Kent’s ShoWare Center operating losses near $5 million in 11 years

With continued financial struggles in 2019, operating losses at the accesso ShoWare Center in Kent are nearing $5 million since it opened 11 years ago.

The city-owned arena lost $641,834 last year with expenses of $3.66 million and income of $3.02 million, according to the ShoWare Center 2019 income statement released Feb. 27 by SMG, the operators of the facility.

SMG had projected losses of $497,200 for 2019. Tim Higgins, ShoWare Center general manager, blamed the higher losses on a February 2019 snowstorm that cancelled one concert, moved one concert to a later date and lowered attendance at three anchor-tenant Seattle Thunderbirds junior hockey league games.

“We took about a $150,000 potential hit in revenue,” Higgins said.

Higgins downplayed the consistent operating losses during a presentation Feb. 27 to the Public Facilities District Board, which helps oversee operations at the $84.5 million arena. The ShoWare Center has lost money each year since it opened.

“I think it’s important that we continue to emphasize the admission tax,” Higgins said about the 5 percent city tax on each ticket sold. “That’s a big, big part of our budget. I don’t know the reasons but we haven’t done a good enough job throughout the years with the admission tax and what we bring into this building.”

Higgins said while operating losses show a $5 million loss since 2009, the city has collected $3.5 million over 11 years from the admission tax. He said that’s a loss of about $1.6 million rather than $5 million or about $153,000 per year.

“It’s a loss, but it’s not $5 million, it’s $1.6 million,” he said.

The admission tax money goes into the city’s general fund to help cover losses and pay for capital improvements at the arena. The city collected $412,601 from the admission tax in 2019.

“We put that revenue into the ShoWare Operating Fund, it helps reduce the loss,” said City Finance Director Paula Painter at the board meeting. “The purpose of us collecting those dollars is to help cover those costs.”

Besides the admission tax, the City Council moves another $500,000 each year from the general fund to help cover ShoWare Center operating losses. The city also transfers another $300,000 each year to help pay for capital improvements. In 2014, the council also agreed to pay off $2.7 million of the ShoWare Center operating debt from the first six years with extra reserve money the city had in its general fund because of higher sales tax and other revenues.

Based on SMG operating income and expenses (without the admission tax), the arena loses an average of $439,737 per year. The worst year was a loss of $752,324 in 2014. The best year was a loss of $155,268 in 2016.

Higgins also emphasized to the board a 2011 study that showed a 2012 economic impact study paid for by the city that showed visitors to the arena in 2011 spent an estimated $23.9 million, including an estimated $12 million on dining and shopping at businesses in and around Kent while attending events at the arena.

“Everywhere I eat at Kent Station it’s packed,” Board member Randall Smith said during the meeting at the arena. “Every restaurant over there, there is a waiting list. When I see this bottom number and I’m asked about it, I always say you can’t quantify it because there’s all these businesses that benefit from ShoWare. There is a huge impact. Even the small Spring Kitchen place I go to she says she counts on business from here.”

Higgins agreed with Smith about the impact on restaurants.

“We do hear that all the time,” he said.

Philadelphia-based SMG, which has operated the arena since it opened, received a five-year contract extension from the council earlier this year.

Fat wallets downtown

Kurt Hanson, city economic and community development director, told the board that the ShoWare Center could get a financial boost from the new residents who live and will be living at two new high-end apartment complexes along West Meeker Street.

A portion of the new Ethos apartments, across from the Riverbend Golf Complex at the former par 3 course, are finished. Residents at the apartments include employees from Blue Origin and Alaska Airlines (pilots and staff), Hanson said. Eventually, 857 units will open at Ethos and another new complex under construction at 64th Avenue and Meeker Street. Rents for two-bedroom units at Ethos start at $2,045 per month.

“The idea is to bring more wallets into downtown to spend at restaurants, buy season tickets or go to shows here,” Hanson said. “We use this building anytime we go out and market to a developer when there is a sizable chunk of real estate that we own and want to sell or we are helping a private owner sell their land, we always try and leverage this building. We say walking distance, we can debate that, but from Meeker Street it’s definitely walkable to this building. … Cruise down Meeker Street to get to this building for shows, hockey and everything else.”

Hanson said the financial health of the ShoWare Center depends on drawing people with disposable income.

“Disposable income will make this building full,” Hanson said. “People will have two soft drinks, two hot dogs instead of one. That’s where you guys will see the return.”

Food and beverage sales are how the ShoWare Center brings in more revenue. The more concerts and shows such as Disney on Ice, the more the arena makes.

Based on about 30 percent of income going toward housing, a person needs at least an annual income of at least $72,000 a year to secure rent at the Ethos apartments, but Hanson said the incomes of people moving there are even higher.

Hanson said as many as 1,500 people eventually could be living at the new apartments with disposable income of as much as $9,000 per year.

“It’s that demographic we want to see, that fat wallet walking around downtown,” he said.

ShoWare Center operating losses

2019: $641,834

2018: $197,052

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: $4.83 million