Chris Hansen’s Sodo arena plan could face battle from Obama proposal

Inside sports business

President Barack Obama has again proposed ending the tax exemption on bonds used by cities and states to finance new sports venues.

If there’s a familiar ring to that item from Obama’s 2017 budget proposal, it’s because he tried the same measure last year. As with that, this effort has little chance of becoming law given intertwined interests of the sports industry and politicians from both political parties.

What Obama really wants is a public debate about eventually eliminating such government subsidies for sports teams. A year ago, it took weeks for most to even notice the budget item. This time, it generated immediate discussion for understandable reasons.

St. Louis football fans are steaming mad their Rams took off for Los Angeles, leaving them still paying off an empty stadium. The Chargers could join the Rams in L.A. after one more season in San Diego, where they have been trying to get a new stadium built.

Eliminating the tax subsidy on such bonds – used on stadiums here for our Mariners and Seahawks – could protect against future public shakedowns by teams. But Obama’s measure could also have a more immediate impact on the debate here over entrepreneur Chris Hansen’s proposed $490 million arena project in the Sodo District.

Hansen isn’t threatening to pull teams. Quite the opposite, he wants to bring the NBA back here and if successful would receive up to $200 million in municipal bond funding for his arena.

It’s not clear if those bonds would be the tax-exempt variety. That’s to be determined, but it’s a safe bet a substantial portion will be.

And that opens a door for Sodo opponents who, since last September, know of another Seattle arena option unlikely to require any bond funding.

Last summer’s city-commissioned report by the AECOM engineering firm states KeyArena can be renovated to NHL/NBA compliance for $285 million. That’s without tearing it down and triggering a historical landmark application.

Expect to hear more about AECOM’s report and Obama’s bond measure before, during and after a public hearing March 15 on the city giving up part of Occidental Avenue South for the Sodo proposal. Sodo opponents will undoubtedly press the city about the seldom-discussed KeyArena option.

Think about it: Why build a Sodo venue for $490 million using $200 million in public bonds? Especially when the $290 million private contribution toward that project would finance the entire KeyArena renovation?

KeyArena is a profitable city facility that the AECOM report projects will lose money as a secondary venue. Of the KeyArena options studied, AECOM concluded the $285 million retrofit could be the public’s most profitable.

Sara Belz, a city analyst who coordinated the report, said in emails with an aide to council member Tim Burgess last year she was surprised the study projected only a $912,000 yearly KeyArena profit with NBA and NHL teams.

“On the upside, though, if we are to attract the NHL and/or NBA to KeyArena, the owners of the teams would likely be on the hook to pay for many/most/all of the development/capital costs necessary to bring the facility up to current professional standards,’’ Belz wrote. “Under most of the other scenarios AECOM studied, the city would have to pick up the tab for construction costs.’’

Belz added that “the city would likely see a significant uptick in Seattle Center parking garage revenues, and that isn’t included in the $912,000.’’ She did wonder whether it was “wishful thinking” to suggest owners pay the renovation cost.

Certainly, team owners try to spend as little as possible. And leagues love new facilities. But doing everything leagues and owners want isn’t supposed to be a local government’s prime concern.

We’ve seen examples with Angel Stadium in Anaheim, or Kaufman Stadium in Kansas City of how renovations can transform venues.

So why shouldn’t future owners pay for most, if not all KeyArena renovations? They’d expect concessions and naming rights income from an upgraded facility. And remodeling costs 60 percent what a new arena would.

Worth noting on Belz: Since August, she’s become a senior policy adviser to Mayor Ed Murray.

Yes, the same Murray who keeps reminding folks the city and county’s Memorandum of Understanding (MOU) with Hansen wasn’t his idea but he’s legally bound to it through November 2017. He certainly knows AECOM’s study thoroughly via Belz.

But Murray being handcuffed another 21 months by the MOU doesn’t prevent Sodo opponents from asking why local governments would provide Hansen any bond money at all.

They already know Victor Coleman, a potential NHL owner here, has KeyArena interest. Last August, Coleman’s sports representative, Jeff Marks, having examined AECOM’s study, emailed Murray’s top aide on the arena issue.

“Our team is looking forward to hearing any updates around the KeyArena site,’’ Marks wrote, adding Coleman’s group is “ready to move forward with this option, if viable.’’

But Murray insists nothing can happen until Hansen’s deal expires.

So, we’ll see whether Sodo opponents put heat on Obama’s fellow Democrats, Murray and King County executive Dow Constantine, for supporting a project likely to involve the very bond funding our President wants to eliminate.

And council members as well, since all it would take to effectively kill the bond-funded Sodo project is to vote down Hansen’s street removal request in late-April or May.

Sodo opponents had already vowed an epic fight. And Obama and the AECOM report just gave them a timely one-two punch.