Council gets a status update on Key Arena renovation

This afternoon, the Council was updated on the current status of negotiations with OVG on the renovation of Key Arena. It also advanced legislation to establish historic landmark controls on Key Arena and the adjacent Bressi Garage.

As you may recall, after the MOU with Oak View Group was signed, the effort turned to hammering out the next level of details in a series of “transaction documents,” including:

  • a development agreement detailing the design and demolition/construction plans;
  • a lease agreement related to use and occupancy once the redevelopment is complete;
  • a Seattle Center integration agreement detailing how OVG will work with Seattle Center and other tenants on the campus.

The city and OVG also are taking the approach of building “community benefits agreements” into each of the transaction documents, rather than trying to tease all that out into a separate document. Many of the community benefits were specified in the MOU, though more details have been worked out since and articulated in a “community benefits summary” letter negotiated with and endorsed by several local community organizations. Embedding them into the separate documents has the benefit of highlighting the importance of community benefits during the two-year construction period and not just after the project is complete.

The transaction documents are not yet finished, though they are expected to be transmitted in the next few weeks in time for the Council to start deliberations on September 7th. Today’s briefing summarized where negotiations stand with each of the documents. Generally speaking, there are no major departures from the terms of the MOU.

Here’s a list of what we learned today:

  • OVG’s budget for the project has increased to $700 million, as they have worked through detailed design and bidding the project out to contractors. Some of the added cost is also due to choosing “means and methods” for particular aspects of the project (e.g. digging the tunnel to the new freight entrance) so as to minimize construction impacts to other tenants and the larger community. The city’s financial consultants are vetting OVG’s updated financing plan to ensure that it has sufficient funding to support the project at the new price tag.
  • There will be a “financial backstop agreement” that assures OVG has certain funds in reserve at the point they start demolition, since demolition work reduces the value of the existing property and the city needs to ensure that it can be made whole if OVG abandons the project.
  • OVG will announce the contractor it has selected for the project any day now.
  • All the major labor issues with the project have been negotiated to resolution, including a community workforce agreement, a labor harmony agreement, Priority Hire, a Women and Minority owned Business inclusion plan, offering prevailing wages, apprentices, and offering employment to current Key Arena workers. Along those lines, a Key Arena Staff Transition Plan has been established to find new jobs for displaced workers. Of the 31 workers affected, only 4 have not yet been placed, and those are in process now.
  • The construction impact mitigation plan is being written now, and will be “advanced” with the surrounding community over the next 4-6 weeks.
  • The project’s MHA affordable-housing payment is being negotiated now. The MOU specified it would be around $2.5 million, and according to the city, the current negotiations are consistent with that.
  • OVG has already hired a community liaison for the project, and the city will also be hiring an ombudsperson. Under the terms of the development agreement, OVG will also pay $225,000 to the Uptown alliance to use as it sees fit in support of the community during construction, though there is an expectation that it too will staff a community liaison. It was noted today that those three positions will need to work closely together to coordinate their work in support of the community.
  • The financial terms of the lease agreement are consistent with the MOU, though they have firmed up. Rent will be $2.8 million per year, with CPI adjustments over the 39 years. OVG will also reimburse the city if its tax revenues from the Arena fall below $2.4 million per year (also CPI adjusted. OVG will also pay $40 million into a transportation fund over 39 years, to be administered by the city.
  • It was brought up today both in public comment by a representative of environmental advocacy group 350 Seattle, and by Council member Bagshaw later, that OVG’s business model for the Arena (and the city’s, since there is a revenue split built into the agreement) is heavily dependent on parking revenues, which creates a tension with the city’s commitment to environmental sustainability. The problem is similar to Seattle City Light’s: encouraging environmentally-friendly consumer behavior reduces revenues. That said, there are several terms in the agreement to try to make the project more transit, bicycle and pedestrian friendly both during construction and after the project is complete, including that $40 million transportation fund that the city has full discretion over.
