ShoWare Center sees operating loss, but officials say it’s early

Tim Higgins

Tim Higgins

Despite an operating loss of $169,923 during the first four months of the ShoWare Center’s operations, Kent city and arena marketing officials remained optimistic last week that the facility can make money this year.

“We expect the events center at the low end to bring in $250,000 (this year) and at the high end, if we sell a bunch of concerts, we could make $1 million,” said Bob Nachlinger, city finance director, at a Public Facilities District Board meeting May 28. The board oversees operations of the $84.5 million events center.

The ShoWare Center had expenses of $948,480 and receipts of $778,557 from Jan. 2 through April 30, for a loss of $169,923.

Despite the initial shortfall of funds, Tim Higgins, ShoWare general manager, also said he expects the facility’s revenues to exceed expenses by the end of 2009. He predicts the number of booked events to pick up in October and November to help make up for a lack of events in April and the summer months.

“We feel comfortable we’ll be in the black (profitable) by the end of the year,” Higgins said at the meeting.

Nachlinger said he has received calls from residents claiming that the ShoWare Center is hemorrhaging the city’s operating budget.

That is not a correct assumption, he noted.

“It has no impact on the operating budget,” Nachlinger said.

If the events center remains in the red this year, it potentially could impact the city’s capital improvements budget, although city officials already had set aside $600,000 within that capital budget to help cover any lack of revenue at the fledgling arena. City officials use the capital budget to help pay for improvements to city streets, facilities and other projects.

“There’s also another $1.5 million that could go to the ShoWare or capital projects,” added John Hodgson, city chief administrative officer, in an interview after the board meeting.

City officials delayed spending that $1.5 million as part of cutbacks earlier this year because of projected shortfalls in city revenue from the real-estate excise tax.

“We didn’t budget up to the maximum in case the downturn in the economy was bigger than we thought,” Nachlinger said.

Most of the project funds to build the arena will come from the city issuing bonds, to be paid back over the next 30 years from fees collected from events and activities at the facility. If those fees to pay the debt service fall short, city officials would use funds from the capital budget.

“None of us want to tie up the capital fund of the city,” said Mike Miller, chairman of the Public Facilities District board. “I’ve been in banking for 30-plus years and I’ve never seen the economy this tough. We’re on the challenge to attract events to the center and we’re on it early. The board and the city want to make sure the events center is not a burden. But we do have the funds to cover the debt service, and a backstop if operating numbers are short.”

In addition to city bonds, the state will pay nearly $21 million toward the arena through the earlier formation of a Public Facilities District that allows Kent to keep 0.033 percent of the state’s share of the sales tax, or 3.3 cents on every $100 purchase, collected in the city. It’s the same funding scenario that Seattle used to help offset costs of the Mariners’ Safeco Field.

Even though sales-tax revenues to the Public Facilities District for the ShoWare Center are lower than expected so far this year, the fund has a positive balance of $361,512.

“The sales tax is not performing as well as we would like, but it is still performing adequately,” Nachlinger said.

More than 50 events have been scheduled at the arena for the remainder of the year, including the Ringling Bros. Barnum & Bailey Circus Sept. 1-6 and Disney on Ice Nov. 10-15.

ShoWare officials expect to announce several concerts as well, once the Seattle Thunderbirds hockey team releases its schedule in late July for the 2009-2010 season that opens in September. The Thunderbirds are the anchor tenant of the arena.

“There are a number of events on hold that can’t be booked until we know the T-Birds’ schedule,” Nachlinger said. “I think we will wind up with a number of events other than hockey in the fall. And we do make money off of hockey, but we make more money off of concerts.”

The T-Birds get most of the ticket revenue as well as a portion of concession sales from their games. ShoWare’s contracts with concert promoters are more favorable to the city’s profits.

The T-Birds averaged 4,245 fans per game at the ShoWare Center. Hockey officials had projected an average of 5,200 fans.

“We projected 5,200 at $13.50 per ticket and we averaged 4,200 at $19 per ticket,” said Colin Campbell, assistant general manager for the T-Birds. “Where we went backwards was with the no-shows.”

With about 500 ticket buyers per game who did not show up, the team and the arena did not make any concession money off of those customers.

“But we played as many as three games per week,” Campbell said, noting that frequency may have led to the lower fan turnout. “Our schedule will be more spread out this year.”

Campbell expects the T-Birds to hit the 5,200 fans per game in 2009-2010.

Meanwhile, city and ShoWare officials continue to try to bring an arena football league team next summer to Kent, said Ben Wolters, city economic development director.

“We’re working on it seriously,” Wolters said. “We’ve had some good feedback.”

Higgins has talked with representatives of Arena Football League 2 as well as the Indoor Football League, but no agreement has been reached. A football team could play as many as eight home games in Kent. Spokane and the Tri-Cities each feature teams in the Arena Football League 2.

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