Committee Hearing, November 19, 2003

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE OF THE WHOLE - - - - Room 696, City Hall Philadelphia, Pennsylvania Wednesday, November 19, 2003 2:30 p.m. - - - - BILL 030663 - an Ordinance creating the Boyd Theater Tax Increment Financing District... PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL L. ORTIZ COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center. 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 I N D E X BILL 030663 JAMES CUORATO, Director of Commerce..... SAM RHOADS, PIDC........................ 19 LESLIE SMALLWOOD, Goldenberg Group...... 36 DAVID ANDERSION, Clear Channel.......... 52 JANICE PRICE, Kimmel Center, Inc....... 132 HOWARD HASS, Friends of the Boyd....... 162 JUDITH ROBINSON........................ 171 TERRY GILLAN, Committee to Save the Sam Eric........................... 174 JOHN GALLERY, Preservation Alliance.... 180 ADRIAN FINE, National Trust for Historic Preservation....................... 185 MICHAEL BARNES, Stagehands Local No. 8. 191 ANTHONY GIUSSEPE....................... 197 PAUL STEINKE........................... 200 ROBERT HOREN........................... 203 CRAIG MORRISON......................... 206 3 11/19/03 - WHOLE - BILL 030663

Good afternoon, everyone. This is a public hearing of the Committee of the Whole regarding Bill 5 No. 030663. I would ask Mr. McPherson to please read the title of the bill.

Bill No. 030663, an ordinance creating the Boyd Theater Tax Increment Financing District, being the area generally bounded by Chestnut Street on the north, 19th Street on the east, 20th Street on the west, and Sansom Street on the south.

Thank you. I believe our first witness will be Mr. Cuorato. Do we have anyone else from the Administration that will be testifying?

Madam President, there are a number of people from the Philadelphia Industrial Development Corporation. None of them are going to offer any formal statements, but they're all here to answer questions.

Fine. Thank you. 4 11/19/03 - WHOLE - BILL 030663 Mr. Cuorato, please identify yourself for the record and proceed with your testimony.

Good afternoon, Madam President and Members of the Council. My name is James Cuorato, I'm the City Representative and Director of Commerce. I'm appearing here today to testify in support of Bill No. 030663 which would create the Boyd Theater Tax Increment Financing District. Also here with me today are representatives of the developer and the Philadelphia Authority for Industrial Development which is responsible under the TIF Act for preparing and submitting the Project Plan. The historic Boyd Theater located at 1908-10 Chestnut Street, also known as the Sam Eric Theater, was considered one of the premier Art Deco movie palaces in Philadelphia. The Boyd is located in a federal historic district in Center City Philadelphia and operated as a first run movie house until May 2002 when it was closed due to low movie ticket sales and high maintenance 5 11/19/03 - WHOLE - BILL 030663 costs. Creation of the Boyd Theater TIF will enable the developer, an affiliate of Goldenberg Group to restore and expand the existing theater into a fully functioning performance venue for touring theater and other live performances, as well as for cinema presentations. The renovated theater will be operated by Clear Channel Entertainment, a major multi-media company with substantial experience and expertise in theatrical productions. Clear Channel is also investing $11 million of equity in the project. As part of the restoration plan, the theater will retain most of the 2500 seats and a new stage house will be added to accommodate large Broadway theater productions. When completed, the Boyd will be one of only two theaters in Philadelphia that can accommodate the space and scheduling requirements associated with Broadway-style productions. We firmly believe that the Philadelphia market is sufficiently deep to support two venues. 5 million. This investment translates into 120 construction jobs and approximately 60 full-time equivalent permanent jobs. 4 million for the City. Beyond these additional revenues, the redevelopment of the Boyd Theater represents a key element in continuing the revitalization of the Chestnut Street commercial corridor. The Boyd is perfectly situated within walking distance of a majority of Philadelphia's other cultural attractions which attract millions of visitors to the City each year. Redeveloping the Boyd will draw additional visitors and residents to this section of Center City and create a natural extension between Chestnut Street and the vitality of the Avenue of the Arts. The City and School District are being asked to approve a TIF loan of $5 7 11/19/03 - WHOLE - BILL 030663 million to be repaid from new real estate, City sales, business privilege, and half of new use and occupancy taxes. 4 million. PIDC may provide a HUD 108 loan of up to $3 million to fund a portion of the TIF note. 5 million. Since introduction of the bill, PIDC and the City have met with City Council staff, representatives of the School District, the Department of Revenue, and representatives of the Controller's Office to review the Project Plan. Based on these meetings, we have made several changes to the plan. These changes are contained in the revised Project Plan that was forwarded to each Councilperson and can be 8 11/19/03 - WHOLE - BILL 030663 summarized as follows: Definition of the developer has been changed to clarify that it will be an affiliate of the Goldenberg Group. The TIF boundaries have been modified to include only the theater and the land required for the theater expansion which has reduced the district size and total project cost. The number of construction jobs has been modified from 189 to 120 full-time equivalent positions. Several corrections to the tax revenue estimate were made based on information provided by the Revenue Department and Office of the City Controller, including adjustments to the amusement and wage tax projections and base values for use and occupancy, business privilege, and wage taxes.

