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Changing the MOU should be no risk to the City of Seattle

I posted an article on SonicsRising last week on the risk to the city of amending the Memorandum of Understanding (MOU) to allow an either NHL or NBA scenario. Currently the MOU reads that an NBA team must be obtain before breaking ground on the SoDo Arena. I wanted to document the same content here so if you read the SonicsRising post, you probably don’t need to read this one.

The premise of the MOU is simple. ArenaCo will pay the city rent + taxes generated specifically at the arena will be the mechanism on which how the City of Seattle gets paid back the loan for the Arena. So on that last part, taxes on ticket sales and concessions will be applied to the loan from the city. (I am trying to keep this simple).

My argument is that the City has less risk if an NHL team is the lone tenant in the building vs. the NBA. This is backed up with data from 3 supportable metrics.

1) Attendance: NHL averages higher attendance than the NBA. Higher attendance = higher tax revenues

2) Ticket Prices: NHL averaged higher ticket prices than the NBA. Higher ticket prices = higher tax revenues

3) Demo Profile: According to The Nielsen Company report, 53% of NHL fans income is greater than $75K per year vs. 33% of NBA fans who have income over 75K a year. More disposable income = more money spent at the arena and therefore more tax revenues.

Now the reality is that the Sonics are more popular than a potential NHL team but the city used league averages to run their risk analysis models. Therefore the logic I lay out above should stay true when evaluating the risk of changing the MOU to potentially lead with the NHL. From a city’s perspective, changing the MOU should be an easy exercise.

The complexity comes from the other party in the MOU agreement, ArenaCo.

John Barr
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