NBA- Come Play At KeyArena For Your Own Good

“Why relocating to Seattle’s Key Arena would be beneficial to struggling franchises”

Many teams around the NBA are struggling mightily financially. Player salaries and expenses are at highs where teams are crunching numbers finding ways to generate more dollars. Arena deals are another aspect that is really hurting franchises.

Key Arena is a marvelous venue when watching an event. The problem is everything else associated with it. When walking the concourses or backing up media and tour trucks to the loading dock, that is causing some huge issues. Though, the benefit of having the arena right now compared to the past is one huge reason – the building is debt-free. All paid off. The Sonics were paying in the neighborhood of $9 million per season in rent and loan payments. They were sharing revenues generated from Suites, club level seating, and various revenue sources. By having the arena all paid off, it eliminates many of these hardships franchises deal with on a daily basis.
Coming to Seattle would immediately put a team such as the Kings, Hornets, Grizzlies, Bucks, and Pacers in a larger metropolitan area with a larger base of corporate businesses and populations of people. In an arena agreement where any team that comes to Seattle gets free rent until a new facility is built or the Key is re-built could be a huge luring tactic for struggling billionaires.

Seattle would benefit as well. The city would re-claim an NBA franchise, putting them in a bigger market with a sweetheart arena deal. Having an arena sit empty for weeks at a time is doing the city no good either. Empty dates mean no revenues and no revenues hurt the bottom line. In this economy anything helping the bottom line is viewed as a good thing. It is no secret the Lower Queen Anne area has taken a huge hit with the Sonics and Thunderbirds out of town. Many businesses in that area depended on those events to pay the bills and keep business going. Take a drive down by the arena now and there is a former restaurant and bar boarded up – straight across the street from the arena entrance doors. This extends all over the neighborhood. By having a franchise return, people will begin coming back, spending money at these establishments and helping them pick up their bottom lines. Fans will be piling into the arena spending money on tickets, concessions, merchandise, etc. which all creates sales tax revenues. Not to mention, the more the businesses make that people stop at to have dinner, enjoy a beverage, conduct some business meetings at, generate higher revenue which also creates higher tax revenues based on business earnings.

Here is my proposal on what to do:
-Offer an existing franchise FREE rent until a new building is built or the KeyArena is rebuilt
-Offer the team tax breaks.
-The city will cover expenses for providing staff to work and maintain the facility before, during, and after events.
-The franchise keeps all ticket revenues, no splitting revenues as previously done by the Sonics
-All revenue generated by the Sonics at Sonics events goes to the franchise.

Why would Seattle do this? Well the reasons above should be enough. Why shouldn’t the team split revenues with the city on revenues generated during events? Because without these events, the revenues wouldn’t be generated anyways.
If the Sonics had this deal back when they were here, Schultz never would have sold out of market. Now, the arena is debt-free and the biggest obstacle with KeyArena has been removed.

Another Financing Scenario

Quick Facts:

$500 million arena.
A visitors tax (20 cents per passenger via airlines at Sea-Tac International Airport
31,300,000 passengers flew through Sea-Tac in 2009.
A 20 cent Port of Seattle tax per each passenger would generate $6,260,000 per year. This would end after the buildings 15th year.
Port of Seattle would pay a $3 million naming rights fee per year.
City of Seattle would pay $75 million towards arena through arena ticket tax
NBA team would pay $3.5 million per year for 25 years ($87.5M)
NHL team would pay $3.5 million per year for 25 years ($87.5M)

Up front arena payments:
- NBA ownership group - $150 million
- NHL ownership group - $75 million
$225 million

Remaining financial sources:
- Port of Seattle tax: $93,900,000
- City of Seattle tax: $75,000,000
- NBA team rent: $87.5 Million
- NHL team rent: $87.5 million
TOTAL: $568,900,000


Why would Sports Teams agree to this?

NBA team would pay $150M down payment on facility and pay another $87.5 million in rent over 25 years. The NBA team does this because they get 100% net revenue from ALL NBA basketball events, including ticket sales, concessions, parking. They also get 80% of all non-NBA and non-NHL events net revenue.

NHL team does this because they are guaranteed a brand new, state of the art facility in one of the league’s most un-tapped markets. NHL has many faltering franchises and Seattle offers better stability. The team keeps 100% net revenue from ALL NHL hockey events, including ticket sales, concessions, parking. They also get 20% of all non-NBA and non-NHL events net revenue.

Splitting revenue streams with other sources have long been issues regarding arena/stadium deals with cities.

Why does Port of Seattle get taxed here?

The Port of Seattle is one the biggest source of tourism transportation in our state. The amount is so little that it doesn’t harm any industry. It also does so because they are guaranteed naming rights for $3million per year for minimum 15 years. By having Port of Seattle on the arena and having the arena provide worldwide events, it promotes a larger platform to put its name out there. Seattle is one of the main gateways to Asia and NBA is very popular in Asia, thus providing a larger audience. The arena would also be able to hold conferences and seminars. The arena could be right next to the Port of Seattle, which would allow it to be used by many companies using the Port, as well as local companies such as Microsoft, Boeing, Amazon, Weyerhaeuser, and Starbucks.

