SLC finalizes deal with Smith Entertainment Group

SALT LAKE CITY — Utah’s capital has all but finalized an agreement with Smith Entertainment Group on a plan to completely change downtown Salt Lake City to welcome in the NHL and retain the NBA through a funding plan that includes a sales tax increase.

Members of the Salt Lake City Council voted Tuesday to approve a resolution authorizing Salt Lake City Mayor Erin Mendenhall to complete a partnership agreement with the owner of the Utah Jazz and Utah Hockey Club.

The agreement gives Smith Entertainment Group the ability to seek up to $900 million in bonds, which will be used to cover the cost of Delta Center renovations and a few other projects within a new sports, entertainment, culture and convention district by the arena.

The City Council also approved a 0.5% sales tax increase that will generate funds over the next 30 years to repay the bond. In return, Smith Entertainment Group plans to implement a new $1 to $3 ticket fee that will go toward affordable housing and projects within the zone, along with other benefits for the city.

Among them was former Salt Lake City Mayor Rocky Anderson, who said he plans to launch a referendum effort against the deal, potentially getting the vote onto the ballot for residents to decide its future.

“If you can’t say ‘no’ to this oppressive deal, then we the people will do it for you,” he said.

How we got here

Tuesday’s vote wasn’t much of a surprise. The City Council voted unanimously on July 9 to endorse the agreement so it could be sent to the Utah Revitalization Zone Committee for review and approval. The council also approved zoning changes to make way for the projects around the arena.

The state committee voted last month to approve the terms with some notes, including that the entities work to make sure Abravanel Hall — up for National Register of Historic Places consideration — is preserved during any changes in the downtown district.

The Utah Legislature passed a bill — SB272 — in March that set up the framework for an agreement between Smith Entertainment and Salt Lake City. It was created as Ryan Smith, the company’s owner, had publicly expressed his desire to bring an expansion NHL team to Utah.

That happened in April. NHL commissioner Gary Bettman explained that the league stepped in to negotiate Smith’s purchase of the Arizona Coyotes beginning about a week after the bill was passed. The Coyotes’ ownership had struggled to find a permanent arena for the club, which prompted the league to intervene.

During a press conference to celebrate the purchase and relocation of the team to Utah, Smith explained that he had originally intended to build a new arena outside of Salt Lake City that would have likely become the home of both the Hockey Club and Jazz, but state leaders talked him out of it, and he focused on renovating the Delta Center to accommodate both teams.

SB272 was created to help finance the changes. It authorized Salt Lake City to approve up to a 0.5% tax increase and Smith Entertainment Group to collect up to $900 million in public funds to finance the endeavor should the two sides reach a partnership agreement.

Smith applied for an agreement shortly before he acquired the NHL franchise. The two sides spent months negotiating an agreement before a preliminary vote in July on a place that would drastically change downtown Salt Lake City.

The plan also calls for major renovations to the Salt Palace Convention Center so that 100 South — currently buried underneath the massive property from West Temple to 300 West — can be unearthed and turned into a public plaza outside the arena’s eastern entrance.

It also calls for a hotel and a high-rise within the two blocks east of the arena.

“What I will say about this agreement is that it’s unique in that Smith Entertainment Group is committing to two teams downtown and also committing to revitalizing and building out three blocks in the downtown (area) in exchange for the public investment,” said Salt Lake City attorney Katie Lewis, who co-led many of the city’s negotiations, in a meeting earlier Tuesday.

“Many of the public investments that we saw nationwide were only for a sports arena — sometimes only for one team,” she said.

However, the plan has also received plenty of backlash from the beginning. One prominent national sports economist said there is “little evidence that sports venues promote the type of commerce that downtowns need to prosper” while lawmakers considered SB272.

Others sounded off during lengthy public hearings about the plan held before July’s vote. Some wondered why a billionaire like Smith needed public funding to carry out the project, and some criticized the speed in which the agreement negotiations were going based on a Sept. 1 deadline set up in the bill.

However, most voiced concerns about the future of Abravanel Hall, home of the Utah Symphony since it opened in 1979. Groups banded together to plead for the building’s preservation after Salt Lake County considered demolishing and rebuilding the aging concert hall.

The pushback led the county to adjust its plan and focus on preserving the building. Similar plans to protect what’s left of historic Japantown were also included over the past few months.

A divided room

The sales tax drew most of the backlash before Tuesday’s vote. One person even brought a large sign to the meeting, which read: “No sales tax increase for SEG. I’ll do my shopping outside SLC.”

Beyond a possible referendum, some said they are concerned about raising costs and that it could drive consumers to South Salt Lake, West Valley City and other neighborhood cities without the sales tax.

Resident Jeff Novak said the project may not even need the tax increase. He believes the 2034 Winter Olympics will ignite state, federal, commercial and private funds that can be used to revitalize the downtown area without a sales tax increase.

Representatives of the Utah Restaurant Association, Salt Lake City Downtown Alliance and the University of Utah were among those who spoke in favor of the deal, saying it could rejuvenate the city.

Michele Corigliano, director of the Salt Lake Area Restaurant Association, said downtown has needed help since the COVID-19 pandemic changed consumer trends. She said downtown businesses have relied on conventions and events to stay afloat.

“We would like to see a revitalized downtown; we think that this would do that,” she said. “Downtown is really suffering.”

Salt Lake City Council Chairwoman Victoria Petro said she understands the concerns, saying that it became one of the trickiest city issues she’s come across since taking office in late 2021. But she believes the city put in the time to complete a “thorough” review of the partnership agreement.

“This is obviously an important moment,” Salt Lake City Councilman Alejandro Puy added. “It’s hard to quantify, but a death to downtown means less sales taxes gathered in Salt Lake City, less activation, less jobs. Many cities across the nation are seeing this. … The hope is that this agreement (will) bring additional life to downtown.”

What happens next

Despite all that has happened over the past six months, the process is far from over. Smith and Mendenhall are expected to sign off on the partnership sometime soon. The sales tax — within a 30-year life span — will go into effect on Jan. 1, 2025. It will be applied to many items citywide but not groceries.

However, the deal still hinges on a few land lease agreements tied to the participation agreement. Salt Lake City leaders will have to approve a lease extension for the block where the Delta Center is located.

Smith is also seeking a land lease agreement with Salt Lake County over the two blocks east of the Delta Center the company wants to create a district outside of the arena. The company has indicated to the city that it is still negotiating with Salt Lake County on a lease, Lewis added.

Both agreements must be reached by mid-2025, which is when the renovation process is expected to begin in earnest. If both are reached by then, Smith Entertainment Group will begin implementing a new ticket fee for the city fund, which ranges from $1 to $3 per ticket.

On top of that, Salt Lake City is also working to hammer out a development agreement with Smith Entertainment Group, which will outline the building plans within the district outside of the Delta Center.

“This is the beginning step in a 30-year relationship on the development of these three city blocks and the commitment for the two sports teams to remain in downtown,” Lewis said of the participation agreement.

The deal also includes penalties for Smith Entertainment Group if the teams are relocated at any point over the next 30 years.

The company would be responsible for repaying the rest of the bond debt and face other remedies should both teams move out, Lewis said. That wouldn’t be the case if one team moved out — should the two-team experiment fail.