Council members Sally Clark, Tim Burgess and Mike O'Brien said the body had reached a memorandum of understanding with Hansen's ArenaCo that creates a $40 million transportation infrastructure fund for Seattle's SoDo neighborhood, where the arena would be located.
It also contains "significant new financial protections" for the city and King County, which would provide $200 million in bonds toward the construction of the arena.
The building will be used to lure an NBA team back to the city. The Seattle SuperSonics fled to Oklahoma City in 2008 after efforts to finance renovations at the existing KeyArena were rejected by the Washington Legislature.
The deal includes a personal guaranty by Hansen for the city and county's annual debt payments on the new arena, and also requires him to double a proposed security reserve if its revenue fails to meet expectations.
The transportation fund was created to address the objections of the Port of Seattle, which says arena traffic will clog vital truck shipping routes.