High Costs Involved in Sustaining Expo Center

There is a high cost in keeping the going, said Marketing and Events Manager Kristen Damazio at Tuesday night's City Council workshop that was intended to explore ways to make the center a sustainable and even profitable entity for the city.

That assertion was supported by financial numbers Damazio provided dating back to 2007 when the city first acquired control of the center from King County.

While the city has benefitted from some funding support from King County each year, if that support was taken out of the equation, the Expo Center has lost money each year it has operated under city management.

For example, in 2010, the city collected $483,911 in revenue without county support; but with expenditures, it saw a net loss of $334,829.

The projected loss in 2011 is $127,368, again, without county funding.

Damazio explained that in 2007 when the city took over the center, King County provided a $2 million fund in which $1 million each was designated explicitly for operating and capital expenses. The losses she presented to council represented those from operations alone.

At present, the city has used about $655,000 of that $1 million. Damazio expects that with cost-reduction initiatives currently being undertaken by her staff, the remaining sum would still be good for another two and a half years.

There wasn't a lot of analysis into the center's mode of operation from 2007 to 2010, she said. Since then, however, city staff are pursuing the following as some of these cost-saving/revenue-generating initiatives:

• Reduce expenses across the board, including reducing operating expenditures by 29 percent from 2010 to 2011
• Increase rental rates and reduce non-profit discounts in order to cover operational costs
• Re-examine city-run events for profitability. The only city-run events planned for this year are the Wine & Chocolate Festival that has already passed, and Oktoberfest this fall, Damazio said.
• Ensure all contracts outline a revenue goal of 30 percent expense to income ratio. For example, if an event were set to bring in $1,000, expenses can't exceed $300.
• Continue to improve the Exhibit Hall and Field House to encourage more short-term rentals. Short-term rental, as opposed to long-term rentals such as that by , generates more revenue, said Community Development Director Erika Shook.
• Explore new events and marketing opportunities that expand beyond traditional fairgrounds use
• Hire permanent, part-time staff to ensure better and continued customer service as well as provide ongoing maintenance/cleaning

Damazio projects that such efforts should result in reducing net loss for the Expo Center by more than 50 percent in one year, with 2014 being when the city will start to break even.

Capital investments that the city has made to improving the infrastructure of the center, including the Exhibit Hall and Field House, have already helped net more bookings by just February of 2011 than in all of 2010, she said.

Expenses for the center are expected to level off moving toward 2014 while revenues are projected to grow, she said.

Possible Future Events

The Expo Center currently has contracts with Olympic Kennel Club and the Highland Games, both expiring in 2013. It is also working with the Creation Festival for a multi-year agreement and looking into accommodating a BMX group, based in Sumner, for providing a long-term BMX facility.

Damazio said the center is also working with a third-party vendor to put on the county fair. King County is not contributing financially to the fair aside from providing the use of the 'County Fair' name.

Choosing Renters

The Council's discussion steered toward those of short-term versus long-term rentals. Councilman Jim Hogan offered the question of how to optimize the facilities' use, either to work and accommodate different groups or aim for a more permanent configuration.

Damazio added that the Council may want to consider the benefits and costs of acquiring a sports and entertainment license. Events that include liquor generate good revenue, but they also necessitate increases in insurance and liabilities. 

Similarly, should the center look to accommodate motorcross events, it would have to weigh the costs of noise complaints in the area.

Council and staff also discussed a preliminary proposal being floated around from a group wanting to build a five-acre equestrian facility on the south side of the center. The group itself has not come forward with much detail about their proposal aside from offering to raise funds to support the building of the facility, said Mayor Liz Reynolds, so there is little detail about how operations and maintenance costs would work. Staff recommends further studies on this, Shook said. But it fits into the long-term plan discussion, Damazio said.

Council Reacts

Councilman Sean Krebs thanked the staff for their work but commented that the process of managing the center seemed haphazard, pointing out that some data that Damazio presented couldn't quite be accounted for, as well as an overall lack of decisions being made on policies.

During Damazio's breakdown of capital expenditures, Krebs asked what a line item named 'Expo Business Plan' was as it totaled more than $96,000 from 2007 to 2009, but no one, including Damazio could be for certain.

Damazio similarly offered that she wasn't sure on what nearly $36,000 spent in 2008 for Field House improvements entailed. She took this position in March of 2010 and many of these numbers were listed for years prior to her joining the staff.

Reynolds countered that the process was not haphazard but presented the important work the staff has done to gather pertinent information for the council to hear and begin to discuss -- as such, it's the council's responsibility to set policies.

Councilman Kevin Mahelona and Hogan asked staff to come back to council and let them know what they need from them.

Councilman Mike Ennis suggested that it may be beneficial for staff to provide more frequent reports on how Damazio's initiatives are working throughout the year to reign in expenses.

Another workshop will be forthcoming for future decisions regarding the Expo Center.