The Project Plan anticipates a potential amendment to the Commonwealth TIF Act to include amusement taxes eligible to be pledged for repayment of the TIF loan. 4 million. In addition, the developer forwarded a proposed Economic Opportunity Plan to City Council technical staff for their review and have submitted the revised plan in accordance with their requests. And we do have copies of that Economic Opportunity Plan available here today. I would like to note that today's hearing is required by the Pennsylvania Tax Increment Financing Act to create a TIF District and the Act requires City Council to wait at least three weeks for final consideration. Under the State Act, Council will not be able to act then on this bill 18 until the regularly scheduled meeting on December 11, 2003. In order to expedite the redevelopment of the Boyd Theater, I am requesting your approval of Bill No. 030663 creating the Boyd Theater Tax Increment Financing District at the December 11th meeting. Madam President, that concludes the 10 11/19/03 - WHOLE - BILL 030663 prepared testimony that was submitted. I would, with your permission, just like to add several additional points, if I may.

Certainly.

This project has been one of a very high profile here in the City and I would venture to say that there has been, at least to my knowledge, almost universal agreement that the Boyd Theater should be saved and preserved. I certainly have not heard from anyone to the contrary. When the developer pulled the demolition permit back last year, there was a lot of concern from many people that the developer's primary intention in this case was to actually demolish the property and put up a new development on that site. The developer insisted to us, and we verified, that they were in fact making every good faith effort to find an appropriate reuse for the building. There were several discussions that they had that we participated in and several attempts made to come up with a plan that would work across all the different factors that had to 11 11/19/03 - WHOLE - BILL 030663 be satisfied. And we actually were convinced at that point that they were sincere about trying to renovate the building despite some skepticism from people that thought that that was not the case. During this time, I personally and I know the Mayor received a lot of correspondence and I certainly got as many e-mails and phone calls about this as just about anything else that we've worked on. And the basic message was, do whatever you have to do, come up with whatever plan you can, but we need to preserve that theater. It's a national historic treasure. It's the last art deco movie palace here in Philadelphia. Other cities have managed to do this, and we certainly can come up with a way to do this ourselves. So that's what we set out to do. When the Goldenberg Group came up with this plan, we fully supported it. We believe that it is an economically feasible plan and one that does meet the preservation objectives that we sought, and there is a public subsidy required. I think we realized 12 11/19/03 - WHOLE - BILL 030663 that from the beginning. But any restoration that's going to work has to be economically feasible. We cannot enter into any agreements with the developer for a project that we don't believe will work. In this case, we have a project that we think is feasible, that can succeed and prosper in the long run. And there is a substantial equity investment being made by an affiliate of the developer, the development partnership Clear Channel, of $11 million. There have been, and I am sure that you will hear today some concerns expressed about the reuse. " However, you will hear some concerns 13 11/19/03 - WHOLE - BILL 030663 today from people in the arts community. And these are friends of ours, these are friends of the Administration, these are from institutions that we support and that we work with and that we want to continue to support and work with. And I believe that -- certainly, the witnesses can speak for themselves and I don't mean to speak for them, but I think the essence of what you may hear has to do with the fact that putting another live performance venue in at this location will somehow hurt other performance venues in the City of Philadelphia. And that is certainly not the intention here. My response to that, which I will give you now and I'd be pleased to elaborate on it later in the hearing if you'd like, is that we have to stop thinking so narrowly in this City. We have to stop this notion or this mindset that because we have a certain number of institutions, we can't grow the market, that we reach a certain point and that's the maximum, and therefore when someone wants to come in and invest a lot of money in 14 11/19/03 - WHOLE - BILL 030663 the City, we have to turn them away because we don't think this market can support it. There is, in my opinion, no reason why we cannot grow this market here in Philadelphia for live performance venues. And I will say to you that we, the City, should be prepared to play a role in helping to do just that.

