Kent mayor, ShoWare officials remain confident in arena despite operating losses

The financial operating losses at the city-owned accesso ShoWare Center in Kent went back up in 2017 just one year after the facility had its lowest deficit since it opened nine years ago.

The arena lost $361,861 in 2017, according to the ShoWare Center income statement. The arena had expenses of $3.11 million and income of $2.75 million. The events center lost $155,268 in 2016.

Despite the losses, SMG, which operates the facility, and new Mayor Dana Ralph remained confident that the numbers show better days are ahead for the $84.5 million arena.

“It was another great year,” said Arletta Voter, ShoWare finance director, during her report Jan. 25 to the city’s Public Facilities District Board, who noted food and beverage concessions were up $307,000 more than budget.

ShoWare staff had projected operating losses of $482,822 for the year, so anything less than that is considered a success at the 6,200-seat arena.

Tim Higgins, ShoWare general manager, explained to the board, which helps oversee operations, how staff determines a budget. SMG predicts a loss of $478,000 in 2018.

“We budget on our history – what we’ve done in the past,” Higgins said. “Budgeting what we do know and what we are going to have. Nobody wants for us to come in and say we are going to have 25 shows and we don’t and we show a significant loss. So I think that needs to be real and here’s where we think we are going to be and in the meantime hustle to get it done.”

Mayor offers support

Ralph attended the meeting and agreed with how SMG projects its annual budget.

“I do not believe in aspirational budgeting which is where we kind of started out eight to 10 years ago,” Ralph said. “I would much rather us be very conservative. …and at the end if we get to celebrate, that’s the best way to go. Going the other direction is way more difficult and causes way more problems. I appreciate coming as close as we possibly can at the time of preparing those numbers knowing that there’s all kinds of possibilities of different events that will come here or not.”

Board member Randall Smith said he agreed with the way the budgeting is done but wants to be sure that message reaches residents.

“I think that’s good but you’ve also got a community out there looking at this and they’re not thinking like we are thinking and they are not in business, so they are thinking why (the financial deficit) and what are we doing to stop that,” Smith said. “We are working toward bringing it down, but we need to educate the community that we would rather do this and like the mayor said celebrate it at the end.”

Ralph, who served six years on the City Council before voters elected her mayor in November, later explained at the meeting that she had doubts at first about the success of the ShoWare Center. She has since changed her opinion.

“I’ve had some skepticism in the past about how things were done,” said Ralph, who has met with Higgins numerous times over the last six years about arena operations. “I am probably one of the biggest supporters of this building at this point. I have seen all of the significant benefits that it brings to our community. We are bringing in some amazing shows and in the upcoming years we will continue to build on that.

“It’s very different than in the beginning. Now promoters are coming to us and saying they heard about this show and we want to do that. That is where the success of this building is going to come – it’s other people saying this is a great place to be. I’m excited that we have this point.”

Ralph said the operating losses don’t tell the whole story.

“There are all of the other benefits it brings and that is the business in the downtown core and the number of people that come here and the number of people that are coming to Kent that didn’t even know where Kent was,” she said. “We need to talk about how important this building is to the region, to the city and be really proud of the fact that it is here.”

The arena has an economic impact of about $25 million per year on the city, according to a consultant study several years ago, much of it area restaurants, including the Kent Station shopping center. About 410,000 people attended events last year at the arena, according to SMG.

“We are at this turning point where we either take it to the next level or we start going backwards and I am 100 percent confident we are moving to the next level,” Ralph said.

The council covers the operating losses at the ShoWare with money from the general fund. Some of that money comes from the city’s ticket admissions tax (5 percent on each ticket) at the arena, which brought in an estimated $350,000 in 2017.

Labor costs rise

During an interview after the meeting, Higgins said increased labor and maintenance costs hurt revenue last year. The arena pays minimum wage to ushers and ticket takers and that hourly pay goes up each year after voters approved Initiative 1433 in 2016 to raise the rate of $9.47 per hour to $11 per house and eventually to $13.50 per hour.

“Minimum wage went up 50 cents this year and goes up 50 cents next year and $1.50 in 2020,” Higgins said. “So everything goes up. We have supervisors, so that pay goes up, too. We had to account for it in 2018.”

ShoWare Center staff raised the projected budget for salaries and wages to be $1.8 million for 2018, up from a budget of $1.3 million last year. That cost came in at $1.8 million in 2017, in part because of more events such as 10 extra Western Hockey League playoff games by the Seattle Thunderbirds, anchor tenant of the arena.

“Ten extra hockey games sends up expenses,” Higgins said.

But the extra hockey games also boosted the food and beverage sales, where the facility makes most of its money.

Other unexpected expenses last year included $50,000 in extra security measures, $45,000 to re-brand uniforms and signage with the new accesso ShoWare Center name; $25,000 to repair a heating, ventilation and air conditioning unit; and $25,000 in repairs to an elevator pit, Higgins said.

Strong start this year

But things are looking up for the arena in 2018 with a strong start to the first quarter concerts lined up. Concerts, similar to hockey, are revenue producers because of large crowds who buy food and drinks.

“This first quarter is significantly better than all of our other first quarters,” Higgins said about the concerts lined up. “We will have through April eight confirmed shows and potentially 12.”

More than 6,000 tickets have been sold (only single tickets remain) for the March 3 show by rapper G-Eazy. Comedian Jo Koy will perform before a sellout crowd on Feb. 17 and the ShoWare added a second show on Feb. 19. Tickets also are going fast for heavy metal band Judas Priest on April 15 and the country duo Sugarland on June 7. Tickets just went on sale for the March 16 performance by singers Tyrese and Keyshia Cole.

ShoWare Center operating losses

2017: $361,861

2016: $155,268

2015: $254,530

2014: $752,324

2013: $370,874

2012: $707,541

2011: $487,855

2010: $427,119

2009: $480,851

Total: $3.9 million