The NBA in Seattle seems like it could be happening sooner rather than later if a new arena gets constructed. But there is a good possibility that the Seattle City Council could impede development if they don't get the revisions they're looking for in the current deal. The concerns aren't likely to stop the arena from being built, but they could force plenty of delays that forestall the program.
There appear to be two crucial issues that could impede progress on getting the arena moving in the right direciton. One issue is that the city is willing to borrow up to 120 million dollars in bonds, but arena revenue plus rent payments won't be enough to match that, meaning the arena would owe additional rent. The other issue is that if the arena doesn't make money, it would be in violation of Initiative 91, which requires the city make money off of their investment in private sports organization.
We believe the annual return to the City/County is likely to be 8-10%
- This return significantly exceeds the return required by I-91 (30 year Treasury Return)
- This significantly exceeds the return expected by the private investors on the aggregate private capital (over $600 million) required for the project
Using very conservative assumptions, we believe the project will generate an annual return of 7.4% for the City
- Assumes only annual cash flow to the City is the debt service as Ancillary taxes generated merely offset the substitution effect
Assumes Arena is worthless at the end of 30 years, and is sold for raw land value only
Until the City Council agrees to move on this though, the Seattle Arena plan appears to be at an impasse for at least the near future.