Kent's ShoWare Center revenue losses break $2 million since 2009 opening
By STEVE HUNTER
Kent Reporter Courts, government reporter
February 5, 2013 · Updated 3:44 PM
Kent's ShoWare Center suffered a record-setting loss of $706,432 in 2012 as arena operators scramble to find ways to boost revenue in 2013.
The city-owned arena has lost $2.013 million since it opened in January 2009.
The arena had expenses of $2.53 million and income of $1.82 million in 2012, according to the ShoWare Center income statement released last week by arena operator SMG. The operators had projected a loss of $379,482 for last year. The company projects a loss of $495,000 in 2013.
With smaller crowds than projected at paid events, event income was $174,000 under budget. Food and beverage concession income came in $91,000 under budget.
SMG got hit with several unexpected costs as it paid $80,000 to replace a compressor that cools the ice, $44,000 for a state business and occupation tax that it didn't budget for and $14,000 for plexiglass to replace broken glass, said Patrick McCluskey, ShoWare finance director, in a Jan. 31 report to the Public Facilities District (PFD) board that oversees operations of the $84.5 million arena.
Despite the record-setting loss, PFD board member Randall Smith said the arena's performing well if one looks at its overall impact.
"In the economic way we are now, I think ShoWare's done great," said Smith after hearing about another deficit. "You're going to have some losses but it'll come back. We're not the only ones losing money."
Smith said he sees all of the activity at Kent Station restaurants before and after events at the arena.
"All of these businesses generate so much money," Smith said during the meeting at the ShoWare. "I watch these restaurants and they are so packed. That has to count somewhere in there for this place. Because if this wasn't here I think on those nights it'd be pretty empty down here."
ShoWare brought in an estimated $25 million to the local economy in 2011, according to an economic impact analysis presented last year to the Kent City Council. Bob Nachlinger, city finance director, told the board the city's admission tax on tickets at the arena brings in about $275,000 per year.
But city officials want to reduce the deficit. The city sets aside money each year to cover the anticipated losses at the arena, including $500,000 in the 2013 budget. If not needed for the arena, that money could be used to help pay for improvements to city streets, facilities and other capital projects.
"We're all working our tails off to make this place a success," Council President Dennis Higgins said at the PFD meeting. "We really don't have any choice in that matter. We want to make it work and we're going to make it work. All hands on deck. All ideas are good ones. I look forward to working with anybody who wants to make this place a success."
The council and Mayor Suzette Cooke agreed with SMG's proposal to have the city put up money to try to buy shows to book the ShoWare.
"If we want to continue to have concerts and more importantly to grow the number and quality of those concerts, this is the way we've got to do it," said Ben Wolters, city economic and community development director who helps oversee arena operations.
To buy a show means the city will put up a certain amount of guaranteed money in order to help a promoter to book an event. Tim Higgins told the council at a workshop in November that the amount needed from the city could be anywhere from $100,000 to $200,000 per concert. But if enough tickets, food and beverages are sold to cover that amount or even make money, the city comes out ahead.
"Promoters look to buildings to share in the risk," Tim Higgins said. "We become a promoter. With the city's blessings, we've gone out and are contacting promoters and agents - not that the checkbook's open - but here we are looking for shows."
Comcast Arena in Everett has been buying shows for a couple of years, Wolters said.
Comcast Arena had been making money until revenue losses hit in 2012. The facility had a net income of $329,869 in 2011, way down from $1.1 million in 2010, according to the Everett Herald website. The drop was blamed on fewer people at concerts and Everett Silvertips junior hockey games. The arena started to lose money in 2012. Besides a main arena, Comcast Arena also features a community ice rink and a conference center.
Wolters said the city's upfront money will come out of the ShoWare operating budget as the city seeks to reduce the deficit and eventually comes to a point where the city makes money.
"This is an important part of our effort to build the revenue for this building, improve the bottom-line even as this building continues to be a success in serving the community," Wolters said.
The council's Operations Committee members agreed at a Jan. 15 meeting that the council does not need to review each potential concert to buy and instead gave that decision-making ability to SMG, Wolters said.
"When you call a promoter the first thing they want to ask is how serious are you and show me the money," Tim Higgins said. "It's a good move on the city's part to take this step."
SMG can set up the arena to handle concerts of about 2,000 people or as large as 6,000.
"We are going to see some other concerts," Tim Higgins said. "It depends on what's out there but it gives SMG the ability to move forward, talk to promoters and tell them we are serious about bringing shows to the building."
Officials hope the buy a show concept will bring bigger-name concerts to the ShoWare, draw larger crowds and increase revenue. SMG said last fall that such a promotion, if successful, could bring in anywhere from $20,000 to $50,000 in revenue per high-profile concert for the ShoWare and maybe as much as $80,000.
SMG will research potential concerts to determine whether it's worth going after them with money up front.
"The research will be whether you can sell enough tickets to break even on your investment for the show," Tim Higgins said.
ShoWare Center revenue losses
Total $2.013 millionContact Kent Reporter Courts, government reporter Steve Hunter at email@example.com or 253-872-6600, ext. 5052.