing
4. Briefing No. 2012-B0064 Arena Review Panel Report
Jan Drago, Former City and County Councilwoman – Panel Co-Chair
Lenny Wilkens, Former NBA player and Coach – Panel Co-Chair
Maud Daudon, President & CEO, Seattle Northwest Securities, and Interim President & CEO,
Seattle Metropolitan Chamber of Commerce – Financial Adviser to the Panel

We will be able to watch it live using the link, on the right hand side of the page, on King County television (that's right, government access television, welcome to the dark side of the political sports nerds universe).
On this page you see on the right a graphic link to council agendas! Watch it live. That takes you to committee information, including archived video of the council meeting if you can't watch it live.

When this gets turned into a bill and referred to a committee you can get to the council materials, video, agendas, etc, through the King County web site. City of Seattle is the same way.

Hansen, a Seattle native who has preached patience throughout the process, declined to comment specifically on the Kings situation.

"However, these developments are a reminder that franchise opportunities may arise quickly and in an unpredictable fashion," he said in a statement. "And so we should continue with our joint efforts to find an 'Arena Solution' that best works for our City, County and the various constituents of our community and in as timely a fashion as is feasible to ensure we are in a position to take advantage of an inevitable opportunity when it arises."

The collapse of the deal left both Sacramento and the Maloofs scrambling.
. . .
Seattle officials, meanwhile, said their focus remains getting an arena deal done that could lure a team. The Metropolitan King County Council is scheduled to be briefed Monday morning from Lenny Wilkens and Jan Drago, co-chairs of the Arena Advisory Panel that was asked by Mayor Mike McGinn to gather information and make a recommendation. It will be the first time the full council takes up the issue.

County Councilmember Pete von Reichbauer said the news out of Sacramento gives local decision-makers reasons to go slow and remain careful rather than rush a proposed deal.

"Sacramento is a cautionary light rather than a green light," von Reichbauer said. "Sacramento is an opportunity. It's also a reminder of how important due diligence is, because the owners had an agreement with the NBA and backed out. It shows the importance of a clearly understood legal agreement."

McGinn and King County Executive Dow Constantine are expected to send legislation to the city and county councils this month, requesting approval of a memorandum of understanding between the city, county and Hansen's ArenaCo group. Hansen has requested that the councils approve legislation by early June.

Hansen has said he has several local investors interested in joining him to bring an NBA franchise to Seattle and help build a $490 million, 18,000-seat arena for pro basketball and hockey. Hansen wants taxpayers to pitch in $200 million in construction bonds, which he says would be repaid by revenue from the arena.

Hansen is paying for a study on the traffic impact of a new arena in Sodo. That study is expected to be completed next month.

Von Reichbauer said "the devil is in the details," such as the traffic study, but he credited Hansen with quickly paying for it.

"My primary take-away from Sacramento is how important it is to build a relationship between Mr. Hansen, the city and the county on a solid foundation so everyone knows what they're getting into," said von Reichbauer.
Seattle Times, Sacramento Kings' future unclear as arena deal there falls through.

I will be following this, but I will not post everything at SonicsCentral.com that happens. It's a different kind of sport, not basketball, I will be following this here.

Saturday, April 7, 2012

Opening statement from Nick Licata: ARENA REVIEW PANEL LOOKS INTO FUNDING A BASKETBALL AND HOCKEY ARENA - Urban Politics #320 4/6/12

This past Wednesday, April 4th, the Arena Review Panel, a citizen group referred appointed by Mayor McGinn and County Executive Constantine, released their final report. The panel examined an agreement that would be between the City, County and the investor Chris Hansen to fund a new sports arena for a professional basketball and hockey team. The Panel was asked to adhere to three principles: 1) existing General Fund resources are protected; 2) the City and County should be significantly protected from any financial risks; and 3) the partnership should result in an investment to the community and region.

While the media correctly caught the gist of the Panel's conclusion that that "the proposal is favorable, has promise, and generally consistent with the principles set forth by the Mayor and County Executive," the Panel also found that there are many "important issues to be worked through to ensure these principles are met and to address other issues of importance to the community." They recommended that the City "begin the processes that are required to address the multitude of issues at play..."

I'll focus here on some of their recommendations for issues to be addressed, since that's the work that local government and elected officials will be charged with examining. You can view the report, and other materials, at http://seattle.gov/arena/.

The report states that prior to any public contribution, all land use processes must be complete; NBA and NHL teams secured, with 30-year non-relocation agreements; private investors must establish a security reserve, and disclosure of members of the investor group, and due diligence to ensure their financial wherewithal.

EXISTING GENERAL FUND RESOURCES

The Panel noted that public investment would involve the use of General Obligation bonds, and the pledge of General Fund resources and the full faith and credit of taxpayers to fund the City and County portion of the debt issued for the project. The proposal places the burden on cost overruns during construction, and operating shortfalls, on the investor group. The panel found the intent of the proposal was to provide protections for the City and County General Fund, and raised the following issues:

General Obligations: because repayment of public bonds would ultimately be a liability against the City and County's general funds, financial protections are important. I believe that this should be the highest priority for the City Council.

Unknown Costs: there may be additional operations costs, such as police and fire, as well as additional capital costs, such as traffic and transportation improvements; it will be important to be clear about specific funding sources and expectations about costs. I believe that these on-going costs can best be covered in a tightly written operations agreement with the team owners.

