Lance Lopes says Oak View Group is seeking $70 million in federal tax credits should KeyArena be declared a national historical landmark, as expected. But Lopes added the money isn’t a “subsidy” — only funds given any company preserving historical buildings.
Just how historical of a landmark KeyArena winds up being could prove lucrative for one of two companies seeking to renovate it for NBA and NHL use.
Director of projects Lance Lopes says Oak View Group is seeking $70 million in federal tax credits should KeyArena be declared a national historical landmark, as expected. But Lopes added the money isn’t a “subsidy” — only funds given any company preserving historical buildings.
“In no way is that a public subsidy,” Lopes said. “We’re just asking for credits that anybody spending this type of money on a historical building would be entitled to.”
At least one sports economist agrees. Victor Matheson of the College of the Holy Cross said Friday: “I would not consider that a subsidy for the arena. Because I think that’s a subsidy that you would grant to anything you designate as an historical thing.
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“In which case, it’s not the fact that it’s an arena that gets (the federal tax credits), it’s the fact that it’s historical that gets it.’’
But Brad Humphreys, a sports economist from West Virginia University, disagrees.
“Absolutely, it’s a public subsidy,” Humphreys said. “It’s tax dollars. Forgone federal taxes collected is an implicit subsidy. The only difference between this sort of subsidy and something from the state or county is whose pocket is this coming out of? It’s coming out of the pockets of everybody in the country.”
Matheson questions if KeyArena should be considered a “historical” venue.
“I think it’s probably a crock that it should be a historical monument,” he said. “I mean, for God’s sake, this isn’t Soldier Field, or Ebbets Field or something. It’s KeyArena. I mean, come on.’’
The arena is under consideration for historical landmark status because it is one of the buildings constructed for the 1962 Seattle World’s Fair.
A group headed by entrepreneur Chris Hansen that is pitching a rival arena project in the Sodo District issued a release Thursday stating the KeyArena renovation groups would seek more than $200 million in subsidies apiece.
In a comparison between its project and KeyArena proposals by Oak View Group (OVG) and Seattle Partners (SP), the Hansen group alleged historical-landmark benefits are part of OVG’s subsidies. It did not state an amount.
The Hansen group also says its arena project would cost more than $600 million and that it is putting $200 million to $300 million of private equity into that. No mention was made regarding who pays the balance, though Hansen’s group said it could secure a bank loan for the balance.
Hansen’s group also indicated the KeyArena proposals released for public consumption this month did not reveal how much private equity OVG and SP would spend. That’s true, but both have verbally indicated amounts.
OVG says its $564 million renovation would be financed via a loan from Goldman Sachs and the remainder — $414 million — would come from its equity and minority partners, Madison Square Garden Company and Delaware North.
SP wants $250 million in public-bond funds for its $521 million project and says the remaining $271 million would come from private equity.
The Hansen group correctly notes that SP‘s public proposal fails to indicate whether it’s guaranteeing bond repayment via its multibillion-dollar partners — AEG and Hudson Pacific Properties — or the lesser-valued new joint venture between the two. Also, it says both KeyArena groups are vague on cost overruns.
Hansen’s group also says an 850-stall parking garage OVG wants the Port of Seattle to help subsidize could cost $30 million — an amount appearing to be in line with industry standards.
But both KeyArena groups took exception to the Sodo group’s claim that they’re seeking “hundreds of millions” in subsidies.
Alex Vouvalides, chief investment officer for Hudson Pacific Properties, says the $250 million in bond funds requested by SP is not a subsidy for the full amount. The group estimates saving $48 million off lower interest rates — indeed a subsidy — but also claims the city could earn a yearly surplus.
Lopes says OVG would seek a “partial share” of various taxes after construction that wouldn’t be generated without the renovation. He estimates that’s a $40 million subsidy over a 35-year lease.
Also, economists Matheson and Humphreys said Hansen asking the city to waive admissions taxes — which the Mariners and Seahawks had done for Safeco and CenturyLink Fields, respectively — constitutes a subsidy. That’s because developers and promoters tend to build that waived amount into ticket costs and pocket the money.
“If I’m charging 20 bucks a ticket and there’s a 10 percent ticket tax and all of a sudden you take away the tax, I’m still charging $22 per ticket,’’ Matheson said. “So there’s no doubt that this is a subsidy.’’
Humphreys said it’s usually better to just collect the taxes — or something similar, such as the $5 “facilities fee” per ticket the SP group seeks — because at least the money can be earmarked for the project.
Hansen’s statement didn’t mention the minimum $100 million a city-commissioned report from 2015 estimated Seattle taxpayers would absorb to maintain KeyArena if a Sodo arena is built.
Mayor Ed Murray said Thursday that cost is something city consultants will weigh in deciding which proposal pencils out best.