Seattle City Council Select Committee on Civic Arenas 52019

Good afternoon.

Thank you for being here this morning.

This is a special meeting of the Select Committee on Civic Arenas.

I'm excited to chair it in the absence of the co-chair, Councilmember Juarez.

We wish you a speedy recovery.

We'll do introduction in a minute after we go through some other administrative item.

It's Monday, May 20th, and the time is 1047 a.m.

We started a few minutes late because our briefing went over.

Again, first, I'd like to approve the agenda.

So if there's no objection, the agenda will be adopted.

Hearing no objection, the agenda is adopted.

I'd like to go through the public comment section.

We'll take public comment on items that appear on today's agenda.

And we have one person signed up, Mr. David Haynes.

Mr. Haynes, come forward and you have two minutes, sir, to talk on our agenda items this afternoon.

City Council needs to reject the permits for permanent tiebacks and renegotiate this horrible deal to co-op key arena using 100 million dollars of taxes to dig a hole 15 feet down into the concrete.

The LA consortium is using Seattle as an inflated business write-off while denying Seattle a 21st century world-class venue.

The fact that OVG is cutting a hole in a rooftop to distract with a view of the Space Needle justifies tearing the whole Cold War concrete structure down and replace with an advanced 21st century world-class venue.

Not this shady rinky-dink arena unsafe because the rooftop is already cracked, spackled, and repainted on the corners.

Also, the amount of dust inside the arena will never be clean proper.

There will always be dust inside that venue, potentially ruining the first generation of pro hockey team.

Seattle Council should put an injunction on the LA consortium and renegotiate a deal to replace the entire venue.

No NBA team will ever play under a 60 year old cement slab of rooftop that looks LSD inspired by a cartoon on the Jetsons.

Yet Tim Lewicki and OVG is allowed to get away with buying the integrity of the city council, resulting in a circumvention of our denied democracy, buying off a sitting council member.

This shady deal has already been sensationally inflated for business write-offs and to falsely assure council if it's a billion dollars, it must be world class.

Reject the permits out of principle.

We don't need an artificially inserted foundation to take place of an already cracked cement structure.

Also, Tim Lewicki and OVG is endangering the people at Folklife with his toxic dust plumes with big green walls that don't capture the toxics.

Renegotiate this deal.

Why is City Council voting for Tybex?

This should be more scientific and engineering, not political.

They're circumventing certain unsafe realities.

Don't think because Goldman Sachs is involved, this is a world-class deal.

Thank you, Mr. Haynes.

Democracy in action there.

Okay, that will close our public common comment section and we'll move to our agenda items and thank you all council members for being here um before we do introductions let's have uh the items one two and three read into the record miss erstat could you just you want to read them into the or the clerk could read whoever's going to read them i think the

Items of business, item number one, arena at Seattle Center construction schedule update.

The second item on the agenda is the arena at Seattle Center financial due diligence report.

And the third one is an update on the Seattle storm lease modifications.

Okay, thank you for that.

I think Linda was at the helm ready to read those.

So why don't we do introductions first.

Kirsten, go ahead and begin.

Hi, I'm Kirsten Aristad, the council's central staff director.

Jerry Bruckheimer, investor.

Todd Leiweke, CEO.

Ken Johnson with OVG.

Okay, thank you for being here.

So let's kick off the first item, which is a construction schedule update, and let's proceed.

Very good.

Well, thank you very much.

A little bit of history, because I think it's important for the council to take stock as to what really happened.

And when it all happens in pieces, sometimes it's hard to stand back and really understand what took place.

So indulge me on a few slides on just a little bit of history.

But the last time an arena was built in Seattle was 1962 as a part of the World's Fair.

And it served a great purpose.

It was not a very elaborate arena.

It was a flat floor.

but it facilitated that World's Fair, and then five years later, the Sonics came, and great things did happen under that roof, and we were all proud as a community, but it was realized that that arena simply wasn't gonna get it done.

A flat exhibition space didn't constitute, so in 1995, a renovation was done, and the renovation did some things, but didn't do enough.

And it wasn't very long after that the word started circulating around town that if the arena wasn't fixed, things could happen.

Eventually, perhaps an NBA team leaving.

I was running the Seahawks and lo and behold, in 2008, that very thing happened.

But the community sensibilities were such that It was a Rubik's Cube, and as we did so many things in this community, the one thing we seemingly couldn't get done was to build a new arena.

And there were significant challenges in doing that.

It was an asset owned by the city, and it was in real decline.

And now that we live on Seattle center grounds, we've fully realized how many of those stakeholders were dependent upon this city council figuring this out.

And it was an asset not only in decline, it was starting to really negatively impact Seattle Center.

In its final year of operation, we had less concerts at our arena than they did in Des Moines, Iowa.

The community was deprived of many acts that just simply skipped Seattle because the loading docks weren't adequate.

The building was in demise.

So we had to, you made the right decision because the arena belonged where it was, but it had to be fixed.

It had to be not only ready for events, it had to be ready for NHL and NBA.

And that was extraordinarily complex because the current footprint at 400,000 feet didn't allow for a modern arena.

And its landmark status wouldn't allow you to go out or up.

So we had to create the first subterranean arena really in the world, expanding from 400 to 800,000.

The other challenge was privately financed.

This is not what happens.

Teams go to cities and say, if you don't do this, we're going to leave.

The city simply said, this building's going to be privately financed, and that was one of the landmarks.

The city believed all those things could somehow happen, and so in 2017, the city issued an RFP.

And this is a picture, this is actually one of my favorite pictures because of the next picture that's coming.

But this is the current status of the building.

And you see a back of house that has an antiquated loading dock.

That loading dock caused a lot of shows just to skip.

