Key Arena redevelopment announcement is the culmination of a farcical process

The rights to redevelop Seattle’s Key Arena into a modern facility that could potentially house both an NBA and NHL team have been awarded to the Oak View Group. That’s the inevitable result of a questionable process by the city spanning many months.

The former home of the Seattle SuperSonics could see another NBA and/or a new NHL team someday if the Key Arena redevelopment effort is successful. While fans will have to wait on that possibility, what’s becoming more certain is that the “open bidding process” along with several other commitments made by the City of Seattle were not what they appeared to be.

Among the list of those seemingly misled by the city’s double talk are hedge fund manager Chris Hansen, the Seattle Partners group (comprised primarily of the Anschutz Entertainment Group and Hudson Pacific Properties) and the people who elected the city’s council. It appears to some that the council has wanted the Oak View Group fronted by former NBA and NHL front office mogul Tim Leiweke as its partner all along, and has resorted to unethical means to achieve that end.

This process seems to have began in February of 2012, when the city made a public announcement about Hansen’s interest in bringing the NBA back to his native city. Hansen proposed building a new arena for an NBA team with private funding in the SoDo district. Soon thereafter, Hansen acquired a Memorandum of Understanding with the city that no other stadium projects would be discussed by the city on the contingency that Hansen could secure an NBA team for the arena via either relocation of an existing franchise or expansion of the league.

After months of futility with the NBA that landed Hansen in some legal trouble involving the possible relocation of the Sacramento Kings, Hansen adjusted his proposal. The SoDo arena project became an NHL-first venue, as the NHL was ready to expand at the time and Seattle was a strong possibility if a suitable venue could be found.

Hansen needed the city to approve two other measures in order to make his SoDo arena work for the NHL. Hansen offered to tear up the existing MOU in exchange for the city vacating part of Occidental Avenue for the arena, and he also sought a tax waiver.

Everything hinged on the city’s decision on Hansen’s new proposal. Without the vacation of the street, he had no concrete arena plan that would be necessary for the NHL to choose Seattle for expansion. At the same time, without a team secured, his MOU with the city would become void. That appears to have been the beginning of the end of the SoDo Arena. The city council voted to reject the sale of the street, and eight months later, acted as if the MOU between Hansen and itself didn’t exist although it actually runs through Dec. 3 of this year.

In January, the city announced that it was accepting bids to redevelop the Key Arena in the hopes of luring an NBA and/or NHL team to the renovated facility. As it seemingly shelved Hansen’s SoDo arena proposal, two strong contenders submitted bids. At the time, the city council stated that it was insisting upon the bids containing 100 percent private financing, and would not consider any bids that called for public dollars.

The city’s double talk on that point was revealed in April. The city’s budget director, Ben Noble, revealed that both of the contending proposals from the Seattle Partners and the Oak View Group used tax credits and/or dollars as part of their financing plans. As the city considered both bids despite the fact that neither met its original condition while essentially ignoring Hansen’s petition for vacation essential to his arena project and the MOU with Hansen, it released all the details of the Seattle Partners’ bid for the Key Arena renovation.

Meanwhile, parts of the Oak View Group’s bid remained sealed. The city made the call to keep the entirety of that bid from public scrutiny, and the Oak View Group maintains that it wanted all the details of their proposal made known to the public since it was submitted. Despite this, the Seattle Partners pressed on with their internal process, seeking commitments from investors expressing confidence in their proposal. Just over two weeks ago, a letter was sent out to interested parties from the leadership of the Seattle Partners lauding the bidding process.

That changed suddenly on Sunday, when the Seattle Partners sent a letter to the city rescinding their proposal. They questioned the transparency of the process in the letter, expressing a sentiment that the deck was stacked against them and that the Oak View Group proposal was less financially sound than theirs. One of the main criticisms of the Seattle Partners proposal that city council members reportedly had was the inclusion of $250 million in public bonds, reiterating the old standard of insisting on private financing. Whether or not that would have led the city to choose the Oak View Group plan had the Seattle Partners remained in contention will never be known, but it does present a double standard for the city when the facts of the situation are presented.

In response to the retraction of the Seattle Partners’ bid, Leiweke put out some spin which directly contradicted the report of Noble:

"“Our project is 100% privately financed and built with 100% private proceeds. With our partners MSG and Live Nation, we have assembled the best team in the sports and entertainment industry.”"

On Monday, it was revealed just how misleading Leiweke’s comments were. The city released the full details of the now unopposed and victorious Oak View Group bid. In the financing plans is included $90 million in public funds from a historic tax credit and the reinvestment of city taxes generated by the project back into the facility. The question begs to be asked: if the $250 million in public bonds proposed by the Seattle Partners were such an issue, why has no similar alarm been raised about the $90 million in tax credits and dollars that were part of the Oak View Group proposal section which was kept from the public?

The city said that it withheld the Oak View Group financials until Monday because of the involvement of potential third parties who were still negotiating possible financial commitments with the group. While that is standard practice, it seems that the city could have kept the process equitable by redacting the financial details of the Seattle Partners proposal from public view as well. Additionally, the timing of the release, just a day after the Seattle Partners’ letter criticizing the original redaction, is interesting.

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As the bidding process is now over, the negotiations with the Oak View Group to finalize all the points of the plan to renovate the Key Arena will now go forward. If the bidding process is any indication, it looks like the council is ready to give the group any and everything it wants. It appears that this has been the desired end for quite some time.