A Sporting Chance

Last April, as the battle raged over whether the NBAs Seattle SuperSonics would stay in town or leave, a former Sonics star and a public-relations executive unveiled a bold new proposal that they believed at the time was a game changer.

They wanted to build a sparkling new professional sports and exhibition center along the south end of Seattles scenic waterfront, some of the states most valuable real estate. The new entertainment mecca was dubbed the Emerald City Center. Its cost? Oh, about $1.1 billion.

Wait, how much? Thats right, $1.1 billion. But in this economic climate, whos got the bank for that?

We do, says Fred Downtown Freddy Brown, one of the greatest perimeter shooters in Sonics history, captain of the 1979 championship Sonics team and a former vice president at Bank of America. The response weve gotten from the private sector has been overwhelming.

Emerald City Center is nothing if not audacious. The plan calls for the creation of a sports center that would include exhibition halls, open spaces, restaurants and lots of stores.

The facility would be anchored by a massive sports arena, which in artist renderings resembles a horseshoe crab. It would house teams from the National Basketball Association, the National Hockey League and, perhaps, even the Arena Football League. There would be exhibition centers on the site to spotlight the regions technology sector, the aerospace industry, the agricultural sector, the areas Native American heritage and a Pacific Northwest sports hall of fame.

And the best thing about the proposal, according to Brown? It wont cost the taxpayers a single penny; the entire project would be completely financed by money from the private sector. While Brown says there has been widespread interest from a variety of investors, none has come out publicly in support of the idea.

While the complex is obviously the longest shot of Browns career, he and his business partner in the deal, Dave Bean, senior director of integrated strategies for WongDoody, believe that this project can be done and that it actually makes financial sense.

Of course, several things would have to happen before such a grand vision can start to become a reality. The first, most obvious and most difficult hurdle would be to find an NBA team to replace the Sonics, who have departed Seattle to the wilds of Oklahoma after 41 seasons. As die-hard Sonics fans will always remember as a day of infamy, the city of Seattle settled its lawsuit with the team for $45 million on July 2, 2008, thereby releasing the team from the last two years of its lease at KeyArena.

One thing, however, is clear: As far as Brown and Bean are concerned, the era of publicly financed arenas in Seattle is dead. If so, the Emerald City Center could be the start to a new chapter in the relationship between Seattle and its pro sports teams.

The Private-Public Debate

Browns organization brings a new perspective to a quandary that taxpayers, lawmakers and business leaders have wrestled with for several years now: how to finance major sports facilities. Beans position on professional sports is straightforward: This is a private business, and private business should be responsible for providing the capital for the operation of its business.

Others in the stadium-financing world arent so convinced that the public should stay out of their gamea group that includes Microsoft CEO Steve Ballmer, wireless magnate John Stanton, Costco CEO Jim Sinegal and Seattle real-estate developer Matt Griffin. Before the Sonics turned into the Oklahoma City Thunder, these four men were in conversations with lawmakers and the city of Seattle concerning a $300 million renovation of Seattle Centers KeyArena, where the Sonics played their home games.

Ballmer and his partners agreed to put up the money to acquire the Sonics from current co-owner and chairman Clay Bennett as well as $150 million for a KeyArena retrofit. The city agreed to supply $75 million, leaving local taxpayers and area visitors to cover the remaining $75 million through the extension of various taxes and fees. But the package needed Olympias approval, and lawmakers balked. The proposal was declared dead by Seattle Mayor Greg Nickels in early April.

Nickels and members of Ballmers group say that they will still put up the money if the city can convince the Legislature to approve the tax and fee extensions, and then use the $75 million to renovate the outdated arena and lure a new NBA team to Seattle.

Of course, the mayor and Ballmers group are not the only ones asking for public financing. University of Washington president Mark Emmert also wants taxpayer-funded support to renovate the aging and outdated Husky Stadium, which, as it happens, is a public facility owned by the state of Washington.

The notion that were never going to use public dollars for sports facilities again is, frankly, silly, Emmert says. The state of Washington now owns a 90-year-old football stadium. We need to find a solution to renovate a facility that has fallen into disrepair.

During the last legislative session, the UW tried to redirect $150 million in King County taxeswhich are currently paying the debt for Safeco and Qwest fieldsto be used for a $300 million renovation of Husky Stadium, but the issue went nowhere fast. Emmert intends to try again in Olympia next year. Asking the taxpayers for money to fund a new NBA and NHL arena amounts to spinning our wheels, Brown contends. We wanted to avoid that when we started talking about [the Emerald City Center] more than a year ago.

Stadium Fatigue

Theres no secret why taxpayers in Seattle are so dead-set against shelling out any more money for pro-sports facilities. After a decade of being asked to support high-profile sports projects, stadium fatigue has set in among the regions voters. In 1995, an election was held to determine whether to set aside taxes on hotels, motels and car rentals for the funding of what is now called Safeco Field, home of the Seattle Mariners. The voters narrowly defeated the measure. However, in a special session, the Legislature voted to approve the taxes anyway, and funding for Safeco Field came through. The stadium ultimately cost $517 million to build, with $372 million of that coming from public resources.

