The yet-to-be approved, $31.85 million Performing Arts and Conference Center may have additional costs, city officials discovered after a Blue Ribbon Panel recommendation earlier this month.

The Federal Way City Council met on Tuesday to discuss enhancements to the proposed facility that several suggested during the panel’s discussions. The enhancements include more square feet for features, such as a separate entrance hall, or “outdoor vestibule,” a bigger kitchen and a larger area for office, storage and dressing rooms.

But Patrick Doherty, the city’s community development director, said the added square feet won’t be free.

Doherty presented the Council three options at the special meeting — the first being more space in the front of the center.

“The Blue Ribbon Panel made a strong recommendation to front-of-house changes — an enhanced entry lobby and external vestibule … by moving it outside, all this space is clear for queueing for a big event, for will call lines that might be long for a big performance,” Doherty said. “It allows for more gracious circulation for especially some of the larger events, it’ll increase the point of sales at the box office … “

This first option would cost $210,000 but would allow for more tables in the lobby if a banquet was held.

The other two choices are pitted against each other.

Option “2a” illustrates a center with a larger kitchen space but only enough counter surface, sinks and ovens to be considered a catering kitchen.

Doherty explained this would act as an interim step if other entities wanted to expand to a full kitchen later down the road.

“The reason for that is our developer has been contacted by a hotel recently who was actually very interested …” he said. “The most recent hotelier they spoke to had some interest in the kitchen operation.”

Instead of fully equipping a full-sized kitchen, the third option, the mayor and other city officials are recommending this option because it “might come out as a deal with the hotelier and if not, at least it’s something we can grow into and still have a full catering kitchen.”

Nonetheless, option 2a, which would add 1,680 square feet, still costs $369,000 — totaling $579,000 in combination with the first option.

The most expensive option, “2b” does add everything “2a” has but includes “everything down to the utensils.”

Vent hoods and grease traps apparently aren’t cheap, — $50,000, according to Doherty — and are a significant reason the price for that option jumps an extra $269,000, for a total of $857,000 if the Council chooses options 1 and 2b.

“We heard from those at the Blue Ribbon Panel [and through] due diligence and involvement of the other folks, that if we were able to have a full-service kitchen, it may enhance the experience of the venue, it may attract more events because we have a full-service kitchen with better quality delivery of food and it would also be a profit center,” Doherty said, adding that the full kitchen at McIntyre Hall in Mount Vernon, Wash. generates a $30,000 annual profit, but mainly has it for the experience.

Ultimately, the Council will decide on these options as well as how they’re funded at the June 3 Council meeting, officials said on Tuesday.

“My recommendation to the Council is to build out the area for the kitchen but not to build it out completely, not fully equip it,” said Mayor Jim Ferrell, adding that it would be coupled with option 1. “ … Building out the kitchen to a full-service kitchen doesn’t make a whole lot of sense but what you don’t want to do down the road is kick out the wall after the facility’s [constructed]. That’s gonna cost a lot of money.”

Exactly how the city will fund the center, enhancements and all, is another discussion altogether.

The panel’s finance subcommittee stated the city has “sufficient funds to build the project without additional taxes, even in the panel’s most conservative fundraising scenario,” which would put the city $9.15 million in the hole.

City officials state they have the $19.07 million of the initial $31.85 million construction cost and can enact a short-term $12.78 million “loan to itself” to finance that gap. If the most conservative option is chosen, city officials state they have the resources to bond the $9.15 million over 20 years “without impacting other programs.”

This would cost about $600,000 annually, which city officials state they can afford without a special tax levy on citizens.

But in looking at the Blue Ribbon Panel report, Councilwoman Susan Honda questioned $5.2 million of that “already secured” $19 million, as those funds would need to be transferred from the 352nd Street project.

Brian Wilson, the Federal Way chief of staff, said the money was “earmarked for a period of time” and has been sitting in an account.

Public Works Director Marwan Salloum said the project was put on the work plan around 2008-09 and he anticipates the project will be submitted for funding this year or next year.

Although the initial utility taxes will be transferred, Salloum anticipates a plan for the Transportation Improvement Board to replenish the millions and is a high priority on the Public Works work plan. Real estate excise tax funds and savings from other capital projects could also help fund the 352nd project, he noted.

“I think obviously, we have to always be aware of all the services the city is responsible for, be it the 352nd project or other different types of programs that we fund,” Ferrell said in an interview. “And I’m confident that the [Performing Arts and Conference Center] is not going to negatively impact other programs that we have in this city. We have to be careful about things, we have to make sure the programatic changes or how we proceed doesn’t have unintended consequences, so it takes a lot of planning.”

However, there could be some re-priortization of the funds the city anticipates from Community Development Block Grant section 108 loan.

City spokesman Chris Carrel said the city applied for the funds, which aren’t strictly designated for the Performing Arts Conference Center and can be used to further other types of economic development, if approved.

This year, the city received $649,054, 65 percent of which was designated toward capital projects. The approximate $422,000 was used for small business technical assistance ($102,345), the housing repair program ($208,655), the Parkview Services home purchase program ($30,000) and $75,0000 for code compliance, of which the mayor recently designated.

“Those are all Council designated, approved expenditures,” Carrel said. “[The] Council can designate any part in future years to the section 108 loan.”

Fifteen percent of the Community Development Block Grant entitlement, by law, must be used for public or human services, of which the city will not touch, Carrel said.

The section 108 loan repayment would cost about $200,000 and would be paid for from the capital community economic redevelopment funds from the block grant entitlement amount, based on the amount borrowed.

The city is requesting $3 million in the block grant section 108 or other loans in the future years to help pay for the center or other city improvements if the center isn’t approved.

To bridge the funding gap, city officials will be seeking naming rights, which could provide between $2.2-3.5 million, citizens are holding a fundraising campaign with hopes of raising $750,000 to $1 million, they’re applying for grants of up to $1.5 million and asking for $7.2 million of New Market Tax Credits, of which have yet to be allocated by Congress but is expected in the coming weeks.

“When we break ground on this performing arts center, how much money do we have to have available and what happens if we don’t have all the money when we break ground, and what happens if we aren’t able to get the rest of the money?” Honda asked at the special meeting.

Doherty said the city won’t be spending all the money up front but if they can obtain the $7 million from the New Market Tax Credit, they would have to deposit approximately $25-26 million by the end of the year for the arrangement to work.

Alternatively, if they don’t get the credit, Doherty said they would still use the interfund loan but the cash flow would be used at a “burn rate.”

“We actually don’t spend all that money up front, it’s billed over two years, or 18 months of construction so you don’t need the full $32 million right there at day one,” he said.

As the Council wrapped up one of their last public discussions before a vote on the center, the mayor reflected on the decade-long process for the proposed center.

“I think the mayor’s Blue Ribbon Panel just did a phenomenal job,” Ferrell said. “They put out a 139 page report … we’ve been debating this issue for 10 years, and that report and the work that they did provided the community with an opportunity to move forward, where we can agree on the facts and then it’s the policy issue that’s been teed up for the Council and we’re gonna do that June 3. I’m confident that we’re on the right track.”

For more information on the Performing Arts and Conference Center, visit www.cityoffederalway.com/PACC.

Option 1

Option 2a

Option 2b