Spokane Journal of Business

Arena fills bill, saves up millions

Reserves dedicated strictly for maintenance; new theater planned for smaller events

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The Spokane Veterans Memorial Arena and the public district that owns it are performing as well as the entertainers who grace the arenas stage and the champion athletes who compete on its rinks and courts.

The Spokane Public Facilities District has accumulated a healthy $8 million in reserves as it seeks to protect the publics investment in the 4-year-old facility far into the future, and the arena, staffed by the city of Spokane through a management contract, continues to bring in major events and large audiences.

Now, the district wants to create a mid-size venue in a portion of the arena for concerts, convention sessions, and sizable meetings. Arena General Manager Kevin Twohig says the district envisions an entirely different environment within our existing space, so people feel as if theyre at a theater. That environment, expected to be called the Star Theater at Spokane Arena would have up to 5,500 seats that could be set up at the east end of the arena bowl and then taken down for larger arena events.

DisplayMaker Productions, of Seattle, has been selected to design the new venue, and Silhouette Lights & Staging, a Spokane company that has done work at the arena, will be involved in the project, says Kris Mote, executive director of the district. The project is expected to cost $150,000.

Entertainment agents and promoters booking events here have said they needed a venue in between the size of the 12,500-seat arena and the 2,700-seat Spokane Opera House, Twohig says.

Filling seats

When the civic effort to build the arena was launched in the late 1980s, few goals were quantified for the project in terms of number of anticipated events or the size of the expected audiences. Proponents voiced an overriding concern that they wanted to bring more and better entertainment to Spokane than the citys decrepit old Coliseum could attract.

With the new arena, Twohig contends, We have completely filled the niche for a large venue here.

Last year, the arena hosted 892,000 people who attended 153 major events, such as concerts, sporting events, and family shows, and 464 minor events, including meetings and conferences. Those results are well above the annual average of about 400,000 people and 111 major events at community arenas across the country, Twohig says.

In at least one way, the arena has far exceeded expectations. The consultant who helped design the arena recommended against including any suites, saying the Spokane market couldnt support them, but the district did include the suites, and they are fully leased, Twohig says.

The arenas 12 corporate suites provide the companies that lease them with unobstructed views, upholstered seats, private bathrooms, the availability of catered food service, and tickets to all events. The arena has had a waiting list for suites since it opened, and last year 10 of the 12 companies that hold five-year leases for the suites renewed their agreements only three years into the leases, Twohig says. He says the arena could potentially accommodate more suites, but major remodeling work and the relocation of public restrooms would be necessary.

Considering a new role

Having fulfilled the goal of giving Spokane a modern, attractive venue for big-name entertainment, the districts board of directors has said its not interested in taking on another civic role, but has at least been willing to talk about allowing the district to serve as a platform for an expansion of the citys convention facilities here.

In November, the citys Sports, Entertainment, Arts, and Conventions Advisory Board (SEACAB) gave a formal presentation to the district board on a proposal under which the district might take on the expansion and then own the convention facilities here, in addition. Although the district board rejected that proposal, it met Monday with the convention expansion advocates in a work session to explore the idea further.

The district was created as a single-purpose entity, dedicated to replacing the Coliseum with a new facility. When voters authorized the district in 1990, they approved a countywide 2 percent hotel-motel tax and a 0.1 percent sales tax to be levied to pay off bonds sold via the city and county to pay for construction of the arena. The two taxes raise about $6 million annually, Mote says, and about $4.5 million is required for debt service. Additional funds are held in reserve and have been used to build up the $8 million dedicated to maintenance of the arena.

City Councilman Jeff Colliton, who is working with the convention expansion advocates, says that under one scenario for such an expansion, the districts current levy and a sales-tax credit could cover both the cost of the expansion and debt service on the districts arena bonds if those bonds were refinanced.

Last spring, however, the districts board approved a mission statement that expressed its commitment to terminate the arena levies in 2018 when the bonds are to be retired. The mission statement also said the district wanted to remain a single-purpose entity, dedicated only to ensuring the arenas success.

Convention facilities expansion proponents presume the public facilities district is the right place to go, in the hunt for an entity to handle the expansion, says Dan Kirschner, public affairs director at Spokane Area Chamber of Commerce.