It was a terrible entryway into our park.

And you see an old antiquated building.

But dreams do come true.

And this next image shows, that dream coming true.

Through the courage of lots of folks, through the unanimous support of the city council, in two years, this spectacular building will open.

We believe it's the only arena in a park in the world.

We believe that it's defendable that this will be the most, if not one of the most, beautiful arenas in the world.

It scales, it fits, it has no back of house, it has a beautiful entryway, it'll expand from 400 to 800,000 square feet, and every man, woman, and child in this community will have a reason to go and celebrate under this roof.

I'm going to talk more about those events in a moment, but to my left is Ken Johnson, who's built many things in our community, and we were very, very fortunate that he, this past November, came our way in his leading constructions.

So, Ken?

I love this picture because it shows the footprint, and it emphasizes that we really are part of a group of tenants out there, and we're spending a lot of time talking with them as we do our work.

But in addition, as Todd mentioned, if you look again, north is to the left.

The south end of the building, which used to be loading dock and blocked off by old buildings, that becomes a wonderful, fantastic entrance to the building.

and alongside Thomas Street, which has long been talked about as the pedestrian street, a huge important entrance to Seattle Center.

Everyone working on this project, the entire team is, they're pumped on a daily basis.

We have the best designers of arenas in the world.

Mortensen is consistently one of the top arena builders in the country.

CA Iacon has managed the process more than any firm And we have a strong mechanical engineering firm, ME.

We have structural engineers.

So it's a wonderful team.

And from my standpoint, I lived through the history of the building.

I went to the World's Fair.

My first concert was in the Seattle Center Arena.

I went to the Sonics when I was 10 years old.

So to me, having this building at this really sweet location and memorable location is a key thing that makes it work.

This gives you a little more look at what the building did.

As Todd said, it started out flat.

So if you look at the line there, the plaza level, that's what existed until 95 when the decision was made to go down.

And it went down the 38 feet.

But what it didn't do was go down from drip line to drip line.

So if you look again, it was a narrower expansion that got it to the 400,000 square feet.

What we are doing is building a solid back of house going down from drip line to drip line and really increasing the, again, the square footage in the middle of the building, almost doubling it, which means that from a fan experience standpoint, all the facilities we need will be there.

And from approaching the building, I think this is really important, it will be very approachable because you'll be coming at the plaza level and then once you're in, you look to go down.

So it'll be a very intimate bowl.

I think it'll be, without a doubt, one of the best in the country.

But before we build this brand new arena under the iconic roof, we have some work to do, and we're in the process of doing that right now.

So we are currently doing the demolition of the building because, again, all of that will go away, and then we will go down another 15 feet to haul out about 600,000 cubic yards of dirt.

But this is an interesting phase, and people are hard at work on the site right now.

We have about 120 people on site working right now on the demo.

This looks to the south, showing some of the buildings that have been removed already.

At its peak, we'll have over 1,000 people working on the site.

This is another great feature of the building.

I think you know, beyond the iconic roof, we are taking all of the glass out of the building, categorizing it, hauling it down to a warehouse in Kent and then we will bring it back and reinstall it as part of the landmark status of the building.

So again, from people like me who walked into that building when they were 10 years old, it'll feel a lot like that until you get inside and then.

It's time to rock and roll, so to speak.

And this gives you a sense of just how fantastic the bowl will look coming in on that plaza level.

And one last feature I did want to talk about is the back of house.

We will be bringing in a tunnel from the block south of us that will go underground to eight loading docks rather than the two that are there right now.

And again, this allows the building to be approachable from 360 degrees, and we're very, very proud of that.

The reason we're doing all that is to create world-class events for our city and create a place for every man, woman, and child to want to come.

And we've talked a lot about the NHL and the NBA, but this is going to be, we believe, one of the top concert venues in the world.

We have that on good word from the largest live entertainment company in the world, Live Nation.

They love what we're doing here acoustically.

They love what we're doing to create a back of house that'll be perfect for the artist.

And we are as excited about that as we are any other part of this project of how great this is going to be from a music standpoint.

Because of our deep heritage in music, we deserve nothing less.

It's going to be spectacular for basketball.

We've studied the sidelines.

There's four basketball arenas only in the NBA.

Our sidelines are better than two of those four.

This is a rendering of the storm and we are so proud of our partnership with the storm and we think this is going to be a defining moment not just for the storm but for the WNBA.

This will introduce to them all sorts of new opportunities to serve their customers, to serve their fans in a world-class arena and we couldn't be more proud.

We're hoping that their championship ways will rub off on our other team that will be coming to the building soon but I do want to say that We're fully committed to the NBA playing in this building.

We think it'll be perfect.

We think if this building had been around in 2008, the Sonics wouldn't have left, and we're intentful that this building's going to help bring the NBA back.

We built an economic model.

We built sidelines.

We built locker rooms.

This will be a great home for the NBA.

Customer, Brian.

Did you say there's only four?

dedicated single NBA where the NBA is the sole tenant.

But one of the reasons the sidelines are so fantastic in this bowl, and this bowl really was developed out of principle, is we only put in one ring of suites.

And there was temptation, privately financing this, to put in a second ring of suites to help the economic model.

But what that would have done is it would have dramatically changed the bowl.

and a key signature of this building.

We think it'll be on the exterior, one of the most beautiful buildings in the world, but the interior bowl is going to be absolutely magical.

It will be steep, and it will remind people of the great buildings that existed in the day.

And you can see the steep sidelines here for a storm game.

We also are going to host a hockey team.

And this is showing the sidelines of that steep bowl.

You can see if you do have vertigo, we suggest perhaps not the upper deck.

