Will Seattle See a New Arena?

Schwabe, Williamson & Wyatt PC

Schwabe, Williamson & Wyatt PC

Part One: History

July 2, 2008 lives on in infamy--when the City of Seattle announced that the beloved Seattle SuperSonics would exchange its white, green, and gold jerseys for blue and white ones. The decision was the result of a two-year failed negotiation to update KeyArena or build a new stadium, and marked the end of a 41-year-old franchise… or, as some would hope, a hiatus.

It’s been awhile. How did we lose the Sonics in the first place?

There is some debate about when the first signs of a franchise move appeared. The Basketball Club of Seattle, headed by the one and only Howard Schultz, owned the Sonics from 2001 to 2006. On July 18, 2006, the Sonics along with its sister franchise, the Seattle Storm, were sold to the Professional Basketball Club, LLC (PBC) chaired by Clay Bennett, an Oklahoma City business executive. In return, PBC paid a combined purchase price of $350 million and “promised” to expend a good faith effort to keep both teams in Seattle. After Bennett’s proposal to build a new stadium in Renton was denied, PBC informed the NBA of its intent to move the Sonics to Oklahoma City and requested arbitration to release the team from its KeyArena lease. The request was denied and the dispute went to federal court. Just hours before a ruling was to be issued, PBC and the City of Seattle came to a settlement where the Sonics would be permitted to move to Oklahoma City for a payment of $45 million, and an additional $30 million if Seattle was unable to secure another NBA team within five years.

The recent debate.

The issue has revived itself onto center stage in recent years, largely led by Chris Hansen, a San Francisco-based hedge fund manager raised and rooted in Seattle. In 2011, then Mayor Mike McGinn offered Chris Hansen the opportunity to obtain ownership of KeyArena. Hansen declined after the National Basketball Association (NBA) officially deemed KeyArena unacceptable for an NBA team, favoring the possibility of building a new arena altogether. Shortly after, Chris Hansen began purchasing property in the SoDo area at the end of the Stadium Transition Area Overlay District (STAOD). As of last year, he owned a total of 12.66 acres where the new stadium was proposed.

Hansen began negotiating the proposal with Mayor McGinn and King County Executive Dow Constantine, resulting in a Memorandum of Understanding (MOU) presented to the public on May 16, 2012. The MOU specified that no public financing would be committed until an NBA team was acquired as the primary tenant. Any public funds allocated to the project would be via city bonds to be paid back by taxes and revenue from the new arena. After various amendments and additional contingencies were incorporated into the MOU, the MOU was passed by both the Seattle City Council and the King County Council by mid-October of 2012.

Obtaining an NBA team has proved elusive. For a variety of reasons, the NBA has resisted promising a team to Seattle. NBA owners rejected a 2013 bid to relocate the Sacramento Kings to Seattle due to a variety of labor concerns and the ongoing issues of where to house the team. The NBA has for several years continued to refuse to consider a Seattle expansion team.

In 2016, the officially named Hansen-led Sonics Arena Investment Group (the “Hansen Group”) took a new approach and proposed a completely private finance of its arena proposal. Private financing would eliminate the MOU with the city, and allow the investors to move forward with the arena development without an NBA franchise confirmed. This could open the door for a National Hockey League (NHL) team to anchor the project, or would simply allow the Hansen Group to put together a more persuasive bid for a NBA team by addressing the significant facilities and transportation concerns that ostensibly* factored into the Sonics relocation. Other notable investors of the Hansen Group include Wally Walker (a former Seattle SuperSonic), Erik and Pete Nordstrom (the last name says it all), and Russell Wilson (Go Hawks!).

The proposal for a 100% privately-funded sports arena was unprecedented. As a comparison, $300 million of the $430 million used to construct CenturyLink Field was publicly subsidized. However, Hansen’s private proposal still hinged on City approval. The plan called for the sale and vacation of several blocks of Occidental Avenue South in order to build the arena. The City Council voted against the sale in 2016, based largely on concerns of impacts on the local Port industry and transportation in the already heavily congested SoDo area.

While Hansen’s MOU with the City does not expire until December 2017, the failed Occidental vacation vote pushed the city to move forward with strategies for renovating KeyArena in a way that might woo an NBA or NHL team. The city issued a Request for Proposals (RFP) in January 2017. The city received two bids by the deadline; neither of them from the Hansen Group. One of the bidders, Seattle Partners, withdrew its bid in June, stating concerns about the Seattle’s evaluation process. Subsequently, the Oak View Group was selected to move forward with the project. The Hansen Group ended up submitting a redesign proposal for two small concert venues at Seattle Center, but only after the KeyArena RFP deadline passed. The City declined to consider this proposal outside the required bid process.

The Oak View Group redevelopment proposal calls for a $600 million renovation of KeyArena to be completed by October 2020. A MOU between the Oak View Group and the City could be approved as soon as December 4, 2017. Stay tuned for Part 2 of this series, which will examine the key provisions in the 98-page MOU.

* While we attempt to be neutral about the history of the efforts to bring the Sonics home, we are Seattleites, and therefore are still a bit salty about the move to begin with.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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