Bob Newman said the $250 million in public bonding is only a suggestion being made to the city and added that his Seattle Partners group is open to going with 100 percent private funding on its $520 million renovation plan if turned down.
Anschutz Entertainment Group president Bob Newman on Thursday clarified his company’s plans to seek about $250 million in public bonding from the City of Seattle in its KeyArena renovation proposal.
In an interview with The Seattle Times editorial board, Newman said the bonding is only a suggestion being made to the city, and he added that his Seattle Partners group — a joint venture between AEG and Hudson Pacific Properties — is open to going with 100 percent private funding on its $520 million renovation plan if turned down. But Newman added that the proposed funding mechanism is “risk free’’ and a “win-win’’ for his group and the city if it chooses to participate.
“This is an option that, if you do it this way, it creates better returns for the project as a whole,’’ Newman said.
Municipal bonds often carry lower interest rates than regular project financing from a bank or venture capitalist.
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The Seattle Partners plan envisions the public bonding of three separate revenue streams — his company’s future lease payment to the city, ticket taxes and a facility fee — at the remodeled arena. Newman said his Seattle Partners group would guarantee the full repayment of the bonds and that the city would receive the same amount it currently gets from those same KeyArena revenue streams.
He added that any shortfall on those revenue targets would be fully covered by his group as well. Any revenue above that guaranteed amount would constitute a surplus, which Seattle Partners says the city could keep.
Seattle Partners estimates it can deliver $144 million in surplus revenue to the city via this funding mechanism over the period of a 35-year arena lease. The benefit to Seattle Partners would be the reduced financing cost on that $250 million amount used to build the arena.
“What you’re able to do is take advantage of financing options available only to the city to make it work,” Newman said, adding a similar model was used when AEG built Staples Center in Los Angeles.
But the public-bonding request has raised eyebrows, given the city’s Request for Proposals (RFP) on KeyArena renovations states that bids must involve 100 percent private financing of construction. The request also has drawn comparisons with a previous arena plan pitched by entrepreneur Chris Hansen in Sodo District that would have provided him up to $200 million in public-bond funding.
Hansen abandoned that plan last fall and is pitching a proposal with all-private funding.
Though the city would stand to keep the surplus revenue if generated, such large use of its bonding capacity would reduce its ability to fund other major projects should the need arise.
Roger Nyhus, whose communications firm has been hired by Seattle Partners, sat in on the interview and suggested the main difference between Hansen’s proposal and this one is the city already owns KeyArena.
“It’s a city-owned asset, and the city will retain full ownership of the building,” Nyhus said. “So it’s the city investing in its own property.”
Hansen’s plan also involved the city fully owning the proposed Sodo arena, though that venue likely would drain concert and event revenues from its KeyArena holding.
Newman also defended the bond request, saying the RFP asked for creative ideas in which the city could be involved in bringing the project to fruition. Newman said the city is interested in his group’s idea, though no formal discussions have been held.
“It’s a model that we think makes sense,’’ he said. “It doesn’t mean that there aren’t other models. You’re only allowed to put forth one until you get to the dialogue. We just looked back and said, ‘This could be a win-win.’ It truly is. There is no wool over anyone’s eyes.
“It would truly be different if we said ‘We’re keeping the taxes’ or ‘You can’t keep them after the bonds are paid off.’ This is a mechanism that truly will provide better returns to the city in addition to retaining ownership. And with zero risk.’’
Brian Surratt, head of the city’s economic development office and the man overseeing KeyArena proposals said Thursday: “We’re aware of their request for public financing on this question. We’ll just have to take a look.’’
Surratt added: “We made it very clear to anyone that wants to respond that we want minimal city dollars being a part of the construction and long term operations of the facility. We made that very clear in our RFP.’’
Surratt said it’s too early to determine whether the bond-funding proposal falls outside the 100 percent private financing requirement imposed on all KeyArena bidders by the city’s process.