Seattle Center's financial forecast grows more bleak

By KATHY MULADY
SEATTLE POST-INTELLIGENCER REPORTER

Seattle Center, the city's hub for fun, sports and culture, is nearly $10 million in debt and sinking deeper.

The city has begged and borrowed money to keep the place running.

KeyArena, home to the woeful Seattle Sonics, can't pay its bills.

Expected state and county funding for McCaw Hall construction didn't come through.

The Center, site of the 1962 World's Fair, is starting to drain the city's cash reserves and money for other projects. (Editor's Note: The year of the fair was incorrect in the original version of this story.)

The city has issued bonds and made loans to keep the bills paid. Now, officials aren't sure what more they can do. Next year, the Center will sell two small parking lots to raise about $6 million.

But that's only a Band-Aid.

"It keeps the bleeding from getting worse, but it doesn't solve the problem," said Dwight Dively, the city's finance director.

The Seattle Center has a $34 million annual budget. About 75 percent of its money comes from the Center itself, including events, rents, fees, concessions, advertising and parking revenue. The remaining 25 percent -- about $8.6 million -- comes out of the city's general fund.

In 2006, the city will probably have to kick in an additional $1.5 million from the general fund to keep the bills paid.

Some of the Center's best-known attractions, such as the Space Needle, Experience Music Project and Pacific Science Center, are privately owned and operated, and therefore, do not provide the Center with significant income.

Some city officials say it's unrealistic to expect Seattle Center to be self-sustaining. Perhaps it's time, they say, to treat Seattle Center more like a city park or community center and give it a bigger share of the general fund.

"Maybe it should get more support from the general fund," Deputy Mayor Tim Ceis said. "Without some change, it's going to get worse, not better."

Yesterday, the City Council directed Seattle Center directors to come up with a business plan to show how it will increase revenue and become financially viable in the future.

For now, city officials are just trying to figure out a way to buy time until they have a plan.

But council members are firm that something needs to be done soon.

"We have been patching financing together for the last several years," Councilman Richard Conlin said. "I'm concerned that if we keep borrowing money, we are setting ourselves up for some real serious problems in the future. You can play these games for a while, but eventually, you have to face the music.

"I think we need a 12-step program for the Seattle Center," Conlin said. "The first step is to admit that we have a problem."

The problem is that Seattle Center has steadily lost money since 2000.

Several factors and some bad luck contributed to the downward spiral.

To start, the recession hit the Seattle Center hard. With fewer people attending events at the Center, income from parking and food sales fell off too.

Then revenue from KeyArena started to fade.

When it was built, the basketball and hockey arena was the only sports venue in the city with suites. Revenue from those pricey quarters go to the city and are put toward paying off the arena's debt.

Once a money maker for the city, KeyArena lost $1.7 million this year, and is expected to lose $2.5 million next year.

Two years ago, the city decided to refinance the old KeyArena debt to get a better interest rate.

It paid off the first bonds using money from cash accounts, including some money it had received from the sale of South Lake Union property.

While that lowered the debt payment, it didn't solve the underlying problem. KeyArena is still losing money.

The arena is just one of several problems plaguing the Seattle Center.

Last spring, the World's Fair-era monorail, an important tourist draw for the Center, caught fire and has been out of commission ever since.

The city is still waiting to see how much it might cost to repair. No one seems to know just when it might be running again.

Now construction of the new monorail has been delayed.

City officials were hoping to get a fresh injection of cash by leasing ground and air rights for the new monorail, which is expected to cross through the Seattle Center. But the city might not see any of that money for years.

On top of all that, the city is still struggling to pay the public share of construction costs on McCaw Hall, which opened in June 2003.

The $127 million performance center was built with a combination of public and private funds.

With the dot.com bust, financing was slow to come in and the city took out a bond to bridge the gap. Eventually, the promised $72 million in private money was raised.

However, the public side came up about $11.5 million short when money expected from the state and King County never materialized. Finance charges brought the total shortfall to $13 million.

Council members are still hopeful that the state or county might kick in as much as $6.5 million, but note that there were no signed guarantees of payment.

In the meantime, interest payments are coming due. The bill next year will be $456,000. In 2006, it climbs to $910,000.

Mayor Greg Nickels has said none of the money will be paid back using money from the general fund.

It was assumed that, by this time, the Seattle Opera and Pacific Northwest Ballet would start paying the debt.

But yesterday, uncertain that the performance groups could cover the full bill, council members seemed ready to consider sharing the debt evenly for the next two years. Nothing was officially decided.

In the meantime, Seattle Center officials have been slashing expenses at the 87-acre center each year.

This year they have proposed $565,000 in reductions on top of those taken in the past. More than 50 employee positions are empty. Security patrols have been reduced.

Officials say they worry that eventually such cuts could have a negative effect, further reducing attendance.

Other steps have been taken to increase income.

The council is considering strategies such as adding a surcharge to tickets for some events at KeyArena and McCaw Hall, raising rents or trying to rent out facilities such as Fisher Pavilion more often.

"It is a very difficult financial situation that we have to figure out how to deal with," Councilman David Della said.

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