There are certainly ways that we can do that as far as doing a better job of marketing the City, and we will work with the various performance venues and the different arts institutions on plans to do just that. " I would choose to think that we should be able to do here in Philadelphia what other cities have done which is grow their market. We are the fifth largest City in the United States. To think that we can't support as a region two or even three venues that show Broadway-style shows, to me, just doesn't make 15 11/19/03 - WHOLE - BILL 030663 sense. There's no reason why we can't do that. So I just want to leave those as thoughts. And again, I know that you will hear from others that will express concerns. They have contacted me in advance and let me know that they will be expressing those concerns, and I fully encourage them to do so and in fact said that the City is prepared to work with them so that we can have the goal of both a preserved Sam Eric Theater, a new performance venue here without disruption or any damage to any of the existing venues. Thank you, Madam President for giving me the opportunity to add those comments.

You're welcome. Mr. Cuorato, the annual tax revenue from the proposed district is estimated at 66,470,000 (sic) based on a $2.5 million property market value. On Page 4A of the initial project cost, the cost of the land is valued at $6.5 million. Why are you valuating 16 11/19/03 - WHOLE - BILL 030663 the base property value at $2.5 million and not at the $6.5 million?

Madam President, the $2.5 million number represents the assessed value of the property. That's from the Board of Revision of Taxes.

So the 2.5, you say, is the assessed?

The assessed value.

I think in the executive summary that we received, it does indicate that that is the market value.

I see the reference in the executive summary, Madam President. For tax purposes, that is the market value for tax purposes.

Well, explain how we got to 2.5 and not the 6.5? I don't understand it. If it's 6.5 market value?

6.5 represents the cost of the land in the total project budget. That is the amount that's the amount of money that's been expended to assemble the site. 17 11/19/03 - WHOLE - BILL 030663 That's the cost of the land.

So shouldn't that be the base?

The base is the assessed value, which is $2.5 million.

I think it's the market value.

The Board of Revision of Taxes property assessment is what's used for the real estate tax calculation. So that's why we use the 2.5 as the base.

Do we do the same for the homeowners? I don't think so. Councilman Nutter.

Thank you, Madam Chair. I know you're in the middle of your question. I just had a point information. I was not understanding the response so I guess what I want to ask is, what's the market value then?

The market value of the property or what we would call fair market value, Councilman, would be what a willing 18 11/19/03 - WHOLE - BILL 030663 buyer and a willing seller would pay, and in this case it's $6.5 million.

I thought your response earlier was that BRT told you what the assessed value was.

That's correct. And this is no different from a property owner who would buy a house for a hundred thousand dollars. The BRT would set a certain market value and do the assessment calculation which would be substantially less.

Well, the assessed value is two and a half million dollars. And I think according to the formula that we use, I believe the market value would be 7,812,500. I think the way we do this is it's the market value times .32, that gets you your assessed value times the rate, and then that's the tax you pay. So which number is it?

The market value -- we're using $6.5 million. That was the cost to assemble the site so that's why it's in the project budget. 19 11/19/03 - WHOLE - BILL 030663

I understand that. If that's the market value times the ratio, that doesn't get you two and a half.

Then my response would be that the BRT is valuing the property at a higher amount than what we have in this project budget. But the $2.5 million number is from the Board of Revision of Taxes.

So let me just -- and then I'll have to get out of this because it's the President's question. So is the 2.5, is that the market value or is that the assessed value?

That is the assessed value. (Pause.)

I'm sorry, Councilman, if I may just ask your forbearance for one second.

Sure.

Point of order.

The Chair recognizes Councilman Goode.

Thank you, Madam 20 11/19/03 - WHOLE - BILL 030663 President. Mr. Cuorato, excuse me one second. It might be helpful if you use the term "BRT" before you use the term "assessed" when referring to 2.5 and say the "BRT assessed." Everyone knows it's a kooky formula anyway in how they value properties, but what you're referring to in terms of 2.5 is BRT assessed.

Thank you, Councilman. I will do that. I'm going to ask, with the President's permission, Sam Rhoads from PIDC to come up. He has been directly involved in the technical aspects of preparing the Project Plan and I think can offer you a better explanation than I can. At least hopefully.

That will be fine. Thank you. Good afternoon. Please identify yourself for the record.

Good afternoon. My name is Sam Rhoads. I'm with the Philadelphia Industrial Development Corporation. And to address the question, there is a differential 21 11/19/03 - WHOLE - BILL 030663 between market value as we would colloquially think of it and market value as established by the Board of Revision of Taxes. The market value of the property as the Board of Revision of Taxes --

Excuse me, Mr. Rhoads, I'm afraid you have some competition; we have the window open and we can't hear you. Would you speak directly into the microphone? Thank you.

