Panel OKs new Sodo arena, but cites financial risks

The panel of experts charged with determining the feasibility of a public-private arena development in Sodo has given the project a green light, saying the proposal is favorable to Seattle and King County, and warrants serious consideration moving forward.

But the panel did stress the importance of limiting financial risk to the public, saying local taxpayers could be on the hook if every safeguard were to break down. With so much of the cost of the arena dependent on the financial success of future NBA and NHL teams, funding could be shaky if either of the teams ended up in bankruptcy.

Despite that doomsday scenario, the arena proposal put forth by Seattle native Chris Hansen genuinely intends to significantly limit the financial risk to taxpayers, the review panel found. Such a proposition, with all the planned financial safeguards, is largely unprecedented in public-private arena partnerships anywhere in the world, the panel said.

"I found Chris Hansen to be very, very sincere in his desire, in his effort, to bring back an NBA and also an NHL franchise to our area," panel member Karen Lee, CEO of Pioneer Human Services, said during the group's fourth and final public meeting Wednesday at City Hall, "and to do that with as much risk as possible on him and his investor group and not on the taxpayers. I found him to be very sincere."

Hansen, a San Francisco hedge fund manager who grew up in Seattle as a diehard Sonics fan, had been working behind the scenes with Seattle Mayor Mike McGinn's office for the better part of a year, creating a proposal for a new multipurpose arena to host NBA basketball, NHL hockey and other entertainment events. Hansen has purchased land south of Safeco Field and wants to construct the arena at that site.

When the plan went public in February, McGinn and King County Executive Dow Constantine convened the arena review panel to do just that: Review Hansen's arena proposal. Under the current proposal, Hansen and his investment group would put up $500 million to help build a new arena and purchase an NBA team; he is looking for an investment partner to acquire an NHL franchise.

The city and county would advance $200 million in construction costs, to be paid back mainly by revenue generated by the arena – such as property taxes, admission taxes, sales taxes and business and occupation taxes – and rent paid by the basketball and hockey teams. The teams would not be able to relocate for 30 years and would be responsible for paying more rent to close any budget shortfalls.

But, as several panel members said Wednesday, "the devil is in the details." If the franchises were to go south financially, for instance, the public might need to contribute as well – something Seattleites historically have resisted when it comes to NBA arenas. Other unforeseen costs could, under dire circumstances, require taxpayers to help foot the bill.

"My job really for the panel is to be kinda the chief skeptic, I guess, and say: 'What about this? What about that?'" said Maud Daudon, the panel's financial adviser. "And there is a lot to like about this proposal, from where I sit. In Chris Hansen, it appears the city and county have found a very good partner."

Yet, she added, "no deal is ever entirely risk-free."

Another big concern is what a new arena in Seattle's Sodo neighborhood would do to traffic. The area already sees heavy congestion before and after every Seahawks or Mariners game, and the city continues to try to solve issues for through transit of port cargo.

The Mariners, in a formal letter, have said they oppose a new arena being built in Sodo, and insist the objections are all about traffic and infrastructure. The baseball team suggested other sites such as a suburb such as Renton or Bellevue, or even back at Seattle Center or South Lake Union.

But M's President Chuck Armstrong said the team has no problem with the NBA returning to town.

"The surprising part to me is I think people are misconnecting the dots," he told The Associated Press. "They are saying that we are opposed to an NBA team coming back and that is not the case. The Mariners strongly and enthusiastically support bringing the NBA back to Seattle. I don't know anything about hockey but it might be fun to have a hockey team here, too. We really don't see that as competition."

But the Mariners, who said they'd work with a Sodo arena if a study determined that was the best location, may be out of luck. The area where Hansen has bought land is already zoned for an arena, being smack-dab in the middle of Seattle's "Stadium District."

"The property is zoned for a stadium so the policy makers have already made a decision previously that that is an appropriate place for a stadium," said panel member Jan Drago, a former city and county councilwoman. "And Chris Hansen was pretty clear he was only interested in Seattle."

But don't expect to watch the NBA and NHL in Seattle as soon as next season. While teams such as the NBA's Sacramento Kings and the NHL's Phoenix Coyotes are struggling, it appears neither will be moving any time soon. And construction crews won't be able to break ground until both NBA and NHL franchises are secured for Seattle.

Hansen, who describes himself as a "very patient" person, told the arena review panel he's expecting a four- to five-year timeframe.

Now it's up to the city and county to move forward, hashing out agreements with Hansen's group, seeking approval from the city and county councils, and doing the pre-development studies required for such projects. Meanwhile, Hansen, who is willing to contribute up to $10 million for pre-development costs, will be on the hunt for franchises to purchase and relocate to Seattle.

"It's very promising. It looks good," said panel member Lenny Wilkens, who played for and coached the Seattle SuperSonics in the 1970s. "But, you still have to check certain things out."

The arena review panel's final report can be found on the city's website.

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.