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Originally Posted by sammyd
Why is Seattle’s privately funded arena inferior to this model?
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Originally Posted by DoubleK
Were you thinking Detroit vs Seattle? IIRC Seattle is being privately funded.
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Originally Posted by Corndogger
I had the same thought when I saw his post. Also, isn't Seattle getting some infrastructure upgrades paid for by the developer?
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Seattle’s deal being private is entirely spin. It is complicated and each level of government has an interest in calling it private. What it seems to be is privately financed (no government bonds are being issued directly) but that does not mean it is privately funded (no government funds contributing to paying for the project).
In fact the arena will have state financing (just like Seattle’s nfl and mlb arenas)
https://www.king5.com/article/news/l...b-e95a536d6b96
And it will have federal tax preference (privately issued but tax classed as tax exempt municipal bonds).
As for the deal itself.
“The city will pay ArenaCo about $350,000 a year for the first 10 years of the deal to cover the sales tax ArenaCo will pay during construction. The city will also pay ArenaCo any admissions taxes collected on tickets for events at the new arena beyond the amount the city currently collects from admissions taxes on events at KeyArena.”
And more importantly, the third provisions here:
https://www.google.ca/amp/s/www.soni...0-million-plus
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“Base Rent - OVG will pay about $2.8 million in rent to the city annually. That number will be adjusted throughout the term of the lease based on the Consumer Price Index to account for inflation. The rent payment amount was determined by the average of the last four financial years of net revenue earned from KeyArena, the 1st Avenue N parking garage, and Seattle Center campus sponsorships. This is the first in a two-step process to ensure the city doesn’t go backwards from what it currently earns from KeyArena.
Tax Revenues - The city is guaranteed to receive $2.24 million in tax revenues annually from the arena and the 1st Ave N parking garage, the current level of taxes it receives. OVG will reimburse the city for tax revenues that drop below $2.24M in a given year. This is the second in the two-step process.
Upside Tax Revenues - OVG and the city will share any additional tax revenues earned each year above the base $2.24 million, excluding admissions taxes. For the first 10 years of the lease agreement, OVG will get 75% of the upside revenue and the city will get 25%. After that, for the remainder of the lease including the extensions, OVG and the city will split the upside revenue 50-50.
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So since the new arena owners want to increase the number of events by a large amount and improve the attendance at events and the ticket price the upside is large. The city has handed its future revenue uplift to the arena corporation. And not just the uplift above but a much broader base much like tax increment financing - on my phone and don’t care to find this again.
That the revenue the arena people will receive from this is opaque does not mean it won’t exist. Over the term Calgary’s deal has a cost to the city of -$48 million. I bet Seattle’s number will be at least double that. The direct tax alone is probably $20 million a year (Seattle seems to have classified all parking profits as a tax).
TLDR: you’ve been taken in on spin on Seattle’s deal.