Some of the voter unhappiness fell into two categories, says former U.S. Senator Slade Gorton. One, the Legislature ignored the will of the voters. Two, the Kingdome wasnt even done being paid for. Gorton was instrumental in brokering the 1992 deal that gave the ownership of the Mariners to Hiroshi Yamauchi, the former Nintendo chairman. Gorton is now at Seattle-based law firm K&L Gates, which represented the city of Seattle in its suit against the Sonics.

Then, in 1997, the states voters were asked to help subsidize the lions share of what is now called Qwest Field, home of the Seattle Seahawks. The stadium cost $460 million to complete. Seahawks owner and Microsoft co-founder Paul Allen chipped in $160 million of his own money, plus the majority of the costs of the statewide vote. The measure, which was a risky play by Allen, narrowly passed. Results were sharply divided along regional lines: Nearly every county in Western Washington voted for the stadium measure, while only one east of the Cascade MountainsBenton Countybacked it.

The backlash against taxpayer-funded stadiums and arenas has left lawmakers with little appetite for supporting such measures.

The public is strongly opposed to public financing for pro sports arenas, says the states Speaker of the House Frank Chopp (D-Seattle), who describes himself as a huge Seahawks fan.

We did a poll of the Democratic caucus when the Sonics came to Olympia last year, and only five members supported it. Its just not a priority, Chopp says. We have a funding need in this state for school construction, education, health care and maintenance of our roadways, not pro-sports arenas.

On Husky Stadium, Chopps position is a little more nuanced. I see [the Husky Stadium renovation] as a different issue from the Sonics because theyre not pro athletes and the facility is owned by the state, he says. But a lot more work needs to be done on [the UWs proposal] and I need to see some support for it from other legislators. Before the university came to Olympia during the last session, only one legislator came to me about Husky Stadium.

Other state lawmakers, such as Sen. Margarita Prentice (D-Renton), chairwoman of the powerful Ways and Means Committee, threw their support behind the idea of a taxpayer-funded sports facility for the Sonics. At the county level, King County Councilman Peter von Reichbauer has pushed hard for such measures in the past and says he would have voted in favor of extending the taxes passed to fund Safeco Field so that a new basketball arena could be built.

One issue that could sway politicians is the fact that Safeco Fields funding package has ended up being quite successful. Seattle Mariners CEO Howard Lincoln says the ballpark is on track to retire the projects bonds possibly as early as 2011, five years ahead of schedule.

Safeco Field is an example of a great public-private partnership, Lincoln maintains. By 2011, the people of Seattle will own the ballpark and theyll have a great tenant in the Mariners.

Despite Safeco Fields financial success, Brown and Bean recognized the sharp division between lawmakers more than a year ago and decided their Emerald City Center proposal had to be financed by the private sector. Whats more, Brown thinks such a project just makes good business sense.

I said to myself, You know, if I was still in finance, Id bank on [the Emerald City Center proposal], he says. Show me the primary and secondary sources of income, the NBA and the NHL, and take it to the business community and the financial institutions. On its merits, Id be able to say, Yeah. I can turn a profit on that.

Plenty of Hurdles

As enthusiastic as Brown might be about the Emerald City Center proposal, it still faces plenty more hurdles. For starters, Seattle no longer has an NBA team and the NHL has no plans to expand in the near future.

Another serious issue is the preferred site for the project. The Emerald City Centers plan suggests building on the waterfront, possibly on Pier 46, located west of Qwest Field. The problem is the pier is currently one of the Port of Seattles busiest container terminals, and port officials have come out strongly against Brown and Beans proposal.But the two men say they have several alternative sites in mind for the facility, including two others in the SoDo area.

The biggest problem remains whether such an expensive project would actually pencil out. Private palaces havent always succeeded in the past. Just ask Paul Allen, who ran into financial problems of an enormous magnitude as owner of the Rose Garden, a 20,630-seat NBA arena that is home to the Portland Trail Blazers.

In 1993, Allen entered into an agreement with nine private-equity firms, including TIAA-CREF and Prudential Insurance, which lent him $155 million to pay for construction of the Rose Garden. Allen also received $34.5 million from the city of Portland and pledged some of his own assets. The problem, according to one sports business expert, is that Allen didnt control enough of the revenue generated by the arena to pay off the $155 million debt. The lesson here is this: Dont give up vital revenue streams critical to the financial viability of the business, warns Dennis Howard, the dean and Philip H. Knight professor at the University of Oregons Lindquist College of Business. In hindsight, signing that deal was a terrible decision by Allen.

Allens quandary at the Rose Garden was repeated here in Seattle at KeyArena. When the old Seattle Center Coliseum was given a $95 million renovation in 1994, the debt was paid down by game-day revenue streams such as suite sales, concessions and parking. While still in Seattle, the Sonics garnered only a portion of those revenue streams, leading to massive annual losses for both the former owner, Starbucks chairman and CEO Howard Schultz, and the current owner, Bennett.

Brown and Bean appreciate the financial pain endured by Allen, Schultz and Bennett because they didnt control the revenues generated by their respective arenas. Even with such risks in mind, Bean says financial support for the facility wont be a problem.

Its a construction project, and new construction projects usually generate equity right off the bat, Bean says. It will have intrinsic cash flow because of the entertainment complex associated with it. It could work. Look, Ive read the research polls. The public financing model is broken.