But there's a beautiful glass window on the north end where people will actually be able to look in and view what's happening in the arena.

And as we've started to get better renderings and more literate in the renderings, we're realizing just how spectacular this bowl is going to be.

And it's, you know, for the fans who signed up for tickets, they weren't yet aware of this.

And so we're so proud of how this is unveiling.

Let me back up just one more time.

And we're going to innovate.

We're going to innovate in acoustics.

We're going to innovate in other things.

And one of the innovations you see here is two scoreboards.

one over each basket, one over each goal.

And we think that that makes more sense than the big, long-gated scoreboards, which tend to bifurcate arenas.

And the reason you're coming to an arena is to be with your neighbors and your friends and to celebrate.

And we felt those big scoreboards diminish that.

And so thus, the first arena in the world to have two dedicated scoreboards.

Back to our hockey, the fans spoke.

March 1st, a year ago, 32,000 depositors stepped up and gave life to our franchise.

And we had to convince the NHL that we were NHL ready, and that sure helped.

This is our ownership group, and I want to introduce to my right, Jerry Bruckheimer.

Jerry could be many, many places today, but chose to be here in Seattle.

And Jerry, if you want to say a few words.

Sure, I'm so excited about, first of all, the city and the enthusiasm that we've gotten from the fans and the people.

And just with Tim and Todd doing this, first of all, Todd was instrumental in the Seahawks and helpful in the Sounders.

And so I think that's exciting for us.

But also, Tim has built some of the great franchises.

He brought two Stanley Cups to Los Angeles to the Kings.

And I know he'll be part of choosing our management group for the hockey team.

And I know with his great leadership, we will get an NBA team here also.

And that's the exciting part of the project for all of us, to bring a team back here.

Other great things have happened.

So Seattle did not have one sheet of ice, this beautiful city of ours, and that was recreational ice.

It was people who wanted to curl.

It was a young boy and girl dreaming of someday figure skating in the Olympics, and we just didn't have it, so we were...

Very proud of our ownership group to commit to building our project at the Northgate Mall.

It'll act as the centerpiece of the redevelopment of Northgate Mall.

And we have a brief video here we'd like to show if we can cue it up.

Ken, is that going to work?

Seattle, a city that's world class in forward thinking.

a city with a deep connection to the outdoors.

It is fitting that it should have a state-of-the-art NHL ice center that is representative of its community.

Built within city limits, this new training facility will be Seattle's first home ice in decades.

Three NHL regulation ice rinks with spectator viewing will offer the opportunity to serve as a gathering space for our ice sports community.

Born of our native timber beams, it will embrace the natural light and immerse the public in the experience of hockey while integrating Pacific Northwest-inspired architecture.

A best-in-class NHL locker room and training area will ensure top talent is recruited and retained.

This facility will aspire to impact the sport of hockey in the Pacific Northwest for generations to come.

This facility is yours, Seattle.

And that's under construction, and we're hoping to break ground next January.

Just for the record, there is a sheet of ice in Seattle with a granite curling club.

Thank you.

It's a little bit different perspective than it, but it's great.

It's going to be fun to hang out at, and I'm sure they'll welcome additional curling facilities in the city.

Fantastic.

Lead to a bond spiel, yes.

A bond spiel.

There we are.

Yes, it does.

So if no questions, no other questions, we'll move on to the next agenda item.

I just have one general question.

That is, with this kind of construction, there's always either unforeseen surprises or sometimes positive surprises, sometimes not surprising.

This far in the construction, is it going as smoothly or there been any unanticipated surprises, should we say?

We worked really hard to understand the site.

And so, so far, it's really progressing exactly how we want.

I'd be exaggerating if I didn't say that holding that roof up while we're building the building will have its challenges, as you said.

But we have a really smart group of structural engineers.

We brought in another peer group.

I feel really good about where we are.

Thanks, Ken.

Certainly, the price tag is greater than we thought.

But I'm so proud that our owners have not cut one quarter.

And in fact, we think the arena is going to be better than anyone ever imagined.

So we're very proud of that.

Excellent.

Any other questions from any of our colleagues?

Council Member O'Brien.

Just really quick on the, you showed the glass viewing, is that from the outside?

Yes.

So, I'm guessing you can't actually watch the event, but you'll be able to see the spirit of the event.

You can see the spirit of the event.

You can't see the base floor.

You can see people cheering in the light.

People cheering, you feel you're there.

And then in certain concerts, you can also curtain it off.

But it really is a neat feature to have someone be able to, you know, I remember we did that in Safeco, T-Mobile Park, I'm sorry, where you can go down along and look into the building.

It's a fun thing for people to have.

Mike, if we're down by four, that's where I might go and just watch and see if the crowd starts cheering again, and then I'll go back in.

I think it's not a bad second place to be and, you know, watch it on here and be part of the excitement.

Excellent.

Thank you.

I'm going to scoot down so I can thank you very much.

So the second item on the agenda is the financial due diligence piece.

And I'm told that I'm supposed to escape to the second item.

Here we go.

So on.

audio and hopefully on video here in a moment after I get through just the slide show, which is only just one slide here.

I'd like to introduce David Abrams with Inner Circle Sports.

And a quick reminder, Mr. Abrams was retained through our city attorney's office to provide financial due diligence of the Memorandum of Understanding between the city and the Oakview Group.

And as you'll recall, when the Oakview Group first submitted its response to the request for proposal over two years ago, the cost of that project was approximately $600 million.

And by the time the city executed the development agreement last September, that cost had risen to $700 million.

And then this past March, we learned that the cost is now between $900 and $930 million range.

We've been hearing some information through the media that the costs are continuing to rise, and there hasn't been much talk, however, about who's paying for that.

