LAST week’s report on the extent of subsidies for the proposed Sodo pro-basketball arena is devastating. The deal struck between the Seattle City Council and investor Chris Hansen is illegal and should be withdrawn.
The city’s offer may seem irrelevant because Hansen failed to convince the National Basketball Association to hatch him a team. He also sullied himself by trying to influence an arena vote in Sacramento by the surreptitious funneling of money. Still, he could get a team, or his partners could. The city’s offer is still on the table, a precedent for future ones. In light of the new report, it needs to be withdrawn in its current form.
arena opponents, organized as Sonics Without Subsidies, have made their argument over Initiative 91. The measure, passed in 2006, forbids the city from subsidizing professional sports teams. The initiative has not been thrown out by a court, and is not likely to be. It is the law. It passed with 74 percent of the vote. If it were on the ballot again, it would pass again.
Supporters of the proposed arena have said again and again that the plan involves no general tax increase, as if this means no subsidy. But the subsidy is there. Private Valuations, a Bellevue company headed by Adrien Gamache, has now calculated its amount over 32 years: $732 million.
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That figure has some assumptions that are arguable, as would any estimate over that long a time. It is not arguable that Hansen’s plan involves subsidies in the hundreds of millions of dollars.
They come in three parts:
• Largest is the scheme under which the taxes generated at the arena are credited against its debt to the city. The city owns those taxes already. It is as if a person who owed money on a student loan told the government to “just take it out of my income tax.”
• Next is the effect of the city “owning” the arena that Hansen’s company gets exclusive use of. It means the arena has the same tax status as a public library or a church. By paying zero property tax, Hansen’s company would save $154 million over 32 years. Because of the way the property tax system works, however, the city would make this up by collecting the money from everyone else.
The extra charge would never show up as a line on the tax bill. But it would be there.
• Finally comes the $200 million the city has promised to borrow from Wall Street on its taxpayer-backed credit and relend to Hansen’s company on its unsecured promise at a markup of zero. Another subsidy.
Each of these is illegal under I-91.
The opponents have not made it an issue, but these public subsidies are also illegal under the state constitution. Article 8, Section 7 says no city is allowed to “give any money, or property, or loan its money, or credit to or in aid of any individual, association, company or corporation, except for the necessary support for the poor and infirm …”
None of this is to rule out professional basketball in Seattle. The city has had it at KeyArena, and could have it there again. Another arena could be built. This region has plenty of wealth to build a new arena for a for-profit team. But it should be private wealth, without subsidy.