Sonics eye tax money to revamp KeyArena

The Seattle SuperSonics and Mayor Greg Nickels are likely to ask state lawmakers for more than $200 million to pay for a major renovation of KeyArena and pay down the debt from the building's 1995 remodel.

Sonics officials say they have not settled on a specific strategy, but the basic proposal calls for state lawmakers in the upcoming legislative session to redirect King County hotel- and sales-tax revenues that helped finance the construction of Qwest Field and Safeco Field, respectively, to KeyArena. Sonics officials have been talking to City Council members about the plan, which Nickels supports.

Some of those tax revenues are still committed to paying off the baseball and football facilities for more than a decade. The Sonics and Nickels want the Legislature to approve a plan that would direct the revenues to city-owned KeyArena once Safeco Field is paid off in 2018 and Qwest Field in 2020.

The tax on hotel and motel rooms in the county funds a variety of organizations and projects. The tax is still being used to pay off construction of the Kingdome and repairs on its roof, though it was demolished in 2000 to make room for Qwest Field.

While financing details have not been worked out, Deputy Mayor Tim Ceis said the city hopes to sell tax-anticipation bonds, which would in essence provide the revenue up front and allow the city to pay off the debt once it begins receiving the dedicated hotel- and sales-tax revenue.

The plan favored by the Sonics and Nickels would retire KeyArena's $58 million debt while also paying for $180 million in improvements. Sonics Executive Vice President Terry McLaughlin said he would "love this process to begin in the next six months" and the Sonics have already hired veteran Olympia lobbyists to push the idea.

McLaughlin and Ceis said the proposal appears politically palatable because it does not create new taxes and would give KeyArena the same tax revenues that Safeco Field and Qwest Field have enjoyed.

Taxpayers financed a $74 million renovation of KeyArena nine years ago. But McLaughlin said that wasn't enough to make the facility competitive in today's market. He noted that Portland's Rose Garden, home of the NBA's Trail Blazers, cost $268 million and is much larger.

KeyArena has 380,000 square feet of space, while the average NBA building is almost twice that size, McLaughlin said.

KeyArena was built on the site of the former Coliseum, which was constructed for the 1962 Seattle World's Fair.

The plan envisioned by the Sonics would extend the perimeter of the building so the concourse would be wider and allow for more concession stands, bars and restaurants.

McLaughlin said KeyArena's seating capacity — just over 17,000 for Sonics games — would not increase much, perhaps by 500 seats or so. The number of luxury boxes would decrease from 58 to 32, he said. Some of that space might be left open so ticketholders walking the concourse could look in on the action, similar to the setup at Safeco Field.

The arena's south end would see the biggest change. A plan developed by Seattle Center calls for excavating the arena's south courtyard area all the way down to the level of the basketball court. That would allow for 390 parking stalls, staging areas for trucks and function rooms that would host catered events and parties.

It would probably take a year to refine the design, then about two years to complete construction, McLaughlin said. But the building would close for only three to four months, so the Sonics would not have to move. The Seattle Storm of the Women's National Basketball Association would probably lose a season at KeyArena, according to McLaughlin.

He said the Storm, which is owned by the Sonics, would likely approach the University of Washington about playing at Edmundson Pavilion.

Two factors drive the proposal. First, there's Seattle Center's $9.4 million deficit, which is mainly blamed on KeyArena's sagging performance. City and Sonics officials say the arena relies heavily on luxury-suite revenues, which have declined sharply because of competition from suites at Safeco and Qwest fields.

City leaders want to see a financial recovery for KeyArena because its problems create a drag on the entire city budget.

The Sonics' lease at KeyArena expires in 2010. McLaughlin said the team wants to stay there and would "keep trying to make it work until we find it can't."

The second factor is the Sonics' balance sheet. McLaughlin said the team has lost $50 million in the past five years. Improving the arena would help the team's bottom line, he said.

McLaughlin maintained that the problems aren't because of the team's spending practices. He said 20 of 30 NBA teams have higher payrolls than the Sonics.

He also said the way the team's contract with the city is structured makes it difficult for the team to profit, unless it sells every seat and suite for almost every game. Under the deal, the city gets a hefty chunk of the revenues from luxury suites, premium "club" seats, concessions, parking and the arena's naming rights.

"No matter how well we do, I come back to the fact that we have limited capacity to earn under this arrangement. Normally all those revenues go to the bottom line of the team," McLaughlin said.

Sonics and city leaders have not approached legislators about their idea.

Upon learning of the proposal, state Rep. Helen Sommers, D-Seattle, said she thought it would raise concerns.

"It's so far off that it's not such an acute or immediate issue. However, for those looking at funding for school, health or other issues, it will be a red flag," said Sommers, chairwoman of the powerful House Appropriations Committee.

The proposal might also pit the Sonics against other groups that might have designs on the hotel- and sales-tax revenues now dedicated to Safeco and Qwest fields. Arts and culture groups, for example, now get a slice of those revenues and might want more in the future.

Ceis said he hoped there wouldn't be a battle between sports and arts groups for the money.

Bob Young: 206-464-2174 or byoung@seattletimes.com

Times researcher David Turim contributed to this report.