And as we've been consistently messaging throughout the last two years, the cost of this arena is solely the responsibility of the developer.

It is privately financed.

And so I just want to make sure that I'm emphasizing that point here, okay.

Mr. Abrams will be providing his assessment more specifically.

He's going to talk about the memorandum of understanding and how that work has led to his being able to answer questions such as, does the arena have enough funds to complete this project?

Is the city protected if the project costs go up again, you know, past the 930 mark?

And does the general contractor have the ability to complete this project?

And once the arena is operating, will ArenaCo be able to fund its debt service?

So with that, I'd like to put Mr. Abrams up on the screen.

All right.

Good.

Thank you, David.

Go ahead if you would like.

Make any introductory comments if you'd like.

said that somewhere around 20 months ago, I started working with the city on several topics.

The initial engagement with the city between the city of Seattle and Inner Circle Sports was to review the memorandum of understanding between the city and Oakview Group to determine whether there was a transaction that could be accomplished.

And under the guidelines that were were asked of us during that negotiation process.

And I did that in the first few months of my working with the city on this summer before last.

Once the city had entered into its memorandum of understanding with Oakview Group, Inner Circle Sports worked with city staff to negotiate, along with the legal team and your outside legal counsel and other consultants, the lease and development agreement between the City of Seattle and our Seattle Arena Company, LLC, which is the developer that is under the umbrella of Oak View Group.

So we spent quite a bit of time discussing issues related to financial sufficiency, their ability to obtain the appropriate capital, and the ability to finish the project, as well as look at the financial models and come up with a algorithm or a financial methodology that would both give comfort to the city and repay the city for income that it was already receiving from Seattle Center.

And so I see Ben there.

So I'm assuming that he could speak to that if need be.

So that was the second leg of our due diligence.

The third and probably the most complex leg of the due diligence once we agreed to the lease and the development agreement was to review arena codes compliance with certain conditions of section 10.1 of the development agreement as a condition to demolition of the existing arena or at least part of the existing arena and construction of the new arena as well as additional due diligence related to the closing on the arena codes financing.

So I think the most pivotal issue from the city's perspective and from our perspective in working with the city is Did ArenaCo have the capital, both equity capital and debt capital, to complete the project?

As you were told a few moments ago, the project has increased both in scope and in cost, and so this was a bit of a moving target from time to time to determine whether there was the ability to both borrow and put enough equity into the project to make sure it was complete.

Protecting the city's interest on a number of levels, including making sure the project was going to be complete, making sure the project was going to be built to the specifications that the city agreed to.

And lastly, to make sure that the operating capability of ArenaCo was such that they would have a sustainable business model and could pay their debt service and as well as pay the city for their obligations.

So with that, I will sort of step back and let you ask questions, or if you'd like to hear more about specific issues, I'm happy to do so.

Thank you, David.

You're welcome.

First of all, nice artwork in the back of you there.

Oh, yeah.

A hockey.

I think there's a hockey one behind me.

How has the...

First of all, thanks for the diligence, and thanks for protecting our interest, as we protect the public's interest.

How has the, I'll ask sort of the relationship in terms of getting financial information, getting, are you, do you feel as though you're establishing a collaborative relationship, that the financial information is forthcoming, you're able to adequately do your job, or has it been somewhat less than ideal?

I believe yes.

The answer is yes.

I was put into a situation, not a situation, put into the ability to review certain confidential materials of the developer, their lender, their construction management company that were not in the public domain.

And I spent a fair amount of time reviewing a number of documents on the city's behalf, along with the city's external legal team, and reported back to the city my findings.

And I found that OBG, again, they were going through quite a bit of change in the project scope and project size.

But they were willing to provide the information to us.

It wasn't always the simplest.

Sometimes we had to go to their lawyer's office or to their offices in New York City to review documents physically in front of us and couldn't take them with us.

So from that perspective, it was a bit cumbersome.

But I believe that everything I needed to do my job was made available to me.

And not only was I able to review on numerous occasions, when changes were made to the project, I was invited back in to review specific documents and had the ability to ask questions of the developer, of their lawyers, of their partners, including Mr. Bonderman's team about the hockey franchise, as well as the league.

and the construction management firm.

So I feel that I had all of the tools at my disposal to give good advice to the city.

Thank you, David.

We're there.

I assume you're finished with your

Remarks and this is just Q&A Any other questions from any of my colleagues for the good of the order Kirsten you're grabbing the mic I would just like to just conclude by saying simply that Mr. Abrams has deemed that arena code does have enough funds to complete this project and that if the city If the costs were to go up that the city will be protected correct And that the general contractor will have the ability to complete this project.

That is correct.

Okay.

And once the arena is operating, ArenaCo will be able to fund its debt service.

So all is in place.

That is correct.

Green light.

All right.

And so those were elements of the 10.1 conditions.

Actually, for the city to close with ArenaCo and for ArenaCo to close with their lenders.

And so we were in agreement with all those points that Kirsten brought up.

Great.

Okay.

Thank you.

Council Member Herbold.

Thank you.

This might actually fall outside of the scope of the due diligence review, but I'm interested to know whether or not there is any, within that due diligence review for the delivery of the arena project, whether there's consideration about how increased costs associated with that project impacts the Northgate project at all.

Oh, I haven't.

I think that they're two separate projects.

And so, but whether or not, you know, David, I think that some of the lenders and developers and investors may have their hand in both projects.

Could you answer a council member?

Actually, my due diligence did not go to the Northgate project at all.

And so I was not involved in any of the discussions related to that.

So I couldn't opine as to whether that the overlap or the increase in cost in one would impact the other.

Thank you.

Thank you.

We'll do a little work offline to figure out that issue.

