Is the Plan for a Privately Funded Seattle Arena a Sports Fan’s Dream or Too Good To Be True?

The stadium scene.
Aug. 16 2012 5:26 PM

Sonics Boom

Chris Hansen has promised Seattle a no-strings-attached arena. Is this a glorious day for opponents of publicly funded sports venues, or is it too good to be true?

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But according to Christison, such events aren't nearly as lucrative as they once were. "Ten years ago, if you'd asked any arena manager in the country, even if they had a franchise housed in their building, they'd say that concerts are the bread and butter," he says. But today, with a fragmented music industry that's producing fewer acts that can draw arena-sized crowds and competition from an increasing number of both arenas and casinos, "the concert market has become incredibly difficult," he says. "Nobody's making much money except maybe the artists."

Arena managers can sometimes drive a harder bargain with concert promoters if they're the only game in town. But that wouldn't be the case for Hansen's Seattle arena, which would have not only the Sonics’ former home KeyArena to contend with, but smaller arenas in nearby Everett and Kent. Noll puts it bluntly: "In Seattle, what they need is to bomb some facilities."

That, more or less, is what unfolded in Minneapolis-St. Paul, which Noll calls the "quintessential" case of arena glut. In 1990, the privately built Target Center opened in downtown Minneapolis to host the city’s expansion NBA franchise, the Timberwolves. As in Seattle, there were promises that taxpayers wouldn’t be on the hook for anything. But four years later, after the NHL’s North Stars moved to Dallas, the highly regarded, publicly owned Met Center in Bloomington was demolished, in large part because both it and the Target Center couldn't survive on the limited number of available events. The next year, the T-Wolves owners demanded—and got—the city to buy the money-losing Target Center off them for $74 million, turning the no-taxes-needed arena into an ongoing public albatross.

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There are arenas that do enough business to repay their substantial debts. When Brooklyn's Barclays Center opens next month, it will be saddled with about $600 million in construction debt even after getting $260 million in state and city funds. Yet if you believe the projections in the arena bonds' public offering, the new home of the Brooklyn Nets is expected to clear a massive $60 million a year in net profits.

Seattle is no Brooklyn, though—the entire Seattle metro area, in fact, is only a smidge larger than New York's most populous borough. That makes it unlikely that an arena there could come close to matching the $30 million a year in suite revenue or $33 million in annual sponsorships that are expected in Brooklyn. And the precedent from smaller cities isn't promising. Kansas City's Sprint Center, despite being one of the busiest arenas in the United States, nets perhaps $10 million a year. Even worse, most of that money goes to arena manager AEG, leaving only about $2 million for the city to use to pay off its $13.8 million in bond payments.

Could Seattle end up in the same boat as Kansas City or Minneapolis, either unable to lure a team at a decent price or having to bail out an arena owner who’s awash in debt? There are some hopeful signs that neither scenario would come to pass. Hansen has promised that he won’t build the arena unless he’s able to purchase an NBA team to play in it. The city council, meanwhile, has made approval of the arena bonds conditional on there being a plan for the future of KeyArena. And even if Hansen's revenues are disappointing, he may not be able to do much about it. The Timberwolves extracted their public bailout only by threatening to move to New Orleans. Hansen, though, is promising to sign a non-relocation agreement.

But owners aren't forever, and—hello, Phoenix Coyotes!—sports teams have found plenty of ways to demand new subsidies before their leases are up. If nothing else, Hansen's arena plan is a test case of whether modern sports arenas, with their $500 million price tags, can be built without soaking the public. Critics of public sports subsidies may be rooting for its success, but they'll be forgiven if they're hesitant to take that bet.

Neil deMause is co-author of the book Field of Schemesand runs the stadium-news site fieldofschemes.com.