Thursday, February 16, 2006 - Page updated at 12:00 AM

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Guest columnist

Another way of looking at KeyArena expansion

Special to The Times

On Sunday, Howard Schultz said that his goal was to have a constructive public discussion about the Seattle Sonics & Storm's future ("A key decision," Times Opinion section, Feb. 12). The following is in line with that spirit of promoting a constructive dialogue on how the general welfare of the public may be impacted by the future of those teams.

Schultz, the chairman of the Basketball Club of Seattle, is absolutely right when he says that sports are a deeply ingrained part of our culture, and part of what connects our communities and provides moments shared by generations of our families. There are thousands of adults and youth who participate in both organized and ad hoc team sports every day of the week, throughout the year. And Seattle, like any city, is a better place to live because of that activity.

As Schultz says, "Culture isn't just about art galleries, performance halls and museums."

He frames his argument for asking the public to subsidize his teams by saying that they are more than just entertainment, they are about maintaining and growing something that contributes to the culture and the economy of the region. He asks, fairly, whether this region values having NBA and WNBA franchises, and whether it is willing to do what is required for them to be competitive teams.

He then provides a quick rundown on the situation from the owner's view, but there must be a discourse between two people for a dialogue, otherwise it is a monologue. Consequently, to achieve Schultz's goal of having a public discussion, I will repeat the main points he raises and then provide additional information to allow the public to judge for itself how our tax dollars should be allocated in response to his request.

The Sonics & Storm organization is honoring the lease to play in KeyArena until 2010.

He is correct. It is legally obligated to complete its lease.

No tax money was used for the remodel.

This is misleading. City taxpayers were sharing the cost of the remodeling bill, and have been since 2001.

KeyArena was remodeled in 1995, at the request of the team. The issued debt was $75 million and was to be paid from revenue generated by the sale of the Sonics' club seats, suite sales and naming rights. The formula worked well until 2000, and then sales dropped off. Nevertheless the debt payments had to be made and since the city guaranteed those bonds, the city has been paying them along with the Sonics.

The Seattle Center facilities are inadequate for non-sports.

There is no evidence to support Schultz's statement, "Promoters may frequently pass on bringing shows to KeyArena due to the increasing costs and inefficient structure of the building." To the contrary, a representative from Bill Graham Presents, one of the two major concert promoters in town, testified before the mayor's advisory group on KeyArena that KeyArena, as far as they can tell, has not lost major performers because of its facility.

Other professional basketball corporations typically manage a facility built with public funds; this guarantees a revenue stream to the sports team owners from other retail activities in the venue; for example, the Sonics would receive all revenues from concerts and concessions. This arrangement would actually hurt the city by taking revenue away from the Seattle Center.

The region needs a first-rate multipurpose arena for the future.

He is correct. But the question to ask is, "What kind of facility?"

Seattle needs to retain KeyArena as an arena for regional shows, concerts, sports, exhibitions and community meetings. The Sonics and Storm could be anchor tenants. But even without them, KeyArena could still serve as a profitable regional facility after the current remodel debt is paid. The remodeling debt is what is pulling down the profitability of the arena.

The improvements KeyArena needs will make it a competitive multipurpose facility.

He is correct. The question to ask, however, is, "What are the most cost-effective improvements to make?"

Entertainment professional planners suggest that if KeyArena were to be remodeled to allow for a smaller seating configuration from time to time, many more concerts could be held in the space. The cost to the taxpayers for this remodel would be about $20 million, not $200 million. With this modest change, KeyArena could operate in the black.

The Sonics' proposed improvements to double the square footage of the facility would add fewer than 1,000 seats. Most of the new expansion would be to accommodate more retail activity; most of that current retail activity is probably going to the neighboring business community at this time.

No new taxes are needed to provide public support for renovating KeyArena or for building a new arena.

Wrong. The taxes would be new because they would be an extension of taxes that are currently set to expire when the Kingdome, Safeco Field and Qwest Field debts are retired. The Sonics' proposal would extend the tax burden indefinitely, without requiring a public vote.

The Sonics and the Storm provide important economic benefits to the region.

Schultz is walking a thin line on this point. The Sonics engender economic activity but there is little, if any, evidence that "new" revenue is produced. The money spent on games, restaurants, parking, etc., is discretionary and would likely be spent on other entertainment activities.

Schultz says that his teams generate more than $230 million annually in economic activity for the region and provided a report to the mayor's task force looking at KeyArena as proof. But $50 million of that figure is just in player salaries. Professor William Beyers of the University of Washington, who studies the economic impact of professional sports teams, concluded that the report was "not a good study," and that whoever did it "did not know what they were doing when measuring demands."

In summary

Schultz and the other owners of these two teams seek financial assistance. Private investors have not stepped up to help them. So they are asking for public assistance to make their teams profitable again.

House Bill 3233 and its companion, Senate Bill 6849, would provide that assistance. They would also help the arts community, which would receive a little less than 10 percent of the new funding generated from 2015 to 2020. There is no reason to connect the demands of the Sonics with the assistance to the arts organizations.

The question that citizens and legislators must ask themselves is what is the real cost of remodeling KeyArena for the Sonics. A business plan has not been offered, but it appears that the initial debt to be financed is $270 million, which would include the current carryover debt of about $50 million plus the $220 million in new improvements. Since the taxes they wish to tap are not available until 2015, if they issued bonds to finish the remodeling in 2011 when they would be signing a new lease, they will have to be paying interest on interest for the first six years or more. At 6 percent interest and with starting payment on a 20-year bond in 2015, the debt payment would be about $40 million a year for 15 years. Legislators must be ready to explain to taxpayers how this is the highest, best use of limited public dollars for such a long period of time.

It is not an all-or-nothing game. For instance, $44 million in tax revenue would pay for both a remodeling of KeyArena to attract more concerts and also pay off the remaining debt.

I hope that legislators will see the Sonics' proposal in light of weighing what other alternatives could be accomplished to help this region economically and culturally with the public revenue stream they wish to tap.

Nick Licata is president of the Seattle City Council. The views expressed here are his own and not those of the council.

Copyright © 2006 The Seattle Times Company


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