There is a difference between market value, as you and I would commonly think of market value, and market value as in this case as the Board of Revision of Taxes has placed it on the tax rolls. So the two and a half million dollars represents what -- if you looked into the Board of Revision of Tax records today for this property, you would see a market value of two and a half million dollars. And Councilman Nutter is correct, the assessed value then would be 32 percent of that to give you the assessed value and the taxes associated. That would be 8.264 percent of that. So the two 22 11/19/03 - WHOLE - BILL 030663 and a half million dollars is the number that is of record and that, as a matter of procedure, sets the base value for the district. The six and a half million dollars, as the Commerce Director has referenced, it relates to what the developer has actually laid out to assemble the parcel.

Thank you, Mr. Rhoads. Mr. Cuorato, if the TIF creation date is not until July 1, 2004, why are you requesting its approval now?

Well, I mean, we're very anxious to move the project forward. This is not the only public funding that's required here, and we're trying to get this piece of the funding in place and then basically to put us in a position where we can go to the state, which is where we're looking for the balance of the funding, and say "This is the funding that will complete the project."

Mr. 23 11/19/03 - WHOLE - BILL 030663 Cuorato, did you receive a copy of a letter that was addressed to me and to all Members of City Council from the City Controller? The letter came today.

Yes, Madam President. I just got it about an hour ago. (Pause.)

Madam President, I have a letter to you from the City Controller dated November the 3rd.

No, this is dated today, the 19th.

I have not seen it, but Mr. Rhoads has.

And I have had a request from the Controller's Office since he is not here that his letter be read into the record. So, Mr. McPherson, I suggest you do that now.

"Dear Council President Verna, pursuant to the requirements of Section 21-1403A of the Philadelphia Code, the City Controller's Office is charged with 24 11/19/03 - WHOLE - BILL 030663 provisions of comments and analysis for proposed tax increment districts in Philly. I have previously submitted my office findings for the Project Plan for the Boyd Theater TIF District; however, they no longer reflect the proposal being considered by City Council and the School Reform Commission. "On November 18, 2003, I received a revised version of the Project Plan. This version included substantial changes, particularly with regard to anticipated tax revenues that may be allocated to the TIF Fund. I am deeply concerned that the new version represents an even less advantageous investment for the City and School District. "A cursory review has reviewed several inconsistencies and deviates from the Project Plan I reviewed previously. The revised version calls for a larger subsidy from the City and School District. At the same time, the proposal projects a significantly smaller net benefit to those entities over the lifetime of TIF District. Despite this increase in local public money 25 11/19/03 - WHOLE - BILL 030663 requested in the Project Plan and decline in tax revenues that will accrue to the City and School District, there is no increase in the amount of jobs created or the inclusion of public improvements that can benefit all Philadelphians. My office has not had sufficient time to analyze this most recent document. "We have worked diligently with PIDC to resolve many of the incorrect aspects of the calculations for the earlier version. I am troubled that our efforts have been for naught. As PIDC chose to present this revised Project Plan for the Boyd Theater TIF District just one day before the public hearing. I will not be able to offer the members of City Council an accurate examination of the proposal prior to today's scheduled hearing. Should you decide to postpone the hearing, I will be able to fulfill my duty to furnish comments and analysis of the Boyd Theater TIF District to you and other members of City Council. Sincerely, Jonathan A. Saidel, City Controller." 11/19/03 - WHOLE - BILL 030663

Mr. Cuorato, do you have any comments to make regarding the Controller's letter?

Madam President, we dispute a number of the assertions that are made in the Controller's letter. Again, I'm seeing this for the first time. This would not -- the revised plan, I mean, one that just jumps out at me is the revised plan would not mean less revenues for the School District. I'm going to ask, if I may, Mr. Rhoads to respond in more detail to your question.

Mr. Rhoads.

I would just like to comment that we did, I think, have a very productive conversation with the Controller's Office to go over certain questions and concerns they had with the Project Plan, and we did indeed make a number of revisions that are reflected --

Mr. Rhoads, when did that all take place? 27 11/19/03 - WHOLE - BILL 030663

That took place over the past 30 days, so since the ordinance was introduced. What the Controller, I believe, is referring to is that there's been one specific change, and that was to add the potential for TIFing of amusement taxes on this project. There is currently a bill in Harrisburg that would amend the TIF Act to provide for the TIFing of amusement taxes, and we did amend the Project Plan to provide for that if it were to be approved in Harrisburg.

Point of order.

The Chair recognizes Councilman DiCicco.

Thank you, Madam President. Mr. Rhoads, following up on the Council President's question, your conversations with the City Controller took place over the last 30 days?

That's correct.

When was your last conversation with the Controller, do you 28 11/19/03 - WHOLE - BILL 030663 recall?

