Kent City Council might use extra reserve funds to pay off ShoWare debt

Kent's city budget looks so healthy for this year that the City Council might use $2.7 million of extra reserve money to pay off ShoWare Center operating debt built up since the arena opened in 2009.

The Kent City Council plans to use extra reserve funds to pay off debt at the city-owned ShoWare Center.

The Kent City Council plans to use extra reserve funds to pay off debt at the city-owned ShoWare Center.

Kent’s city budget looks so healthy for this year that the City Council might use $2.7 million of extra reserve money to pay off ShoWare Center operating debt built up since the arena opened in 2009.

“Our general fund reserve at the end of 2014 is estimated to be at 15 percent (of the total budget) and the council goal is 10 percent,” City Finance Director Aaron BeMiller said at a Nov. 25 council budget workshop. “We propose to take $2.7 million of general fund reserves and move that money into the ShoWare operating fund and eliminate the debt that exists in that fund.”

The council seemed to favor the idea as part of its 2015-16 budget deliberations. The council will vote on the final budget Dec. 16.

Because of increased sales tax revenue as well as reduced expenses, BeMiller estimates the city’s ending general fund reserves will reach $11.4 million by the end of the year or 15.5 percent of the general fund budget. The city also keeps another $1.5 million in reserve for unanticipated costs.

The city-owned ShoWare Center has lost money each year, with overall losses since 2009 expected to go over $3 million by the end of this year. The council has reduced some of that debt by setting aside $500,000 in the general fund budget the past two years to cover the arena’s losses.

The council could use a similar strategy of using extra reserve funds for the ShoWare Center in 2015, BeMiller said.

“That would free up $500,000,” he said of money for the general fund. “We would leave it budgeted but if we don’t have to use all of that if we have a large balance at the end of 2015, we could use that capacity to bring the ShoWare fund to zero again whether its $400,000 or $200,000. It’s still budgeted but the fund balance covers it.”

If the city pays off the debt, it also could start building up a capital improvement fund for repairs at the ShoWare Center. That fund has no money now because of the arena’s financial losses each year. City officials had hoped revenues from the arena would build up the fund.

“That’s money we’ve been trying to set aside that’s been going into the operating expense so it would allow us to build something up for replacement money or maintenance,” said Council President Dana Ralph who worked with city staff on how to pay off the ShoWare debt.

Derek Matheson, city chief administrative officer, recommended the council pay off the arena debt as part of Mayor Suzette Cooke’s strategy to reduce city debt.

“ShoWare accumulates additional debt every year when the $500,000 wasn’t enough to cover the losses,” Matheson said. “So we’re $2.7 million in the hole with – up to this point – no strategy for repayment. This transfer would take money we weren’t expecting to get in 2014 to use it to wipe out the debt in the ShoWare fund and take it back to a zero balance.”


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