Rights Distributions
The distributions would be split up 3 ways: NBA franchise, NHL franchise, and Arena Debt. Sources of Naming rights come from:
- Official Arena Naming Rights
- Official Soda of Port of Seattle Arena
- Official Beer of Port of Seattle Arena
- Official Telecommunications of Port of Seattle Arena
- Official Fast Food Restaurant of Port of Seattle Arena
- Official Financial Institution of Port of Seattle Arena
- Official Automobile Manufacturer of Port of Seattle Arena
- Official Apparel Brand of Port of Seattle Arena

Of course this isn't a perfect scenario and highly unlikely to be approved, but I thought of this last night while laying bed. Your thoughts would be appreciated.

Arena location

Above here is a photo of the Stadium area in Seattle. To the left you see Qwest Field and Safeco Field, and on the right you see a red box, which is the location I have chosen here. Driving by this area it looks like a Metro Bus barn, but not certain. A bus barn is a very easy thing to relocate. Yes it is at a perfect spot for freeway access, but that is also prime real-estate. There are also many other locations it could be moved to nearby.

This location would be ideal for a new multi-purpose arena for many reasons. Prime factors would include easy freeway access. You don't need to build any new infrastructural needs to accommodate. You are taking advantage of this luxury. Another is parking. You already have the Qwest Field Parking Garage, as well as the Safeco Field garage. And of course, many places nearby to find a parking spot. The 3rd is a newer option- the Stadium Light Rail station is right next to it. If you live on the south end, you can take the light rail train from Tukwila straight to the game, not pay a penny for parking, and take the train home afterward. Weekdays 2 Sounder trains will leave Tacoma, arriving in Seattle at 5:30pm and 6:00pm.

Development around the new arena would almost be a guarantee. As mentioned in the blog post below, there are many reasons to build the arena. How about creating a large Entertainment Center? Dallas has one called the AT&T Plaza shown here http://www.americanairlinescenter.com/about-aacenter/center_venues.php Can you imagine parking at one of the stadium parking garages or getting off the train and walking thru the Plaza on the way to the game? You can go through numerous restaurants, bowling alleys, ice skating rinks, theaters, etc. It could be a real Seattle destination spot. It could be used year round, with people using during football and baseball season in addition to events at the arena.

New Arena Details and Location

New Arena-

-6^th and S. Massachusetts St.
-Right next to the Stadium Link Station
-Build a few restaurants next to it
-Build a smaller parking garage
-Parking garages available at Exhibition Center and Safeco Field garages as well across the tracks
-ESPN Zone Restaurant next door
-Sports Bars in the area
-AMC/Regal Theater in the complex
-NBA, NHL, AFL capability facility
-Have restaurants accessibility from outside stadium and inside
-Build very similar to Pepsi Center (Denver, CO) – which was rated best NBA facility in 2005 by USA Today, and #9 in NHL ratings (http://www.thesportsroadtrip.com/nhlfavorites.html)
-Highway Infrastructure already located here with on and off ramps to I-5 and I-90
-Short cab ride or walk to Pioneer Square

Events-

-41 NBA Regular Season games
-41 NHL Regular Season games
-10 AFL Games
-5 total pre-season games
-3 High School Basketball tournament games
-2 WWE Events
-2 NCAA March Madness Bracket
-5 Disney on Ice
-4 Ringling Bros.
-15 Major Concerts
-15 Mid-level concerts
-15 Conventions/Workshops/Job Fairs etc
Total= 158

Cost: $500 million (Arena, land)

-$150 million from Ballmer Group
-$100 million from NHL ownership group
-$75 million from City of Seattle
-$191,310,000= $6,337,000 Yearly in Facility Fees *30 years
-$118,500,000= $3,950,000 in Yearly Rent Payments ($25,000*158)*30 years
-$3 million annually Naming Rights ($45 million over 15 years)
TOTAL: $679,810,000

With the NBA and NHL groups pledging a total of $250 million up front, $250 million in financing is needed. Here the amounts with a 20 year loan (240 months), at 6%

Monthly Payment: $ 1,791,077.65
Total Payment: $429,858,635.09
Total Interest: $179,858,635.09

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41*18,000*3= $2,214,000 = NBA
41*18,000*3= $2,214,000 = NHL
5*15,000*3= $225,000 = Pre-season games
3*10,000*1= $30,000 = High school games
2*12,000*3= $72,000 = WWE Events
2*18,000*3= $108,000 March Madness
5*10,000*2= $100,000 Disney on Ice
4*8,000*2= $64,000 Ringling Bros.
15*18,000*3= $810,000 Major Concerts
15*12,000*3= $540,000 Mid Level Concerts