Date:
To:

5/31/2017
Mayor Edward B. Murray

From:
Author:

Brian Surratt, Director, Office of Economic Development
Karl Stickel, OED

SECTION A: OVERVIEW OF THE ISSUE
Topic/Issue Title: Arena Recommendation
Please select one Briefing Function:
Briefing Function
General Update Only
Key Policy Impact/Change
Financial Permission Required
Delivery of Information Requested from Mayor or E-Team
Direction needed on next steps

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Objective of this Briefing:
A briefing on the preferred alternative for the redevelopment of KeyArena.
Summary of Topic/Issue:
The Executive Review Team recommends the Oak View Group’s proposal ($564M) for the Mayor’s consideration.
Additional briefings for further actions are already scheduled.
Background:
On January 11, 2017, the City released an RFP for the redevelopment of KeyArena. Proposals were submitted on
Wednesday, April 12, 2017. OED received two proposals totaling more than $1 billion in combined investments proposed
by two developers – Oak View Group and Seattle Partners (AEG and Hudson Pacific).
To evaluate the proposals, the City created a three-pronged approach: 1) convening a Community Advisory Panel to offer
their advice and observations to the Mayor on strengths and areas of concern for the responses to the RFP; 2)
coordinating City Staff Review Teams to provide a detailed analysis of the proposals as they relate to the City’s objectives;
and, 3) having an Executive Review Team evaluate the City Staff Review Team recommendations and consider the advice
from the Community Advisory Panel before making their recommendation to the Mayor. This briefing memo reflects the
Executive Review Team’s recommendation.
Recommendation:
The first significant point we’ve learned is that the KeyArena site is a viable and important site for redevelopment, not
only for Seattle Center and the City, but for the Uptown neighborhood as well. The two KeyArena proposals represent
strong, sensible offers to redevelop the site and we believe this effort to redevelop KeyArena is the appropriate path for
the City to undertake.