Thanks for bringing that issue up.

I'll make a closing remark.

Council Member O'Brien.

I just want to reiterate, and I don't know, Ben, if you're comfortable commenting here at all too, but I appreciate all the work up front and ongoing on this.

This is the moment where I feel like we're most exposed.

We've stopped operations of the existing arena.

In a couple years when that is complete and it's up and running, If for some reason this ownership group decided to walk away from it, which wouldn't make any sense, we would have something operating that we could either choose to operate ourselves or easily find someone to come in.

But at this moment, you see the exciting photos of a thing that's partly torn down.

That's where I think we're most exposed.

Again I want to be clear I have the utmost confidence in the arrangement going forward that we're good but that's I just wanted to check to see from the budget office is you know we're confident internally that the pieces are in place.

Obviously no one would start a project like this if they intended to walk away.

Nothing I've heard to date implies other than the fact that the costs are going up a little bit as one might expect on a project this big but the commitment seems there and the security seems there.

Exactly, and that's precisely why we secured the services of Mr. Abrams, to do that due diligence and to do it in a way where he could see into their finances and report back on this very issue.

The way I've described this to give people a sense of this is that we've been connected to someone's own house.

We've invited somebody in to rebuild our house, and the first thing they do is to tear it down, and they promise they're going to have the resources to rebuild it.

But you really want to be sure they do before they tear it down, which is what we have done.

Obviously, the scale of this is really incredible from a financial perspective.

The big house.

Exactly.

Perhaps the big house.

In any case, but we secured Mr. Abrams' expertise to review that precise issue to look at both the equity and the financing and the flexibility therein.

So, we do have that precise confidence, which is why we're ready to move forward.

Great.

I would say, Council Member, there's probably three hold your breath moments in this one.

can they do what they say they were going to do?

And so the moment that they agreed to get their capital in place to be able to finish the project, that was one.

The second one was allowing them to draw on their lines of credit or their loans from their lenders.

until they had access to that capital, I think we were holding our breath a little bit.

I say that somewhat facetiously, but it's concerning that if they didn't have access to that lender's capital, that would have been an issue for us.

And so we felt that the controls were in place, the amount of contingencies in place, the collateral that's put in place for the city in the event that there is an issue were sufficient to handle any cost overruns from where we start today.

And then the last sort of hold your breath moment is when they open.

I mean, we're all going to be looking with great interest over the next two years during the construction process.

And the city will have open access to information along the way to make sure that any issues that arise will be front and center before city staff.

Thank you, David.

Councilman Gonzalez.

Thank you, Council President.

I just wanted to take a moment to thank everybody who's been working on this project, but also just to acknowledge that as a city council, of course, one of the core functions that we have is to exercise our oversight function, particularly of very significant capital projects of which this is one.

And I appreciated Director Aristad's direct questioning to Mr. Abrams around These are the things that you are supposed to answer for us.

You are answering these in the affirmative for us, so now we have a green light.

I also want to acknowledge that I heard from Mr. Abrams that he has access to confidential information that is not publicly available, and I think it's important for us as part of our work around transparency to also acknowledge that That information is not available to us either.

And to the royal we of the city of Seattle family.

And Mr. Abrams is our hired subject matter expert.

And he's got two, just his own set of eyeballs on this confidential information.

I just want to acknowledge that it's an interesting situation for us to be in as a council who has ultimate authority around oversight.

And it requires us to give Mr. Abrams a significant amount of trust and confidence in his skill set and in his ability and in his independence to provide us with the information that we need that tends to be conclusory in nature as opposed to seeing his math and the formula that he's using.

I have a little bit of discomfort with that, but I acknowledge that it appears to be inherent in these types of transactions.

But just for the record, want to make sure that I express that little bit of anxiety and also sort of that tension that exists in terms of our oversight role and what feels like a pretty significant delegation to Mr. Abrams of that role.

Thanks for those comments.

Appreciate those comments.

So as we, as pretty good segue to go into the storm lease modification, I did just sort of want to say that.

for again, Mr. Bruckheimer to be here.

Thank you very much.

He's got a few more hold your breath moments during this.

I'm sure you're happy that we're so concerned about your ROI on this situation here.

There's serious capital at stake here.

But again, the structure we've tried to set up with Councilman Gonzalez sort of admonitions, I think is the best model to where we've hired someone independent to make sure that we're protecting the public's interests.

And again, thus far, they've done everything that they've committed to do.

And I'm very pleased with how this is unrolling and The ownership group have made themselves very accessible.

To me, it's about access and getting good information.

So thank you, David.

If any of you need David offline, he continues to be contactable.

He's contactable through me and through Greg Narver with the law department since his contract is through the city attorney's office.

And I would tell you that, yeah, I'm happy to answer questions through Kirsten and that And just to make sure everyone understands that nothing was done in the blind and that the city staff was apprised of every decision or every bit of information that I had.

And so the legal team, both external, internal, your city staff, were all kept in the loop on all matters.

And so while I relayed my industry knowledge and experience, decisions were made jointly, not singularly.

And so always in the best interest of the city with no conflicts and always making sure that we upheld to the standards that you asked us to perform to through all of the documents that you agreed to.

Very good.

Okay, thanks for making sure we don't have nine independent callers and we go through the system that we've established.

Okay, let's move back.

Let's move into the storm lease modification.

Thank you, David.

Thank you.

So I wanted to preview for you a piece of legislation that we'll be bringing you shortly that would seek your approval for some minor modifications to the lease agreement we have with the storm.

And in particular, the potential payments to the storm due to the costs and lost revenues that they can be anticipated to incur as they have to relocate their their games for at least two and potentially part of three seasons.