  • During public comment, a representative of KEXP expressed concern that the draft EIS for the project contemplated that part of the station’s operations might need to be relocated during construction. The city said today that it has worked on that issue with OVG, and they currently don’t believe that KEXP will need to relocate at all, because of specific actions planned to reduce noise and vibration at the site. KEXP’s studio is adjacent to the Key Arena construction site.
  • Among the community benefits specified in the lease agreement (carried over from the MOU) is $10 million of charitable contributions, beyond the $10 million already committed by OVG to YouthCare. The lease agreement specifies that the funds will be administered by a nine-person “giving council” with representatives form OVG; the NHL; Seattle Storm; community organizations from the surrounding neighborhoods; resident organizations; and one “at large” position. Council member Juarez took issue with that composition, noting that the agreements deliver a lot to the local community surrounding Seattle Center already and that it was important that these charitable funds be available city-wide. In order for proposals to be evaluated fairly, she argued, the “giving council” needed to be representative of the city as a whole.
  • OVG will become the exclusive sales representative for sponsorships of the Seattle Center campus, subject to the approval of the Director of Seattle Center. However, other Seattle Center tenants and events will retain the right to have their own sponsorships as well.
  • The transportation planning is very complex and is being codified in several closely related and often overlapping documents. They include the Environmental Impact Statement for the project, the Master Use Permit (MUP) and Street Improvement Permit (SIP), the North Downtown Mobility Action Plan or NODO-MAP (which was funded by OVG and will set priorities for how to spend the $40 million transportation fund), and the Arena Access Management Plan. The Final EIS is expected to be released on August 30, and the draft NODO-MAP in September, while the MUP and SIP will be completed in phases starting in the fourth quarter of 2018. Both Council members O’Brien and Gonzalez urged city staff to be transparent with the community on how to provide input on those documents (not to mention how to figure out what should be in which) and to “humanize” the language so that Seattle residents who aren’t experts in municipal transportation can understand them.
  • Monorail! In the intervening years until a new light rail station opens up at Seattle Center, many are looking to see if the monorail can provide a dependable and high-throughput link between Seattle Center and the Westlake light rail station. City staff were specifically tasked with seeing if they could double the capacity of the monorail, to be able to move 6000 people per hour from Seattle Center to Westlake after an event. Today they presented a draft plan that would reconfigure the Westlake monorail station in two phases. The first phase, which would cost approximately $3.8 million, would allow for all eight doors on one side of a monorail train to be opened at once, increasing traffic flow and reducing the “dwell time” at the station. Phase one could be completed by the time the arena redevelopment is complete in late 2020. Phase two would take over some adjacent space along Pine Street to add elevators for a direct connection to the platform, moving people in and out of the monorail station much faster than the current path through Westlake Mall. The city also has some ideas for changes to the Seattle Center station to move people through faster, though they are optional since the station already has room to open all sixteen train doors simultaneously and load/unload from both sides of the train.
  • The long search for a new location for the Seattle Center skate park is almost done: the city is converging on a site along the Broad Street right-of-way next to the Ride the Ducks location. Council member Bagshaw is pushing to get that commitment in writing, which will probably take the form of a resolution accompanying the transaction documents when they are approved in September.

City staff expect to return next month with final details of the transaction documents, which they plan to share publicly. If all goes according to plan, the Council’s Select Committee on Civic Arenas will consider those documents on September 7th and 14th, and the full City Council will vote to approve them on September 17th. Of course, it might not all go well; after the final EIS is published around August 30, if it is appealed that could put the project on hold until the appeal is heard and resolved. One of the reasons that OVG and the city have been working so diligently with community organizations on the community benefits packages is to build support for the project, and reduce the groups likely to try to block it. Nevertheless, it would be surprising if there were no appeals at all.

Today the Council also voted out of committee historic landmark protections for Key Arena itself and the nearby Bressi Garage, both of which are implicated in the arena redevelopment project. This was fully anticipated, and in fact is welcomed by OVG in that it provides clarity as to what they need to preserve in the project designs.