The Federal Way Performing Arts and Event Center opened its door two years ago after its $33 million construction. Staff photo

The Federal Way Performing Arts and Event Center opened its door two years ago after its $33 million construction. Staff photo

Council approves $425,000 to bridge Federal Way performing art center’s budget deficit

PAEC budget falls short at the end of the 2019 fiscal year.

The Federal Way Performing Arts and Events Center operating budget is now $425,000 fuller after the Sept. 17 council meeting.

Council members unanimously voted to provide money to the PAEC, with some discussion around the deficit and projected budget.

Finance Director Ade Ariwoola said this was a way for the city to ensure PAEC deficits were covered while Spectra is still trying to get on their feet. Spectra is an event management company that took over operations of the PAEC last year to help boost the building’s reputation and bring more performing arts groups to the city.

Ariwoola said, though, it is not uncommon for cities to help new organizations like this, especially given the city owns the PAEC.

“When you start a business, it takes time to build it,” Ariwoola said. “I don’t know of any business that can break-even the first year of operation.”

He is expecting the subsidy for the city to decrease over a five-year period as Spectra continues to manage the PAEC and more shows come to Federal Way.

Ariwoola said the more performances that come to the PAEC, the more performers, crew members and audience members will spend time and money in Federal Way’s downtown core, which will also help boost the economy.

According to a PAEC presentation from a previous council meeting, since Spectra has taken over management of the center, expenditures have gone down by nearly $200,000 while revenue has increased by $100,000.

Even with these numbers, however, the PAEC was still unable to fully pay for its utilities, and since the city owns the PAEC, Ariwoola said it was the city’s responsibility to help reduce that deficit.

According to the PAEC presentation, while Spectra took over full management and operations of the PAEC, the city still own the facility and is ultimately responsible for any profit or loss that occurs. Because of this, the city is required to assist the PAEC with its current deficits and provide them with nearly half a million dollars to pay current debts.

Spectra will decide how the $425,000 will be allocated. PAEC Manager Brian Hoffman told the Mirror the monies will be allocated to several different areas, including utilities, payroll, advertising, office supplies and other day-to-day operations of the facility.

In regards to concerns about the PAEC’s current deficit, Hoffman said it is Spectra’s goal to reduce the deficit, which they are projected do accomplish.

“Spectra Venue Management has had day-to-day operational control of the PAEC for the past 13 months, however, many contracts and agreements were put in place prior to us assuming operational control of the facility, which we have honored and will continue to honor until those contracts have expired,” he said.

Hoffman agreed with Ariwoola, saying it is normal both for a facility like this to be running on a deficit even 20 years after it opened, and for them to ask the city for money to help reduce that deficit.

“With a $32 million facility, things may come up that were not budgeted for such as additional lighting, a replacement of a piece of equipment, kitchen equipment failing, ticketing computers failing that were not budgeted for, so additional funds may be needed to address these problems.”

Because the PAEC is still new to this area, Hoffman said it will take time to become similar to other household names like the Pantages Theater in Tacoma.

Though he believes the PAEC will reach this goal and has a bright future in the city.

“We feel we have made significant inroads with audiences, nation touring artists and agents, nonprofits and local acts throughout our short time here. We have an amazing venue in the PAEC, and the revenue possibilities for this region are limitless,” he said.

According to the presentation, since Spectra has taken over PAEC management, they’ve saved a total of $247,907 for the city.

The PAEC’s 2019 budget so far is $453,855 with three transfers occurring in the past eight months, according to the presentation. However, the PAEC still needs $425,000 to meet their needs.

According to the presentation, it took many years for the Federal Way Community Center to reach the level that it is at now, at the top of the nation according to National Recreation and Park Association industry standards.

“When comparing the first 3 years of FWCC in comparison to the trajectory the PAEC is on, opening a new ‘City Asset’ in the developing downtown is an exciting opportunity but comes with competitive challenges,” according to the presentation.

Over the coming three to five years, the city expects their partnership with Spectra will help decrease the city’s subsidy and encourage budget performance turnaround.

“Facilities like the PAEC are similar to King County Aquatic Center and Celebration Park,” the presentation states. “All which bring tremendous positive economic impact to our City.”

Mayor Jim Ferrell is thankful that Spectra has taken over management of the facility and is looking forward to what they can bring to the community.

“I’m proud that we brought in a top-level company, Spectra, to run the day-to-day operations of this facility. They have increased the revenue and income to the betterment of $400,000, which is a big deal. They have made great strides in the past year. In the long run, I believe Spectra is going to be a game-changer for this facility and for the community,” Ferrell told the Mirror.

According to the presentation, the city has already noticed benefits of their partnership with Spectra.

“As we are completing the first year of our partnership with Spectra Venue Management, we have made great advances, procedurally, customer service wise and financially,” the presentation continues.

Three listed reasons for the city’s optimism working with Spectra include signage on the building, Spectra building community partnerships and positive national exposure to entertainment agents and artists, the presentation reads in part.

The PAEC first opened in 2017 after $33 million from a combination of the city’s general interfund loan and New Markets Tax Credit, which holds certain requirements the city needs to meet in order to keep it.

The city has been using the tax credit as a way to revitalize its downtown core, and the PAEC was meant to be a catalyst to increasing economic growth.

So far, though, Ariwoola said it is hard to track exactly how much growth the PAEC has brought since it opened its doors in 2017.

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