The financial troubles continue for the ShoWare Center in Kent as the 2-year-old arena lost money for the second consecutive year in 2010.
The city-owned events center lost $398,000 last year after losing $451,000 in 2009. ShoWare officials project the arena will lose $290,000 in 2011, according to the budget forecast released Jan. 27 by SMG, the operator of the facility.
“We had eight concerts but unfortunately the attendance was less than we had budgeted,” said Patrick McClusky, ShoWare finance director, at the Jan. 27 meeting of the Public Facilities District board, which oversees operations of the facility.
The arena had expenses of $2.43 million and revenue of $2.03 million in 2010, according to the ShoWare Center income statement. The projections for 2011 are expenses of $2.42 million and revenue of $2.13 million.
City officials expected the arena to be in the red last year because SMG last January forecasted a loss of $141,000 in 2010. But the deficits are a constant concern as the city continues to set aside money in its annual capital budget fund to cover the losses. That money could be used to help pay for improvements to city streets, facilities and other capital projects.
“We have to keep setting aside funds in order to cover the losses and that’s not a place where we want to stay,” said Ben Wolters, city economic and community development director, in an interview after the board meeting. “That’s not part of the vision for the building. We need to think of ways to get to the positive side of the ledger.”
SMG and the Seattle Thunderbirds hockey team, the anchor tenant of the ShoWare, are trying to come up with ways to increase attendance at events to bring in more revenue.
SMG manages the day-to-day operations of the arena, including event booking, the budget, vendor selection, public relations and marketing, and event staffing.
The $84.5 million events center needs more people in the building in order to sell more concessions. The income from food and beverages was $274,000 below budget than projected for 2010 by SMG.
“We had a couple of mixed martial arts events that we anticipated that didn’t happen,” McClusky said about the higher deficit.
Tim Higgins, ShoWare general manager, told the board the arena needs bigger crowds to eliminate the deficit.
“It’s all attendance based,” Higgins said. “If we sell out every concert, we would be fine. It’s all driven by attendance.”
A sellout crowd of more than 6,300 packed a Ladies Night Out rhythm and blues concert Dec. 10. That led to Lakewood promoter Steve Brown booking a second Ladies Night Out concert Feb. 10 at the ShoWare.
“The second year financially is where it’s at,” Higgins said. “But we are seeing the light at the end of the tunnel. The Ladies Night Out concert sold out and they are coming back it was so successful. We now have about three other R&B promoters we are working with.”
This looms as a key year for SMG because the Philadelphia-based operator’s three-year contract with the city expires at the end of 2011. The City Council will vote before the end of the year whether to extend a two-year option that was part of the initial three-year contract.
Wolters said he plans to recommend that the Council extend the contract of SMG, the largest manager of arenas and convention centers in the country.
“I think SMG has done a fine job under the circumstances,” Wolters said to the board, citing the recession as having a major impact on the arena’s income. “We do need to have a discussion about how to get the building out of its operating loss. The 2011 budget report has strategies to get us in that direction, but a lot of things have to go well to make that happen.”
ShoWare officials expect the deficit to be less in 2011 than 2010 because four concerts are already booked and the Ringling Brothers circus will return this year after skipping Kent last year. Family shows such as the circus and Disney on Ice always draw big crowds.
“We’re hoping for an increase in attendance in the concerts we have here in 2011 and for a better economy to come around to help the numbers go up,” McClusky said. “We’re looking at T-Birds attendance to go up, the circus will be back and we expect better attendance at the PBR (Professional Bull Riders) event. Tim also has lined up a Strike Force MMA event that we didn’t have (in 2010).”
The $190,000 ShoWare marquee installed in early January also is expected to help increase attendance. The City Council voted 6-0 in August to spend up to $225,000 from the city’s lodging tax reserve fund to pay for the sign.
“It has been an amazing response,” Higgins said. “We get calls daily from people who say they now know what’s going on. We believe it’s selling tickets and will sell tickets.”
The city is entering the third year of a 30-year lease with the Thunderbirds, who moved to Kent in 2009 from KeyArena in Seattle.
The city also is entering the third year of a 10-year naming rights agreement with VisionOne, Inc., based in Fresno. The company distributes ShoWare software for box-office services, including online ticket sales and distribution for events at sports arenas, concert clubs, casinos, theaters and performing-arts centers.
VisionOne agreed to pay the city $3.175 million for 10 years, a rate of slightly more than $300,000 per year. Wolters said VisionOne is in good financial shape and the company’s contract with the city remains solid.