Oak View Group CEO Tim Leiweke speaking with Q13 Fox's Bill Wixey, November 5, 2017

Arena sponsors: ArenaCo has the right to sell sponsorship benefits to one (1) arena naming rights sponsor, eight (8) arena founding partners, eight (8) arena presenting partners, and eight (8) arena partners. Recently, Symetra and Virginia Mason were announced as two of the founding partner sponsors.

Rent adjustment: ArenaCo guarantees to pay the net sponsorship revenue up to the $781,454 threshold annually, escalated for inflation. If the annual revenue is less than that amount, ArenaCo will pay the difference to the city. If the annual revenue is more, the city and ArenaCo will split the excess. This includes the arena naming rights.

After the first ten years of the lease, if there is a period of three (3) consecutive years with no rent adjustment payments made to the city from sponsorship revenue, ArenaCo must pay the city the threshold amount and then pay the city an additional 50% of the then-current threshold amount out of pocket.

This is a rolling provision. So, say there's no rent adjustment in years 11, 12, and 13, ArenaCo pays the threshold plus 50% in year 14, but there's still no rent adjustment in year 14? They have to pay the 50% extra cash in year 15 to cover the run of years 12, 13, and 14, and so on.

Taxes

The city gets first cut of the taxes. Under the agreement's "Baseline Tax Guaranty," each of the five tax thresholds must be met each year. ArenaCo agrees to pay the difference to the city if a threshold is not met.

Rent adjustment: As each of the sales tax, B&O tax, leasehold excise tax, and combo of commercial parking tax and parking sales tax thresholds are hit, whichever tax has excess revenue, the city and ArenaCo will split that excess amount.

Admissions tax: Again, city receives first cut of admissions tax revenues up to the annual $1.3 million threshold, escalated for inflation. ArenaCo will pay the difference to the city if the threshold is not met. If it is met and there is excess, ArenaCo will keep 100% of the excess amount.

COMMUNITY AND ADDITIONAL BENEFITS

As with many of these public-private partnership projects, a plethora of additional benefits are provided for the community at large both associated with the arena and beyond it. These focus on youth, arts, sports, music, and culture.

agreements to foster equity and social justice Community Workforce Agreement / Project Labor Agreement adhering to city’s Priority Hire Program for women, people of color, and those in social and economic distressed areas Labor Harmony Agreements with all relevant labor organizations Women and Minority-Owned Businesses inclusion plan

a charitable foundation with a minimum $20 million fund established to aid various community organizations around Seattle $10 million earmarked for YouthCare, a group aiding homeless youth 12-member "giving council" will vote on how to provide funds to other organizations and administer

$2.5 million contributed towards affordable housing

minimum of $3.5 million to be spent on public art in two phases One phase with art dedicated specifically to the arena One phase with art, music, and cultural programming in public spaces around the arena

city granted 14 days of arena use each year free of charge up to 6 consecutive days around Labor Day weekend for Bumbershoot up to 8 days for the Seattle/King County free health clinic or other community events

meeting space provided for the Uptown Alliance and the Uptown Arts & Culture Coalition bi-weekly up to 12 people quarterly up to 50 people

dedicated positions with ArenaCo and city to coordinate with the communities around Seattle Center full-time ArenaCo community liaison Seattle Center ombudsperson position

Monthly meeting to discuss construction impacts, and eventually arena operation ArenaCo, city, and community coordination committee established by the development agreement

addressing affordability and arena access at all income levels various pricing at all seating levels coordinating with tenants on opportunities for reduced pricing at games and events



FURTHER ARENACO RESPONSIBILITIES

In addition to the responsibility of pursuing an NBA team, ArenaCo agrees to use "commercially reasonable efforts" to garner the 'Seattle SuperSonics' name for the team, pending NBA approval, of course. The group also has to maintain and operate the arena to the standards of three benchmark NBA/NHL arenas: TD Garden in Boston, United Center in Chicago, and Pepsi Center in Denver.

They were charged with preserving the iconic Paul Thiry roof of the existing building. As part of that, they engaged in the preservation entitlement process at their own cost and gained historical landmark status for the roof from the city in August 2017. They are still pursuing a spot on the National Register of Historic Places. If they make the list, ArenaCo will be eligible for federal historic tax credits for the project. They will also need to have the arena green building certified LEED Gold.

Capital Improvements

As part of the maintenance, the arena group is required to cover all expenses for any repair, restoration, or replacement of any element within the arena due to minor or major damage. That's your basic wear-and-tear.

Beyond that, they are required to spend a minimum of $1 million per year on capital improvements during the first 10 years of the lease. This doubles to a $2 million minimum per year each year after that. These are investments toward the future of the arena. But that's not all.

Above those minimum improvements, during the first 20 years of the lease, they are required to make any additional capital expenditures that would be commonly expected in a leasehold mortgage. To then qualify for the first of the two built-in 8-year lease extensions, the arena has to be home to one or both of the NHL and NBA clubs, and they have to spend at least $50 million in capital improvements above the minimums during years 21 to 30 of the lease.

If they want to go for the second lease extension, they'll need the team(s) and have to spend at least another $50 million in capital improvements above the minimums during years 31 to 47.

Development and construction

ArenaCo reimburses the city on costs associated with the development, execution, and performance of the Memorandum of Understanding entered into in December 2017, and the transaction documents that make up the arena deal agreed to in September 2018, up to $3.5 million. They also pay and/or reimburse the city for all costs associated with the permitting process and the SEPA environmental review process.

The arena group also pays to help relocate tenants and facilities affected by the redevelopment of the arena site. For tenants at the Bressi Garage and the Blue Spruce building, they have paid up to $500,000. To relocate the Seattle Center Skatepark, a campus maintenance facility, and public restrooms, they've contributed $1.5 million.

They have also agreed to offer employment to both city workers and employees of contractors previously working at KeyArena who have been displaced by the construction.

Transportation

Long the sticky wicket in the debate over the viability of the Seattle Center site for an arena. With changes in urban planning due to growth, the arena is better located for the future than many will give credit. That said, even in the waning years of the Sonics' original time in Seattle, it was a challenge to get to the arena let alone find parking for the many who drove. With big changes to mass transit still years away, no one can deny it will be a bit strenuous getting to (and potentially from) the new digs.

There are some compelling ideas being explored and possibly initiated to improve traffic and transportation regarding the arena. This is a feast of discussion unto itself better saved for another day. While it's unrealistic to expect ArenaCo to solve all traffic in the South Lake Union-Downtown-Belltown-LQA/Uptown areas, they are contributing $100 million+ to address traffic concerns directly related to the arena.

Part of this is a $40 million transportation fund that ArenaCo will pay into annually during the lease. Many have argued the fund is not helpful unless fully paid upfront. The city counters that they can borrow against the fund with bond-backed financing for any traffic improvements knowing that they have a dedicated source for repayment.

The transportation fund is in addition to money ArenaCo will outlay towards traffic and transportation identified as mitigation during the environmental review process.

WRAPPING UP