Hansen paints clearer picture of Sodo arena plan

It's easy to envision Chris Hansen's plan to build a new sports arena in Sodo as a money-sucking monstrosity that will cause huge traffic jams, plug up the economically important port, put public resources at huge risk and leave KeyArena a deserted, dilapidated shell of a building.

But when he went before a Seattle City Council committee Wednesday morning, Hansen was able to bring the project -- which recently has been blasted for all the above reasons -- back down to earth.

It all started about two years ago, when Hansen decided it was time to try to make his dream come true. The San Francisco hedge fund manager, who grew up in Seattle and was heartbroken when the SuperSonics left in 2008, wanted to bring the NBA back to his hometown.

It's a little-known fact that Hansen was actually a small piece of the investment group, led by Microsoft CEO Steve Ballmer, that wanted to buy the Sonics to keep them from leaving. Obviously, that effort wasn't fruitful, as the team left to become the Oklahoma City Thunder. But it was Hansen's first foray into the business of the Seattle sports scene, and he wanted to give something back to his city.

So in 2010, he began looking around at all the best potential sites to build a basketball and hockey arena near Seattle. He looked at KeyArena and that site at the Seattle Center, he said. He didn't go into specifics, but on Wednesday implied he also looked at sites on the Eastside that had already been reportedly eyed for an arena. He looked at about four other sites, he told the City Council, before deciding Sodo was the best place.

Hansen approached Seattle Mayor Mike McGinn with his idea a little more than a year ago. Hansen hadn't bought up any property yet, though he he had settled on Sodo. The city, of course, was interested, but also took the opportunity to push KeyArena -- or at least the site -- as somewhere Hansen could build. But Hansen had already considered KeyArena and the other alternatives.

"It's not like we bought a bunch of land in Sodo and declared this is where it was going to be," Hansen said Wednesday. 

He had discussions with McGinn's office and the NBA for the better part of the year. Meanwhile, Hansen started buying up property south of the Safeco Field parking garage, on the southernmost edge of the city's "stadium district." By the time The Seattle Times broke news of Hansen's plan on Feb. 4 this year, he and the city had already fleshed out a skeleton of a plan.

So it didn't take long for McGinn and King County Executive Dow Constantine to call a news conference Feb. 16 and announce the arena proposal. They appointed an Arena Review Panel, made up of local experts and community leaders, to examine Hansen's plan and scrutinize the scope of public contribution to the project.

After several hearings, the panel gave the project the green light, and on May 16 McGinn, Constantine and Hansen announced a "memorandum of understanding" for the public contribution to the project and the built-in financial safeguards to protect taxpayers. The formal agreement is now before the city and county councils for approval or rejection.

But this sort of stuff gets muddy; it can be tough to understand. Misconceptions swirled about the public contribution to the project, perpetuated by the Seattle Times editorial board.

Wednesday was, a day after meeting with the King County Council, Hansen's chance to set the record straight for the Seattle City Council.

Public contribution

One of the biggest criticisms of the arena plan is the use of any public money at all. Many Seattleites are understandably jaded after the Kingdome, Safeco Field and CenturyLink Field constructions and the KeyArena renovation -- particularly with the departure of the Sonics. Many just want any new arena project to be funded entirely privately.

City councilmembers grilled Hansen on why he's asking the city and county for financial help. Hansen said that not only is it needed to make the project financially viable, it would only be fair because the city and county would get a lot out of a new arena.

"I think that the transaction is fair. And I think that's what a lot of people are forgetting," Hansen said. "This will be a beneficial investment for the city of Seattle.

"You should have some skin in the game. It's fair."

Under the agreement, the city and county would contribute $200 million to the arena by way of loan. The project is dependent on Hansen and his investment group acquiring an NBA franchise.

If the investors nail down an NBA team and an NHL team, the city of Seattle would contribute $120 million and King County would contribute $80 million. If only an NBA team is in the works, the city would still put up $120 million but the county would only add up to $5 million; Hansen's group would make up the remaining $75 million to build the arena.

Asked why the public should pay that $75 million if he's willing to put it up, Hansen said an NHL franchise would add more tax revenue for the city and county than only an NBA team. Hansen said he believes his ownership group would be able to make the arena viable without an NHL team, filling up many of the extra free days with concerts and other events. 

Another misconception of the arena proposal has been the property value. When everything is purchased, Hansen will have spent around $50 million to acquire the arena site. But, under the agreement, the city and county would set aside $100 million to buy that land from Hansen.

Some, including the Seattle Times editorial board, have wondered whether Hansen's group is looking to turn a profit by flipping that property. But, as Hansen said both Tuesday and Wednesday, that's not true at all -- the city and county would buy the land at its appraised value, whatever that is.

That amount -- say, $70 million, after environmental reviews and permitting -- would be the public's up-front contribution. The city and county would then buy the arena, after it's finished, for whatever the difference is between the land purchase and the $200 million funding cap -- in this example, $130 million. (If the land costs $50 million, the arena would be $150 million; if the land costs $90 million, the arena would be $110 million.)

Hansen estimated the completed site -- arena and all -- would be worth around $375 million. Under the proposal, the city and county would end up owning $375 million worth of stuff for $200 million.

And that $200 million would be paid back (with interest) over 30 years by taxes on arena operations, the venue itself, event tickets and other sources of revenue that would not exist without the arena. That's why McGinn keeps calling the arena "self-funded."

"We're actually selling you an arena that you will own," Hansen said.

There are several safeguards in the proposal to protect the public investment. The biggest is Hansen's pledge to pay extra rent if taxes don't generate enough revenue for his monthly payment to the city and county.