So just a little bit of history here and then I'm going to talk to you about the changes that we are proposing.

And there are changes that we think are necessary or certainly advisable in the context of the circumstances that the storm have actually been able to avail themselves to play at least some of their games here in the city rather than outside.

And we think that's in the city's interest both in the near term and then also in the longer term.

to preserve the Storm's fan base as they become one of the tenants of our new building.

So just here, just a little bit of history.

2017, we negotiated, the council approved a long-term use agreement for the Seattle Storm for Key Arena or its successor arena, if you will.

Agreement runs through 2028, and as we negotiated it in 2017, we knew that there was the potential if not the likelihood of the renovation occurring and the team being displaced.

So we anticipated this in the original use agreement and we're coming back to you for some tweaks.

So what we recognize is that if we wanted the storm as a long-term tenant and to enjoy the benefits of that long-term tenancy, we had to be reasonable in protecting them from the financial losses they could incur for being displaced while we remade the arena, if you will.

So that's the core reason behind the city willing to step up with financial assistance to the storm.

So per the original agreement, the city would pay up to $2.6 million per season, plus a small amount if there are playoff games, and I can highlight that in a second.

And that money was designed to both offset direct costs, so as it turns out, they're going to play both in Everett for some games and also on the UW campus at HEC Ed.

And they were going to face direct increased costs relative to what they paid at Key Arena.

And then also, they face the prospect of lost revenues as to whether or not the fan base would travel, particularly out of the city, was and is an open question.

And then to highlight, the changes we're going to bring you are going to focus on the first two seasons, 19 and 20, because it's for those two seasons that the city is directly on the hook.

For 2021, the arena developers will be on the hook and that was part of our negotiation with them was to create incentives on all sides to try to get the work done as quickly as possible so that if there was further delay that the arena redevelopers would face that cost.

This final bullet under the city's agreement with Seattle Arena Co, that's under the current agreement prior to any actions?

Correct.

So currently the city would pay the up to $2.6 million for 2019 and 2020 and Arena Co after that?

Correct.

And then the question of the up to $2.6 million, is that sort of a reimbursable requirement?

given that we don't know what the actual costs are and we wouldn't want to pay more than what the actual costs are?

Correct.

So we have, we established as a baseline the cost they've incurred.

They were paying at Seattle Center, which we know well.

Their revenues is part of the arrangement.

They'll have to report what their revenues were and what their revenues are and it's the difference between those.

So that we're actually continuing to work out the details of how that verification will take place.

But that's exactly, that's exactly what this is. a reimbursable.

And you'll see as well, as I walk through this, The original structure and the proposed new structure both are not just a blanket payment.

They were designed to have incentives given that the storm is in a position to both to control costs and potentially to minimize the loss in revenues.

We want to be sure that although the city was going to step up and potentially help them financially, that we weren't just writing a blank check, that they too would be incentivized, if you will, to do the right thing.

And at a high level, again, the amendments will cover the first two years.

The storm is currently in discussions with OBG and NHL Seattle about the terms of their facility use agreement going forward, and of which that third year is potentially an element.

So just real quick, on the left here, I have a little box that describes the original terms.

And I'm doing this at a pretty high clip, describing you the season level payments.

The comparable structure exists for individual games.

So if there's a partial displacement in season three, it might be per game rather than on this per season scale.

But the fundamental incentives and structure are the same.

So on the original side, we were, in particular, offering significant financial compensation on the revenue side.

Our expectation was that the storm was best positioned to control on the cost side because they would be directly negotiating agreements with an arena out of the city, which is what we had originally anticipated.

Not hard to think of them being either Kent or Everett.

So we had relatively less compensation available on the cost side because that was completely in their control.

What we recognized on the revenue side is despite whatever efforts they might make, there was a possibility that they would lose significant revenue and there wasn't necessarily much that they could do about that.

So that was a place where we felt the city was best positioned, if you will, to offer assistance.

So on the revenue side, what we said was for the first $850,000, we would cover 100% of their lost revenue.

And again, that's per your question, Councilmember Herbold, that was calculated as how much they were earning on average at KeyArena versus how much they would end up taking in.

And we have defined the streams of revenue that are relevant for the comparison.

So we're going to cover all of that because, again, this is not their fault, if you will, that they got displaced.

At the same time, for revenues above that level, and these were negotiated amounts, we said we would cover a share of the advertising revenue and a share of all other revenue, again, with the goal of giving them the incentive to try to maintain those revenues.

And in total, we said that we would pay a total of $2 million on the lost revenue side, plus, again, a small amount for playoff games.

On the cost side, the total, we'd cover the first $500,000 at 100%, because again, there was a sense that for that first $500,000, there wasn't going to be anything they could do about it.

That's what it was going to cost to relocate at a minimum.

Above that, we would cover a share.

And again, that was capped, the cost side was capped at $600,000.

So the total was essentially $2.6 million.

On what we've discovered since, and it's really the exciting possibility of playing at Heckhead Arena.

I think it's still called Alaska Airlines.

I think I should be getting this right, and I'm not.

I apologize.

Given the folks in the room, that's particularly embarrassing.

That said, what we know about that situation is that it's going to be a higher cost than anyone had anticipated, in particular because Hecate is not air-conditioned, it turns out.

One nice thing about our relatively fair weather here in the Northwest, the university hadn't found that need to date.

So in order to host games for the summer, the university has agreed and engineering has been worked out to install temporary air conditioning, essentially using the air circulation system that exists, if nothing else, to heat the building and a compressor, if you think about it, an air conditioner located just outside the building that will bring air into that circulation system.

So the storm recognized that they were going to face significantly more cost than had been anticipated.

And at the same time, by allowing them to play there, or having them play there...

Director Noble?