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 As you know, the City recently commissioned a comprehensive study on the cost to fix up KeyArena. The final report,
published in June 2015 by the AECOM architectural firm, estimated $100 million cost for minimal KeyArena upgrades,
with a more likely cost of $150 million+ to repurpose the venue into something that will break even financially. With the
current SODO MOU silent on this cost issue, the City rejected the idea of having two venues as not financially viable.
Therefore, having one world-class civic arena serving the region for concerts, entertainment, and NBA/NHL sports is in the
best interest of the City and the arena at Seattle Center is the overwhelmingly preferred site.
The importance of a strong and lasting design, supported by significant financial resources, and a solid commitment to the
community are paramount to selecting a preferred alternative. The Oak View Group (OVG) offers a strong design, backed
by an experienced project team with extensive background in music/entertainment and professional sports to provide a
world-class arena. OVG and its partners have a strong financial background and aimed to minimize the City’s financial
participation as requested in the RFP. OVG has committed to the goal to retain all leadership and staff members that work
at the arena. They have also committed to support and implement local hiring practices and set defined minority and local
hiring goals that reflect the diversity of Seattle. OVG will establish a $20 million community fund, with YouthCare getting
$10 million for supporting homeless youth. Further, we believe OVG’s experience, resources, and connections, will
provide the city with its best opportunity to secure an NHL and/or NBA team.
For these reasons, we recommend the Oak View Group as the preferred Proposer to redevelop KeyArena.
As with any proposal, there are concerns the City will need to consider when negotiating with the preferred Proposer:
• Transportation. Neither proposal held a strong transportation package or funding, and, it would seem that the
Proposers left this to the City to stipulate the details of transportation improvements. The City will need to decide
what transportation and mobility improvements make sense for the area and what portion the OVG
redevelopment should be responsible for.
• Financial/City Revenues. The City will need to confirm a guaranteed baseline revenue (without applying credits or
other incentives against this amount) as an annual income stream. Additionally, the City would want a guaranteed
baseline of tax revenues, as well as an agreement on incremental tax reinvestment.
• Neighborhood. The City and the neighborhood will need to confirm community benefits in an agreement, likely to
include transportation commitments for biking and pedestrians, supporting the creation of a community center,
supporting the efforts to secure a school, helping to designate Seattle Center as an Art District, and their
commitment to preserving the historic nature of the arena.
OVG Specific Analysis
Oak View Group (OVG) and its partners (i.e. Madison Square Garden Company) appear to have the experience, capability,
and resources to contribute significant equity and secure the financing it requires to provide a world-class civic arena.
While OVG is a relatively new company, its principals, partners, and lender have decades of experience building,
operating, and financing comparable world-class arenas with municipalities in the U.S. and around the world. The City has
also had the benefit of working directly with the principal owner of OVG, Tim Leiweke, on his company’s proposal.
Design is a strength of the OVG proposal – it meets NHL/NBA standards, provides for a flexible approach to adjust to
future changes, and maintains existing roofline completely which puts forward a true historic preservation design option
for the Arena that would likely meet federal standards. While OVG maintains the historic roof, they completely gut and
remodel the interior, with a full rebuild of the lower and upper bowl—offering what seems to be a new arena under the
historic roof. The design also offers some surety that the aesthetic and scale of the new Arena will integrate well into the
Seattle Center campus and Uptown neighborhood.
From a financial standpoint, OVG’s principals’ experience and financial support from the Madison Square Garden
Company give OVG and its partners an excellent chance to secure the construction and long-term debt necessary to
construct and operate the arena. A major strength of OVG’s construction financing proposal is that it does not require an
upfront infusion of City dollars (i.e. no bonds issued or new taxes proposed). Construction financing is private equity
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 focused and private debt issuance. Goldman Sachs would finance the debt. OVG creates a capital reserve fund for
maintenance and capital improvements to the building. They would initially contribute $1 million upon completion of the
arena and add $1 million annually, up to the balance of $5 million.
OVG provided a good, overall transportation analysis of the existing transportation conditions and ideas for mitigating
potential transportation issues. OVG pledged to hire full-time community liaison to help with managing traffic and parking
issues as they arise. OVG provided an analysis of use of existing and dispersed parking garages identifying more than
11,000 stalls within a 3/4-mile radius of Seattle Center. OVG also suggests making Westlake Monorail station
improvements to accommodate more mass transit riders to and from Seattle Center. And, OVG’s underground truck
loading is a smart improvement over the existing space. OVG is flexible on whether to include the parking garage, in order
to alleviate permitting and transportation issues. OVG also promises to provide personnel for traffic management,
signage, police presence for event traffic control, and other mitigating measures (such as partnerships/incentives with
Uber and Lyft, bike valet service, shuttle service, regional park-and-ride event shuttles, subsidized transit and Monorail
fares, subsidized parking in SLU/downtown garages, and marketing/technology solutions).
