Form revised February 6, 2008

 

FISCAL NOTE FOR NON-CAPITAL PROJECTS

 

Department:

Contact Person/Phone:

DOF Analyst/Phone:

Seattle Center

Jill Crary/x47107

Amy Williams/x32651

 

Legislation Title:

AN ORDINANCE relating to the termination of the Premises Use and Occupancy Agreement between the City of Seattle and the Professional Basketball Club, LLC authorizing the Seattle Center Director to take actions related to the termination of the Premises Use and Occupancy Agreement.

 

·        Summary of the Legislation: 

The Seattle Center will likely experience significant disruption to its KeyArena operations as a result of the termination of the Premises Use and Occupancy Agreement (PUOA) between the Professional Basketball Club, LLC and the City.  This ordinance authorizes the Seattle Center Director to terminate, amend, and/or take assignment of agreements related to the PUOA including, but not limited to the PUOA, Key Corp Title Sponsorship Agreement, Practice Facility Ground Lease, and Food & Beverage Agreement, Fox Sports Agreement, and Agreement Regarding Certain Use Areas at KeyArena.

 

Additionally, the Seattle Center Director is authorized to enter into consultant, concession, purchasing and service contracts until December 31, 2009.  The agreements will have terms of up to one year to minimize disruption to KeyArena operations and provide continuous services to KeyArena licensees and patrons.

 

·        Background: 

 

On February 14, 1994, Ordinance 117049 authorized the Seattle Center Director to enter into a Premises Use & Occupancy Agreement (PUOA) with SSI Sports, Inc. ("SSI"), the corporation that then owned the Seattle SuperSonics professional basketball team.  Ordinance 117049 provided that the term of the PUOA would commence in October 1995, and would expire on September 30, 2010.  The Professional Basketball Club, L.L.C. became a party to the Premises Use & Occupancy Agreement, as amended, through an Instrument of Assumption executed on October 23, 2006. 

 

In 1993, the Seattle City Council approved a contract for the renovation of the Seattle Center Coliseum that included only a 15-year lease term with SSI (rather than 20 years to coincide with the debt financing) because of the cultural, civic and community benefits derived from having the Seattle Supersonics play their home games in the City of Seattle.

In the fall of 2007, legal action commenced between the Professional Basketball Club, LLC (PBC) and the City of Seattle.  A settlement reached in the summer of 2008 permitted the PBC to terminate the PUOA, allowing the Seattle SuperSonics to vacate KeyArena prior to September 30, 2010. The City Council approved Ordinance 122736 in July 2008, authorizing the termination of the PUOA.

·        Please check one of the following:

 

__X__ This legislation does not have any financial implications. 

Although, this legislation does not have direct financial implications, there will likely be budget impacts after the PUOA is final.  Seattle Center anticipates that many expenses related to operating KeyArena after the Seattle SuperSonics leave will be offset by new revenues.  However, it is anticipated that the Seattle Center will overspend its budget authority as a result of some of the upcoming decisions associated with finalizing the settlement agreement, and to ensure continued successful operations of the KeyArea.  The Seattle Center will work closely with the Department of Finance to identify the levels of needed expenditure authority and associated funds to cover these expenses.  The Seattle Center plans on submitting year-end supplemental budget legislation to the Department of Finance, recommending sufficient appropriation of funds to cover the expenses incurred as a result of the terminated PUOA that have not yet been identified.

 

·        What is the financial cost of not implementing the legislation? 

Per the settlement agreement with PBC, the Seattle Center Director is designated to negotiate the final settlement details.  There are several intertwining issues to be resolved involving sponsorships, concessions, equipment operation, etc. which necessitate providing the Seattle Center Director with the additional approval authority granted by this Bill.  Without this legislation, the Seattle Center Director will not be able to effectively negotiate all of the issues in the agreements related to KeyArena, which would result in major disruption to scoreboard operations and broadcast functions, premium seating usage, sponsorship, and advertising.

In addition, without such agreements, the City risks the potential expense of having to acquire new point-of-sale and the telephone switch equipment, as well as equipment related to concessions, seating, locker/dressing rooms, kitchens, the scoreboard and audio visual equipment.

 

·        What are the possible alternatives to the legislation that could achieve the same or similar objectives? 

None.  This is the only efficient process to manage the transition to City management.

 

·        Is the legislation subject to public hearing requirements:  (If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future.)       No

 

·        Other Issues (including long-term implications of the legislation):

Without the Seattle Center Director having the authority granted by this Ordinance the City will not be able to reach the required deadline to finalize related agreements by Oct 31, 2008.