Mr. Noble?

I'm just trying to track between the previous slide and this slide.

On the previous slide, the question I asked was whether or not those bullets represented the current agreement.

And that's a two point, that discusses a 2.6 reimbursement.

It looks to me that this slide says that the reimbursement is 2 million currently.

And the proposed new reimbursement is 2.6.

That's not correct.

So that the total, sorry, and I'm clearly having technical troubles and I'll stop using this mouse because it's driving me, it's causing problems.

So the total on lost revenue under the current agreement is $2 million.

The total on increased cost is $600 for a total of $2.6 million.

My colleagues should have been more clear.

And so what we've done on the revised terms is just to lump them together.

We no longer see Perfect.

We're trying to incentivize them to stay in the city.

There's more cost in the city and less lost revenue.

So the situation has flipped there.

And as it turns out they're not going to just play in the city.

They're going to do a little bit of both.

So simple simple more simple for everybody and better incentives for the city in terms of keeping the games here and helping us maintain that fan base for when they return.

Better just to group them together, again, providing comparable incentives.

So we'll cover the first significant share of combination of revenues and costs, because there's nothing they can do about some share of this.

And then beyond that, we'll provide an incentive for them.

Again, we'll help cover the cost, but give them a reason to try to keep those costs something less than the full 2.6.

But we haven't changed the total, just the arrangement about how it goes.

So that's and I could go further, but I don't I think at this point that you get it You get a sense of what we were doing here And again, I to me it's really exciting possibility to have them stay in the city wasn't something we'd ever anticipated originally And this this will open that possibility without in total increasing the city's financial risk Any other are you pretty much fin I am I was all ahead I I

Tell me a little bit about...

The storm's reaction, I assume this is all, they're receptive to this, they're at the table, they're pleased with this current revision?

Yes.

They approached us as we got into the discussions about what it would take to retrofit the university facility, came to us saying, you know, the original agreement didn't really, doesn't really fit this model and we assume, and they were right, that we'd want them to try to do the best they could to play games here in the city.

So, they are, we've been working very closely with them.

and they are strongly supportive.

And it is still, it's the, think of AAA, Alaska Airlines Arena at Hackett Benson Pavilion.

They got the best of all worlds in that long name.

Council Member Bryan, did you have a question?

A couple questions.

So the, is the incentive to stay in Seattle Embedded in this or is there a different language that's out there?

It's embedded in this in the sense that they are now in a situation where taking on increased costs to avoid lost revenues makes sense for them.

And in the previous arrangement, it didn't really, right?

That they were only going to get covered so far on costs.

And revenues are relatively open, so they might have had an incentive to play all their games, as it turns out, in Everett, because they could keep the cost down.

We were going to cover the lost revenues in a larger share.

And that wasn't what we wanted, and it certainly isn't what they wanted.

So this works better for everybody.

And you've implied that it might be a mix.

Is that for geographic diversity, or is that there's just some dates that aren't available?

They're working as closely as they can with the UW.

I think their preference would be to play as many games as possible here.

There are issues, essentially, at the beginning and end of the season, in particular when the university is more robustly in session, if you will.

But I think there may also be some conflicts over the summer as well.

Yeah, okay.

And then the other shift on here is the percentage of reimbursables above that base 1.3.

Was there any specific math to that or somewhere between 80 and 65?

It was designed to be somewhat in between and negotiated and also simple seemed like a value in all of this as well.

So then this will have to be formally approved in the form of an ordinance, or is it required to go through?

And when might the timing be on that?

What are you looking at?

So we've essentially wrapped up negotiations, so we're just getting lawyers to put in the proper form and get you a bill.

So I think we can get you a bill in the next couple weeks.

Okay.

The season is actually underway, so your willingness to move quickly, assuming all is in order, would be appreciated by all.

Okay.

Anything to add in closing, Kirsten?

Are we good?

I think we are good.

relate to the city's obligation for the first two years and not for the years that follow?

The reason is the Storm are in discussions with, as described already, with NHL Seattle and OVG about their long-term partnership and it felt like it made more sense for them to think about that third year and then the years that follow in that broader context.

But not that we really needed to, but we helped connect the two of them.

So those discussions are ongoing and we'll keep you updated as well to the extent feasible.

And is there a way that the city can convey its hopes that in their negotiations that they also reinforce what I hope are our shared interests to have the obligations to incentivize games being played here in Seattle.

I think you just did, but I can assure you that I also have.

I communicated in particular to Mr. Laiweke that the city's strong interest and long-term commitment to the storm and our hope and expectation that they will be able to maintain and build on the same.

And he has assured me that they understand that and share that interest.

Yep, we love our storm.

Okay, I think we're going to our voting item.

And so as the presenter comes forward, Linda, I believe we need to have this read into the record so we can vote on it.

Item 4, Resolution 31888, a resolution amending Resolution 31857, providing conceptual approval of significant structure team permit to Seattle Arena Company, LLC, to include the construction of permanent tension tiebacks in portions of Thomas Street, east of 1st Avenue North and west of 2nd Avenue North, and the long occupation of these permanent tension tiebacks in the right-of-way to enable the renovation of Key Arena at the Seattle Center.

Okay, Marshall, why don't we start with introductions?

You guys look pretty serious.

You got your game faces on here.

Let's try to lighten it up.

All right, go ahead, Marshall.

Always got our game faces.

Thank you, Council President, Council Members.

Marshall Foster, I'm the Director of the City's Office of Waterfront and Civic Projects.

Amy Gray, Seattle Department of Transportation.

I'm Liz Sheldon, Seattle Department of Transportation.

Okay, take it from here, Marshall.

All right.

Thank you again for having us.