We understand that OVG will strive to be an integral part of the community and will embrace diversity by using this
redevelopment to help the local community and those in need. OVG has made strong commitments to the Uptown
neighborhood and to the Uptown Alliance mission. OVG is committed to living wage, local hiring, WMBE participation,
apprentice programs and local hiring diversity initiatives. OVG commits to relocating tenants or helping them with
relocation costs, or, if appropriate, accommodating tenants on the site. They will accommodate the Seattle Storm and
Seattle University agreements at KeyArena.
OVG will establish a $20 million community fund, with YouthCare getting $10 million for supporting homeless youth. OVG
proposes to retain leadership and staff personnel at KeyArena, as well as implement a local hiring practice through a
Community Workforce Agreement.
From the music standpoint, the ability to program a robust mix of music and entertainment is a strength for OVG, as they
have partnered with Live Nation Entertainment, the global leader for live entertainment. Live Nation has consistently
brought the highest-grossing shows and the greatest number of shows to KeyArena for the past 10 years, and by a large
margin over their closest competitor, AEG Presents. Live Nation Entertainment is also the parent company of
Ticketmaster, which is the world’s leader in annual live event ticket sales and is the primary ticket seller for 27 of the 30
NHL teams and 28 of the 30 NBA teams.
Seattle Partners’ Proposal Challenges
In evaluating the Seattle Partners’ redevelopment proposal, there were three main issues that continued to be
problematic for the proposal and Proposer:
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Public Financing. A weakness of Seattle Partners’ construction financing proposal is that it requires significant City
financial participation, an upfront infusion of City dollars from the issuance of bonds. To benefit from the
relatively lower cost of financing, these bonds would need to be issued with the full faith and credit of the City.
The proposed $250 million in bonds with a 30-year term would be the largest debt offering in the City’s history.
Also, Seattle Partners has established a new LLC to be the proposer on the redevelopment – this new company
does not have any history and the City does not know the extent to which the principals will guaranty the financial
proposal.
Design. This is an area of weakness for Seattle Partners in comparison to OVG. Seattle Partners has expanded the
existing KeyArena to accommodate hockey to the south; however, many of the patron amenities remain
hamstrung by the 1995 geometry which is essentially intact. Seattle Partners has not added the variety and
flexibility of spaces that OVG has with the expansion of the floor plate. Seattle Partners has maintained 58% of the
concourses and in doing so has kept many of the constraints that were issues from the 1995 KeyArena remodel:
narrow upper concourses, more limited concession offerings and limited club spaces with sightlines in the bowl.
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 There is also a strong possibility that AEG’s proposed Arena design would not meet federal or local landmark
preservation standards. The extension of the roofline falls out of line with what was asked for in the RFP, as the
City asked for either a tear down/rebuild or a design that is respectful of the existing historic roofline.
RSJI Analysis & Implications:
OVG believes that diversity of thought, background, and experience cultivate vibrant communities and thriving
businesses. This project will be built and operated by persons who reflect the diverse communities Seattle. OVG will
prioritize hiring local minority businesses and workers to design, build, operate, and maintain the arena.
With input from the City, OVG will establish metrics and targets that define a percentage goal for inclusionary hiring
practices. OVG is looking at both state and local benchmarks to arrive at defined percentage goals, and will partner with
the City’s Race and Justice Initiative to ensure our policies and practices promote racial and socioeconomic equity.
OVG will have a full‐time position dedicated to community outreach and equitable hiring. This person will work with Tabor
100, the City, and other community organizations to promote racial and socioeconomic justice, and to engage with and to
inform Women and Minority Business Enterprises about contracting opportunities. OVG will provide access to bidding for
WMBEs. OVG will work with the City to designate priority zip codes to define areas that the City identifies as needing
additional support in hiring efforts.
OVG looks forward to working with the Seattle Chamber of Commerce, other regional chambers of commerce,
Washington RoundTable, Seattle Rotary #4, the Northwest Minority Business Council, the Breakfast Group, the Urban
League of Metropolitan Seattle, and other community organizations to develop a comprehensive labor agreement that
creates tangible inclusion goals and policies that allow for women, minority, and LGBTQ persons to be fully represented in
the workforce. Additionally, OVG will engage in efficient and effective outreach to priority zip codes and other
underrepresented groups that will have priority access to hiring for the project both in the preconstruction, construction,
and operations phases.
Seattle Values
Seattle is a city of rich diversity and we pride ourselves on the values we instill in our policies and practices, particularly
socially responsible business practices. AEG is a subsidiary of the Anschutz Corporation, a privately held company lead by
Philip Anschutz, who is known to fund ultra-conservative causes. According to numerous media outlets, Mr. Anschutz is
known to have spent money to fight against civil rights for the LGBTQ community, supports the Institute for American
Values -- which calls single parents "immoral,” funds organizations that fight evolution and the teaching of evolution in
schools, and denies climate science and promotes climate-change skepticism.
Key Policy Issues:
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Leverage – Once an announcement is made public, the City loses its bargaining leverage between the proposals.