Substitution: some existing tax dollars could go toward this project (i.e. entertainment spending diverted from current spending to attending events in this venue); they suggest the impact will be small, but should continue to be examined. I believe this is an important issue, particularly if there is a continuous drain on the City's general fund because it would divert funds away from other more important city responsibilities.

Key Arena: the City will need to evaluate the impact to the Seattle Center finances, and potential General Fund impacts. Key Arena made $100,000 last year, so it currently is keeping its head above water, but if another venue opens in town that serves the same audience the city could end up losing money on it each year.

Debt rating: the City and County should evaluate potential impacts on municipal debt ratings; changes in ratings could impact the cost of borrowing. See the Presentation on Bond Ratings for a better understanding of how the City could be impacted.

PROTECTION FROM FINANCIAL RISK

The panel noted the proposal is in sharp contrast to the arrangement between the City of Seattle and the Sonics. They noted the intent is to shift risk from the City to private investors, and recommended additional scrutiny for what would happen in the case of bankruptcy or default by the investment group.

On this topic the Panel made a number of good suggestions. I will not cover all of them, but a few stood out for me.

+ Ensure investors will not return to City/County for additional public funds in the future, through, for example, a covenant. Since the average life of a professional sports stadium or arena is less than half of the 30 year lease that is being sought, this is a very real concern. Future maintenance, and any arena reconfiguration, must be covered by the investors.

+ Consider whether local market is large enough to support additional teams. Seattle currently has the Mariners and Seahawks, and the Seattle Sounders of MLS draw major-league attendance, averaging 38,000 (the annual total is more than the Seahawks). In addition, UW football draws major-league crowds, and will soon have a revamped Husky Stadium. Two additional franchises may be challenging for the region to sustain. A 2006 City report on KeyArena suggested the area may have been overbuilt with luxury suites. In any case, these issues highlight the need for any agreement to have solid guarantees to protect the public from financial risks.

+ Evaluate strength of ownership group and investor business model, and have a third-party evaluation of the financial strength of the ownership group. This is a very reasonable request and one that the City should be in a better position to evaluate since Hansen said at the press conference on April 5th that he expects to announce his investment team sometime in June. The Mayor should provide the City Council with ample time to follow up on his panels' recommendation that their financial strength be reviewed by a third-party.

+ Protecting maritime and Industrial activities from being impacted by traffic congestion was also identified as a concern by the panel. This issue was also raised by the Manufacturing Industrial Council, Port of Seattle and Longshoreman's union. In response, Hansen indicated he will pay for a $50,000 traffic and parking study of the potential impact of the arena on the surrounding area. The parameters of the study have not been released yet.

+ One new element in the development of the Arena proposal was also introduced yesterday. According to the Seattle Times, Hansen said that the deal could go forward without a hockey team and that it was "highly likely" the arena could be built with only a basketball team; a hockey team could come later. I seem to recall the Mayor saying that the City would not proceed until both NBA and NHL teams were secured (that's what the Arena Review Panel report indicates). This would be a major change, particularly in how it could affect the business plan for the arena. According to estimated revenues provided to the Council, elimination of the NHL team would cut the projected admission tax revenues expected from the arena by 43%; of course, hopefully one would be found at some point.

+ The Panel's report does not examine other questions, such as the use of city debt; the Initiative 91 issues I mentioned in an earlier blog post; or questions of the lifespan of arenas. These important issues will hopefully be covered by the City before a decision is made.

It is still too early to have an in-depth, complete evaluation of this proposal. But it is certainly better than any we have seen in the past and it deserves an honest and fair assessment. I hope the City can do one.


COUNCIL MEMBERS & MAYOR'S EMAIL ADDRESSES

Sally.Bagshaw@seattle.gov

Tim.Burgess@seattle.gov

Sally.Clark@seattle.gov

Richard.Conlin@seattle.gov

Jean.Godden@seattle.gov

Bruce.Harrell@seattle.gov

Nick.Licata@seattle.gov

Mike.OBrien@seattle.gov

Tom.Rasmussen@seattle.gov



Citizens are directed to the following website to complete a form to send an email to the Mayor's Office. http://www.cityofseattle.net/mayor/citizen_response.htm

Keep in touch...
Link to this epesode of Urban Politics Newsletter is here.

The emphasis on the last part is mine. Nick Licata has, as always, described the fence he will sit on until there is an actual council vote of some kind. All of the councilmember will hedge their support or disapproval in some way.

Licata has done a pretty good job of highlighting the issues the city council will want to resolve before the approve a final agreement.

Not all of the minor elements need to be complete before a Memorandum Of Understanding is agreed to as long as those issues look to be solvable and there is a process to resolve them. Some processes will occur between the MOU and the final Resolution being issued by the council. I know everybody thinks everything will be completed by the June 1st target date, but that is just for the MOU.

As much as people complain about the Seattle "process", it does allow incramental agreements to take place befor every little detail is complete. There are actual state and local processes and laws for evaluating the site before a major construction project can move forward. The council really doesn't have to beat those issues to death, or even have final agreement on those things because those processes have their own safeguards that stop a project if there is a major problem.

The SEPA process is designed to addresses many of the issues brought up by the Arena Panel and by councilmembers. The city itself has its own rules in place that further define those steps.
Much of the legwork of this process was completed when the property in question was approved by the council to be rezoned to be a Stadium District.

Blog Feeds