Inside sports business
There has been justifiable concern about the city of Seattle negotiating the best deal possible when it comes to a private company renovating KeyArena for NBA and NHL teams.
After all, the city is in a unique position, with two groups offering to build a modern winter sports venue with private funds. Most cities never have one group offer that, let alone two, as with Oak View Group (OVG) pledging to renovate KeyArena and Chris Hansen’s proposed new facility in the Sodo District.
So, it’s important the city not blow it on the negotiation front.
To avoid that, the city’s legal department has retained New York-based sports consultant David Abrams of Inner Circle Sports to advise its negotiation team on the pending deal with OVG. Abrams has a three-decade personal history as an investment banker specializing in sports venues and leads the boutique ICC firm’s division that deals with funding, negotiation and development plans for stadium and arena projects.
So, he’ll advise city negotiators and be made available to the Seattle City Council for information on what to look for, ask for and avoid during this round of talks.
Then, as a further backstop, the council itself is seeking its own independent consultant to review the Memorandum of Understanding (MOU) negotiated between OVG and the city. The council has asked Mayor Ed Murray that the MOU draft be completed by Sept. 12 so that it can hold at least one public meeting before voting on the package.
But that September date won’t be the first time the council gets an idea about MOU contents. On Monday, the council’s Select Committee on Civic Arenas will hold its first meeting since OVG was selected as the city’s designated renovation partner.
The committee, co-chaired by council members Debra Juarez and Bruce Harrell, will help give the council input during negotiations. Both branches of government must remain separate – meaning the council can’t sit in directly on negotiations – but the idea is to have liaisons incorporate the council’s demands into the city’s talks with OVG.
That way, you won’t have Murray’s team negotiate one deal, and then the council seek a brand new agreement in September.
Once an MOU draft is produced, the council’s consultant will review it, suggest additions and make sure no funny language was slipped in.
This use of consultants is nothing new. The city and council had access to outside consultants during the years it reviewed the Sodo arena MOU struck with Hansen in 2012.
What has changed is how this MOU is being prepared.
The last MOU was negotiated mainly behind closed doors between Hansen, former Mayor Mike McGinn and King County Executive Dow Constantine. When that MOU was announced in May 2012, the council had no idea what would be in it and had to wait to even be told the identity of Hansen’s investors.
That secretive start didn’t help the local stakeholder situation, with the Port of Seattle, various Maritime unions and other professional teams emerging as formidable project opponents.
Things are different today.
The public has been made aware of OVG’s investors, its precise financial plan and its after-construction tax incentives being sought. And it knows this several months before an MOU draft is even produced.
KeyArena stakeholders like the Uptown Alliance were given input on the pending OVG deal as part of an advisory panel. The citizens’ group expressed reservations about the OVG plan that the city promised to address during negotiations.
And to make sure that’s not glorified lip service, the council has pledged to ensure the group’s concerns about neighborhood parking, transportation and overall aesthetics are incorporated into the final product.
This won’t appease all KeyArena project critics, nor should it. The proof won’t come until the final MOU is approved and that can’t happen until at least Dec. 4 – the day after Hansen’s ongoing deal with the city expires.
But the concern expressed by some that Hansen’s previous MOU received far more scrutiny than the pending OVG deal is simply not supported by fact. By any objective measure, the OVG plan has undergone far more public scrutiny before an MOU is even drafted than Hansen’s deal had received by its May 2012 unveiling.
Sure, that scrutiny must continue.
And that may, or may not, include a side-by-side council comparison of the OVG offer with Hansen’s latest plan in Sodo. Thing is, an effective comparison requires something to actually compare.
One problem is Hansen’s current plan, like his prior one, requires the city selling him a street to complete his arena land. Then, he needs to acquire a team and bring on additional investors before building.
Hansen’s surface pledge of an “all private’’ arena sounds great in theory. But any council consultant will take one look and ask how Hansen plans to pay for it. It will seek out fine print details, investor names and ironclad financial guarantees that simply aren’t there.
Then what? This “trust me’’ approach didn’t fly for Hansen in May 2016 when the council voted down his previous attempt at being sold the street. And it’s unlikely to fly now that there’s actual arena competition, with investors already lined up and not needing more land or teams to start building.
It’s one thing to be skeptical about the pending OVG deal, but that skepticism must be applied to all projects equally. After all, the very reason these consultants are getting hired is because nobody, rightfully, is prepared to accept a “trust me” answer from OVG.
The process of exploring a KeyArena deal is arguably miles ahead of the 2012 backroom talks that led to the MOU in Sodo involving up to $200 million in public bond funding.
And only via serious comparisons and diligence will city officials avoid blowing that lead.