We're covering a lot of arena ground this morning, and I think this is your final item.

This is actually an amendment, council members, to a resolution which you've already considered.

The key thing that we're doing this morning is making a modification.

regarding the term permit on Thomas Street.

One of the important aspects of the design that you saw from Mr. Laiweke and Ken Johnson is this idea of really reclaiming Thomas Street as the front door of this new arena.

And in order to do that, we are putting much of the back of house functions that access for loading and unloading for broadcast trucks for moving in and out major events and concerts below ground so that the public's experience of arriving at this arena and arriving at Seattle Center on Thomas Street will be a great urban plaza space, essentially.

Very different from Thomas Street as you experience it today.

If you can picture walking down Thomas, it's basically chain link fence and loading docks.

In order to do that, one of the things that the building has to do is create a structural wall along the north edge of Thomas Street, as well as build an underground tunnel from the site just to the south, which they also control.

And in order for that wall to work functionally, structurally, it has to use a system of tensioned tiebacks.

And so I'm not going to go too deep into the weeds of that, but you actually see these all over town when you see construction, you see the excavation of some of our downtown sites.

Tiebacks are basically a steel structural system that pushes from that wall you see underneath the soil behind it and creates structural strength so that that wall, as it goes down, is holding up that wall of earth behind it.

So in order to really capture the opportunity on this site, they need tiebacks that extend under a portion of Thomas Street.

Again, this was anticipated, but as we went deeper into the design process, the precise details of those tiebacks are now known, and that's what this amendment would do is kind of get the exact plan for those tiebacks reflected in your resolution.

So without further ado, I'll turn it over to you, Amy.

So as Marshall noted, in December of last year, you provided conceptual approval for the tunnel as it is under Thomas Street.

And just a quick thing about term permits, they're for long-term occupation of the right-of-way.

You often, the buildings and sky bridges downtown, the pedestrian tunnels between buildings, all those require a long-term permit as approved by city council.

So they're for a long period.

They're significant structures.

And so that's why we take you, take these, types of permits to council for approval.

On the project proposal, in the red you can see what you've already conceptually approved, that's the tunnel, and in the yellow notes the area of Thomas Street that will be affected by the permanent tension tiebacks.

Term permits are a two-step process.

We're at the first sort of one point A where we are today.

Council provides conceptual approval, and that gives the developer comfort knowing that you're generally okay with the idea.

As the project moves forward, gets more technical design approved and all that sort of stuff, we will bring an ordinance to you, and that is the actual permit, and that specifies obligations of the permit holder, which will be Seattle Arena Company LLC.

It has a bond associated with it.

It names the terms.

If the city ever needs to revoke the permit, there's information in there.

It requires council action to actually revoke the permit.

So since it's approved by council, you have the body that gets to revoke it.

And we're going to bring that ordinance on this project at the end of construction for your approval.

And that's all I have.

Do people have questions?

Very good.

Council Member O'Brien.

A couple questions.

One, on term permits, you mentioned that it's revocable, and we talk about that a lot on these items that come before us.

If we revoke this, then the building fails, so it's technically revocable, but may I assume there's...

That's the nature of a term permit.

Council gets to determine the length of it, so we have some term permits.

that are for 99 years, and those conversations will be happening on that.

It has to be a term permit because it's not a street vacation.

street vacations allow the permanent transfer.

So that's just the risk associated with this.

And it's a high bar that you council would have to decide that that area of Thomas Street is needed for transportation purposes.

Sorry, you always have to figure out a new way to brace your wall or something.

I gotta assume that every project happening, and certainly in the downtown core right now, is using tiebacks to hold those walls up, but I don't recall I think we're doing a ton of these term permits for tiebacks.

Is there another blanket way these happen or something?

Those are usually, the tiebacks are usually contained on the private property and not in the right-of-way, and these tiebacks will be in Thomas Street.

And so that's why we need to have a term permit for them to occupy that portion of the right-of-way.

And just to clarify a bit, so tiebacks often go into the right-of-way, but at the end of the project, the wall is built so that it can handle the structural load of the soil.

So at the end of the project, they're detensioned, and they just become like little pieces of steel in the right-of-way.

You can tear them up at any point.

You can tear them out, and they don't really do anything.

These ones are going to stay permanently tensioned, so they'll be part of the structural wall, which is the difference.

Got it.

OK.

Very good.

Got my engineering stuff here today.

Well, thanks for the explanation on what a permanent Tension Tyvek was I did rely on Wikipedia to figure that out in preparation for this meeting any other questions?

Before we have in a slight amendment We have to make our friend Keelan central staff saw an exhibit change more of a tactic just a technical amendment So another no further questions any other statements you need to explain on this?

Okay, so let me let me amend the exhibit.

So I move to amend Excuse me through resolution three one eight 8 8 exhibit a by substituting version 2 for version 1. Is there a second?

Second.

Second.

You guys scared me there for a minute.

Those in favor of substituting exhibit a please vote aye.

Aye.

Those opposed vote no.

The motion carries and resolution is amended and having said that I move that the committee recommend adoption resolution 3 1 8 8 8 as amended.

Second.

Those in favor of the recommendation of the Council to adopt Resolution 31888, please vote aye.

Aye.

Those opposed vote no.

The motion carries and Resolution 31888 will be forwarded to the May 28th City Council meeting.

And as we close, if anyone, did anyone want to make any closing remarks?

As you can see, something very briefly.

And I just want to thank both our team and ArenaCo folks and for the viewing public that are so excited and supportive of this huge project moving forward.

So these are exciting things for our city and our region.

So thank all of you for being here.

And with that, we stand adjourned.

Everyone have a great rest of the afternoon.

Thank you, Kirsten, very much.

you