Legislative language for funding authority developed by the expansion advocates and now under consideration in the state House of Representatives focuses on using a public facilities district, either the existing district here or possibly a new district, to handle expansion of convention facilities, Kirschner says.

Other possible projects

No matter what happens with the convention expansion, the arena still is likely to evolve. Twohig says he plans to evaluate other new uses of space at the arena this year, besides the Star Theater project, through an auxiliary space survey.

He says he wants to ensure that the arena can accommodate some important upcoming events. The arena has landed contracts for the NCAA Division 1 Womens Basketball West Regional tournament in 2001, and the NCAA Division 1 Mens Basketball first and second rounds in 2003. The survey Twohig plans will look at the arenas backstage areas, such as locker-room space, offices for coaches and organizers, and accommodations for the big media contingents that cover the events.

Also, improved seating is planned at the west end of the arena, Twohig says. He says the planned seating would be a system such as the one used at the east end of the arena that allows seating to be added at the end of the basketball court at floor level.

The additional seating isnt the 2,000 seats that were eliminated from the original plan for the arena for budget reasons, Twohig says. Those 2,000 seats were to be at the same end of the building, but in the upper deck, he says. While they still could be added later, Mote says the arena sells out only about 10 percent of its major events, and until capacity crowds become more commonplace, they arent needed.

Saving for a rainy day

Maintenance has been a top priority for the district, which reported the $8 million in reserves in its most recently prepared annual report, which was for the 12 months ended Dec. 31, 1997, says Mote.

Even as the building, which opened in September 1995, was being completed, the district was establishing reserve funds for maintenance, repair, and improvements to the $42 million structure.

When proponents of a new arena first launched their efforts to pass the bond issue, they found a perception that the Spokane Coliseum hadnt been properly maintained. Once established, the district board decided to make sure it would always have the money to make necessary repairs to the new arena, she says.

We promised never to have to go back to the voters for funds for refurbishments, Mote says.

Mote says the $8 million the district had in the bank at the end of 1997 has grown slightly since then. The reserves were tapped last year to buy a second ice plant to serve the Chrysler Memorial Cup hockey tournament, to update concession stands, and to improve heating and cooling systems, Mote says. The next project probably will be the replacement of the arenas video wall, which was old technology when it was installed and has had problems, with a center-hung scoreboard, she says. The new scoreboard is expected to cost about $1 million.

In 1996, the district developed a list of repairs and replacements that will be needed to keep the building in good condition for the next 30 years, and estimated that the work would cost at least $26 million, Mote says.

The district has anticipated needing in the next half-dozen years a protective seal for brick and stucco, and new paint, acoustic tile, and carpets inside, at an estimated cost of $750,000. Fifteen years after opening, the building is set for a more than $2 million upgrade of air-conditioning systems. The roof, stucco, ceiling, restroom partitions, ice-floor systems, heating units, concession equipment, fire protection and other security systems have an expected life span of 25 years and will cost about $8.5 million to replace.

Arena operating budget

The arena has been earning slight annual net income from its events. Its 1998 annual report, which is prepared separately from the districts annual report and has been completed, reports that the arena had $3.6 million in revenue, $3.4 million in expenses, and nearly $184,000 in net income for the year. Revenue was up from about $3.1 million in 1997, when expenses were $3 million, net income totaled about $114,000, and attendance was 790,000.

Employees who manage and maintain the arena are shared with the citys other entertainment facilities. Arena employment has held fairly steady at between 25 and 30 since the facility opened, and is now at 29 with the addition of two people in the marketing department this month, Twohig says.

The report says 30 percent of the arenas revenues come from hockey games, 26 percent from family shows, and 25 percent from concerts. Basketball and other sports account for another 8 percent of revenues, while the rest comes from meetings, parking, ice rentals, and other events, such as graduations, that are held in the arena.

Twohig says that 1997 was the first standard year in terms of revenues, expenses, and attendance, and predicts the same sort of steady increases seen since than for the coming years.

He calls 1996, the first full year the arena was open, a honeymoon year, with higher than normal attendance as people came to check out the new facility, and lower than normal expenses because many building components were still under warranty. That year 939,000 people visited the arena, which held 159 major events.

It will be fun to see if we can meet those 1996 numbers again, Twohig says.

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