On Wednesday Mayor Jenny Durkan and Oak View Group co-founder and CEO Tim Leiweke made the agreement to redevelop KeyArena official by signing the MOU passed this week by the Seattle City Council in symbolically Sonics green ink.

Durkan, Leiweke, and councilmember Debora Juarez (District 5) each spoke at the ceremony, which you can watch below.

Durkan pledged that “this will not be a publicly financed arena,” and expressed optimism over the Sonics and an NHL team joining “anchor tenant” the Seattle Storm of the WNBA at KeyArena.

She also noted that nothing in the deal blocks the development of another arena, alluding to the plans from the Chris Hansen-led investment group trying to build an arena in Seattle’s SoDo neighborhood.

Leiweke said he and Oak View Group will work to make sure Seattle is no longer the largest metropolitan area in the U.S. without and NBA or NHL team.

100 years ago to this year the Metropolitans won the stanley cup for Seattle. 50 years ago, the NBA came to Seattle with the Sonics. 10 years ago, you had your heart ripped out. We’re going to get you a team.”

“We’re going to get you additional teams,” he added.

For more on the arena debate that has led to this vote, read Seattle Business Magazine‘s December cover story, available online here.

See the full release from Mayor Jenny Durkan’s office below:

City of Seattle and OVG Sign Memorandum of Understanding for Redevelopment of the KeyArena at Seattle Center

Redeveloped arena at Seattle Center anticipated to break ground in 2018 and open in 2020 to be NBA and NHL ready

Costs of Construction and Development are 100% privately financed by OVG

SEATTLE (December 6, 2017) – The City of Seattle and the Oak View Group (OVG) today announced the signing of the Memorandum of Understanding for the privately financed redevelopment of KeyArena at Seattle Center.

“Today we’re writing a new chapter to define our Seattle for decades to come. This agreement is a win for our City, it’s great for music and sports fans, and it’s good for taxpayers – it does not put the City on the hook for even a single cent of project construction,” said Mayor Durkan. “This agreement provides good, family wage jobs and makes investments in our transportation system and in helping combat homelessness.”

“We feel extremely good about the partnership between the City of Seattle and OVG and respect and applaud the City in its ability to be thoughtful and collaborative throughout this process while maintaining the best interest of its citizens.  The process over the last year serves as an example of the transparent public/private collaboration that has led to a great outcome that other municipalities will emulate,” said Tim Leiweke, Co-Founder and CEO, OVG. “While the signing of the MOU marks another important step in the process, we have work to do. We look forward to collaborating and continued dialogues with our partners in the community, our neighbors, sports fans and civic leaders to begin a new chapter for sports and entertainment in Seattle. Today, we celebrate together and we move forward together towards one vision and goal.”

The MOU provides an agreed-upon framework for OVG to construct, operate, and maintain a redeveloped arena nearly double the size of KeyArena. It anticipates a 39-year lease with two eight-year renewal options for a total of up to 55 years. The arena will also be designed to preserve the current and historic roofline, and meet LEED Gold or equivalent standards. The City and OVG will next work to memorialize the MOU terms into a Development Agreement, Lease Agreement, Seattle Center Integration Agreement, and other related transaction documents.

“While there is still much work to do in the upcoming weeks and months, today’s agreement is the best path to bring back our Sonics, recruit a NHL team, make Seattle a world class music city, and drive investment in the future of Seattle Center,” added Durkan. “As we negotiate the final document, we will continue to push for the best deal for Seattle.”

“We will soon have a global entertainment stage worthy of Seattle’s history and future.  The City deserves a world-class arena in a great setting like Seattle Center. When reopened, the arena will be home to the Seattle Storm and with our partners, Live Nation, will become one of the top 10 music markets in the country.  Seattle is the greatest professional winter sports opportunity in North America and with a world-class new arena, will be our best opportunity to pursue the NHL and return of the NBA,” concluded Leiweke.

The MOU covers 5 major categories, including Financing, Risk Mitigation, Transportation, Seattle Center, and Community Benefits. Highlights include:

Financing

• Arena will be funded by OVG.

• OVG will assume all costs related to operating and maintaining the Arena.

• To vest its two eight-year extension options, OVG must invest a minimum of $168 million for capital improvements in the building. In addition, OVG must maintain the building to a standard equivalent to other comparable arenas throughout the term of the lease.

• OVG’s rent will cover current base revenue generated by KeyArena operations, 1st Avenue Parking Garage, and Seattle Center campus sponsorship rights.

• OVG will also reimburse the City should the tax revenues generated by the Arena fall below current levels. This tax revenue guarantee applies to admissions tax, sales tax, B&O tax, leasehold excise tax, and commercial parking tax.

• Rent adjustments between City and OVG will result in City effectively retaining 25 percent of all “upside revenue” in the first 10 years, and 50 percent for the remaining years. “Upside revenue” includes excess revenue above the baseline generated from Mercer and 5th Avenue parking garages, campus sponsorships, and represents the increase in all taxes other than admissions tax.

• $3.5 million also reimbursed to City toward development costs for MOU (i.e. legal, financial consultants).

Risk Mitigation  

• OVG will assume the risk of cost overruns during construction and the risk of increased costs due to unknown environmental conditions.

• City has retained financial consultants to conduct due diligence to ensure that: 1) OVG has in place sufficient debt and equity to build the Arena; 2) OVG has a plan and the financial wherewithal to successfully operate the Arena; and 3) the City’s interests will be protected.

Transportation

• OVG will pay for the Environmental Impact Study, all necessary SEPA mitigation of transportation impacts, plus contribute an additional $40 million for a Transportation Fund.

• OVG and City will develop a North Downtown Mobility Action Plan. OVG will pay up to $250,000 for a transportation consultant separate from the SEPA/EIS process for this mobility planning effort.

Seattle Center

• Project will include a Seattle Center Integration Agreement.

• Pottery Northwest will be temporarily relocated and returned to current space, at OVG’s expense.

• OVG will pay $1.5 million to relocate Skate Park and campus maintenance facility and $500,000 to relocate other tenants.

• OVG will eventually assume City’s obligations to the Seattle Storm or develop a new agreement with the team.

Community Benefits

• Project will include Community Workforce Agreement, Labor Harmony Agreements, Inclusion Plan for WMBEs, Community Benefits Agreement, 14 rent-free days at Arena reserved for community events, and OVG will work with the City to offer employment to KeyArena workers.

• $20 million Community Fund established, $10 million dedicated to YouthCare.

• Voluntary commitment to fund art program similar to the City’s “1 percent for Art Program.”

• OVG will make a Mandatory Housing Affordability payment for the increase in arena square footage.

This story originally appeared in Seattle Business Magazine.