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Negotiation Terms – OED will draft negotiation terms for the Mayor’s review. Also, OED will set up a Negotiation
Team and have the Mayor’s Office as part of its Client Group, providing guidance on the negotiations as the City
moves forward with terms for an MOU. Terms will likely include:
o Transportation and mobility improvements
o Confirmation of guaranteed City revenues/taxes
o Commitment to the Uptown/Belltown/South Lake Union Neighborhoods
o Further financial due diligence
o Commitment to supporting Seattle Center and its tenants

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Council Engagement – How to best involve the City Council during the negotiation process so that a binding MOU
will be completed and approved by year-end.
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 Indicate Legislation and/or Council action:
Arena Resolution – This legislation would reference the City’s selection of its preferred proposal, request Council guidance
as we start the negotiation process, and have the Mayor’s notification letter attached.
July 7th – The Select Committee on Civic Arenas will meet to discuss the Mayor’s preferred Proposal.
Following the legislation and briefing, the next Council action will likely be the Landmark Board’s recommendation to the
City Council on the criteria for the KeyArena redevelopment site. These criteria are called Controls and Incentives and will
determine what can and cannot be changed for each building. Finally, the City Council will review and adopt the MOU in
December 2017, and finally, a Development and Lease Agreement the Executive negotiates with the Proposer.
Please give a brief overview of any financial impacts:
OVG aimed to minimize the City’s financial participation as requested in the RFP. However, there is a request for City
reinvestment of the incremental tax revenue derived from the arena, which would be invested annually.
On the revenue side, the City would generally receive the same level of tax revenues it currently receives, OVG would also
provide the same level of parking revenue (based on average prior years 2014-16, adjusted for inflation) but the taxes and
parking revenue amount above that would be invested into the project or captured by OVG. Net income from the
redevelopment site is not replaced, although about half of the amount is repaid with a “credit” from incremental taxes. If
the proposal is selected, there may be an opportunity to further refine the revenue streams.
Proposed timeline and schedule:
5/31: Deliver recommendation to Mayor
6/1: 2nd Meeting with EBM: Communication/Roll-out
6/2: Final Arena Community Advisory Panel meeting
6/7: EBM Announces Winning Proposal

Supporting materials:
Document Name
1) Notification Letter draft
2) Resolution draft

Document Type (PDF, Word, Excel…)
PDF
PDF

This document, and attached supporting materials, has been sent to relevant CBO/OPI staff, Operations Manager(s), and ETeam Lead (as applicable) 72 hours prior to submission to MO Briefings. ☐
Please check all that may apply to this submission:
Public Rollout Involving the Mayor
☒ Public Event Already Scheduled
Legislation (to write, transmit, etc.)
☒ Significant Budget Impacts
Communications Strategy Needed
☒ Significant Policy Impacts
Council Briefing Upcoming
☒ SLI Response Due to Council

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Legal Review Required
Operational Support Required
IDT or Cabinet Involved
Other (Specify in Summary)

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SECTION B: BASIC INFORMATION
1. Name of Submitter: Karl Stickel
2. Department Origin of Submission: OED
3. Please list all departments involved or impacted by this issue: MO, OED, CBO, CEN, LEG, SDOT, SDCI, OPCD, DON, SDHR,
SOCR, FAS, OPI, LAW, OIR
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 SECTION C: KEY STAKEHOLDERS
TYPE OF STAKEHOLDER
Mayoral Executive Team Stakeholder/Lead:
Operations Manager:
CBO Lead:
CBO Analyst(s):
OPI Policy Analyst(s):
Department Director(s):
Departmental Staff Stakeholders

FIRST NAME, LAST NAME
Ben Noble, Director of City Budget Office
Maggie Thompson, External/Community Services
Catherine Cornwall
Michael McVicker ; Choose an item.
Quinn Majeski
Brian Surratt, Robert Nellams
Karl Stickel, Rebecca Lovell, Joe Mirabella

Departmental Pipeline Liaison(s): Danielle Hursh

DEPARTMENT
MOS
MOS
CBO
CBO
OPI
OED, CEN
OED

OED

EXECUTIVE TEAM/PIPELINE BRIEFING ADVISOR USAGE ONLY:
Recommendation
Concur/Proceed
Follow-Up Needed
EBM Briefing Required
E-Team Briefing Required
MOS Staff Lead

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Notes

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