Surplus tax revenue could go into the city and county's general funds, and Hansen's group would put their extra money into a reserve account for major upgrades to the arena. His group would also be required to set aside $2 million per year for maintainance and incremental upgrades.

Sodo location

The other big hurdle for the arena project is objections from the other businesses that already call Sodo home. The Port of Seattle, labor unions and even the Seattle Mariners have concerns about added congestion to the area, saying increased traffic would block and delay freight operations to and from port terminals and a key train depot.

On Tuesday, maritime industry representatives urged the King County Council to give the  proposal a thorough review, saying an arena should not go into Sodo without major traffic mitigations. Some of them suggested the KeyArena location as a better construction site.

But Hansen disagrees. Renovating KeyArena again is not an option, he said, as the venue is not big enough for NHL hockey games. Because the site is public property, it would be more expensive and more time-consuming to tear down KeyArena and build a new venue there. The site's footprint is too small, he said, and construction would mess up Lower Queen Anne traffic for years.

Besides, if KeyArena were torn down, Seattle's new NBA team would not have anywhere to play in the interim while a new arena is built, Hansen said. UW's Hec Edmundson Pavilion and the Tacoma Dome are not up to the NBA's standards for even an interim venue.

Councilmember Sally Bagshaw asked if Hansen would be open to any other alternative sites, such as the reported option in Bellevue.

"The proposal we've put before you is for a specific site. We've done that work -- we've studied all the other sites. We feel like we've chosen the best site for the region," Hansen said.

"So it's not that I'm not open to looking at them -- I feel like we already did that."

The vision for Sodo

Another big objection from the port and organized labor has been Hansen's grand plan for the stadium district. A month ago, Hansen said his vision for the area is to develop an entertainment center similar to L.A. Live, a collection of restaurants, bars, clubs, hotels and other venues surrounding Staples Center in downtown Los Angeles. 

The manufacturers union, for one, balked at what it called the "gentrification" of Sodo. Critics are worried commercial interests will encroach on the industrial area and become yet another problem for port operations.

On Tuesday, architect and former Seattle City Councilmember Peter Steinbrueck told the King County Council that the arena project could be in violation of the 12-year-old law that designated the area in question -- as some have called it -- a "stadium district." Steinbrueck said the  June 2000 law merely established a "stadium transition overlap district" that allows Safeco Field and CenturyLink Field to be in Sodo.

The law's intent, he said, was to protect the industrial district from commercial encroachment by establishing a buffer zone of stadiums. But no third venue was considered in creating that transition district, he said.

"Within the boundary (of the buffer zone) the arena does work, but it absorbs all remaining land for a third stadium," Steinbrueck told SportsPress Northwest on Tuesday. "It loses the original intent as a transition area. A transition area is used to (separate) sports-recreational use and heavy industrial use. There's a very heavy industrial use here."

Nevertheless, he said a third venue could be shoehorned into the district, though it could make for a lot of red tape. Hansen's proposed arena site is on the south edge of the "stadium transition overlap district," straddling Occidental Avenue South between South Massachusetts Street and South Holgate Street along First Avenue South.

Hansen has also purchased the property north of Massachusetts Street next to the Safeco Field parking garage. There, he'd like to see some restaurants and bars along an open plaza. He's hoping the city will transform Occidental Avenue into a covered pedestrial mall, situated between Safeco Field to the north and the main entrance of the new arena to the south.

"We are not planning on some major redevelopment of Sodo," Hansen said. "We are just trying to make our front door a nice place to be."

He did mention, however, that the Mariners have considered a hotel on some of the organization's property in the area. And with a big residential development going in just north of CenturyLink Field, it's not hard to understand why Sodo industries are worried about "gentrification."

Hansen said he doesn't want to control the entire Sodo neighborhood, just the doorstep to his arena.

'Basketball is a performance art'

The city stands to benefit from a new arena in several ways, Hansen said. The first is obvious: Seattleites would get the Sonics back, and perhaps a new NHL team. And, the venue would also be used for concerts and community events.

A new arena would also generate tax income for the city and county, not just from local fans but those who travel from outside King County to catch a game. Hansen reminded the City Council that if a new arena were in a different tax district, such as in Bellevue, the city would not receive as many benefits.

But an arena would also have less tangible perks, Hansen said.

"Sports are very impactful on youth. There is definitely a correlation between having professional basketball -- and adding professional hockey -- and having kids participate in those sports," said Hansen, who grew up in Rainier Valley. "Sports had an impact on me; I participated in a lot. And it's probably why I'm successful at this point."

Asked why the city, which already helps fund such community mainstays as the Seattle Symphony, should give an arena similar (or better) treatment, Hansen said the City Council should not look at the arena entirely in terms of dollars and cents.

"Basketball is a performance art," he said.

He meant that basketball brings with it a lot of the same intangible benefits as the symphony or the opera. So Councilmember Richard Conlin asked Hansen if he would be willing to run his operation as a nonprofit, like the symphony and opera.

Hansen, of course, said all but the word "no," explaining that the city's investment in the arena is dependent on Hansen's group turning a profit.

So Conlin asked why the city should make an investment in an arena, instead of just working with Hansen like it does with other for-profit groups that bring their business to Seattle. Conlin used the example of movie theaters, which bring in a lot of tax revenue for the city.

"It's different," Hansen said, "than a for-profit business engaged in, I don't know, marketing or something, opening up a new headquarters here.

"They don't have people opening up the sports page every day."

Nick Eaton can be reached at 206-448-8125 or nickeaton@seattlepi.com. Follow him on Twitter at twitter.com/njeaton. Visit seattlepi.com's home page for more Seattle news.