Last week.

Did he indicate at that time that he would not be at this time supporting this request?

We had seen the November 3rd letter so that we knew what the remaining questions and concerns they had regarding the planning, and we were entirely comfortable with those. We were not aware at that point when we had communicated over to them about the amusement taxes that they would issue this letter. And we, in fact, just received it an hour or so ago ourselves.

No 17 communication since November the 3rd?

Not to my knowledge.

So this comes as some sort of a surprise, I guess, to you as well?

Correct.

Thank you. Thank you, Madam President.

You're 29 11/19/03 - WHOLE - BILL 030663 welcome. Mr. Cuorato, the last time this bill 4 was listed, we were asked to cancel the hearing because the School District had to approve it and we were led to believe that the School Reform Commission would be meeting this morning. Do you know if, in fact, they have approved or disapproved this?

My understanding, Madam President, is that they are scheduled to meet and consider this proposal this evening at 6 p.m. The requirement is part of the TIF legislation that School District approval occur on or before the date of the City Council public hearing. We're hopeful and optimistic that the School Board will approve this this evening when they meet, and we will formally work out a mechanism to officially advise City Council of that hoped-for approval this evening.

Thank you. I just have a couple more questions. Could you explain your amusement tax assumptions? 30 11/19/03 - WHOLE - BILL 030663 Have you contacted other theaters or venues in town to find out what their activities are and how this project will impact their operation?

I believe there's two questions. One is in terms of the calculation of the amusement taxes, and that was based on information and analysis that we obtained from the developer and their operator as well as looking at the -- understanding how the amusement tax operates mechanically and what would be taxed in the theater and what wouldn't be. I think the second part of your question is what Mr. Cuorato referred to in his additional comments in terms of the impact of the use of this theater on the cultural community generally speaking, and I would just reiterate his comments that we believe that the market is deep enough to accommodate this venue.

Was an analysis taken?

Yes, there was. The 31 11/19/03 - WHOLE - BILL 030663 question could be answered in a couple of ways. One is, yes, there was an analysis performed that Goldenberg, the developer --

Well, discuss it with us, if you will. Tell us about the analysis.

Again, the conclusion of the analysis was that the market was sufficient to accommodate this venue. The second level of analysis is obviously the operator of this theater believes that this is something that they can operate successfully in the City.

At this time, the Chair recognizes Councilman DiCicco.

I think you may have answered all of my questions. I just want to ask one brief question about the amusement tax.

Councilman, you're going to have to speak into your mike.

I'm sorry. Thank you, Madam President. I think you asked 32 11/19/03 - WHOLE - BILL 030663 most of the questions I would have asked anyway. One other question on the amusement tax. This is a first, isn't it, in terms of TIF financing?

Yes. In fact, Councilman, we need a state amendment to do that, which we're supporting.

And would this be in conflict with the uniformity by any chance? Because any of the other TIFs haven't had this opportunity, because many of the TIFs we've done under economic development entertainment venue kinds of places as well. Is there any question on uniformity on this that you know of?

Not that I'm aware of, no. Our Law Department was involved in the preparation of the amendment at the state level and has reviewed this very carefully, so I don't think we'll have a problem.

No further questions at this time, Madam President.

Thank you. 33 11/19/03 - WHOLE - BILL 030663 The Chair recognizes Councilman Nutter.

Thank you, Madam Chair. Mr. Cuorato, thank you for your testimony. I would just like to mention to you, as you were reading the Controller's letter -- and I know that there has certainly been a lot going on in recent times, but I was reminded as you were reading the Controller's letter, which I think you said you were just seeing at the moment or maybe today, I think at least I've had the same experience with regard to your testimony which I think I just got today. This is obviously a very serious and complicated matter, so it would really be helpful if we could get the testimony with a little more advance, okay? First, how many Tax Increment Financing districts or proposals has the City put forward and have been completed?

Total, Councilman?

Yes.

The City Council has approved, I believe, TIF districts of which 34 11/19/03 - WHOLE - BILL 030663 we've settled on about 9, or 10. 3

So what is it, 4 26 and 9? 5

Correct. 6

And the others 7 are in some state of still discussion or 8 trying to move along or -- 9

That's correct.

And I thought I heard some discussion earlier about a variety of analyses that may have been done. I may have missed this, so I apologize. Was there a report done on the potential impact of this proposal or, in the alternative, the impact on other venues by this project, and was that work done by Econsult Corporation?

Yes.

Do you have a copy of that report?

Yes, Councilman, we do.

Have you handed it out? 35 11/19/03 - WHOLE - BILL 030663

We have not. We used the conclusions of that report in our presentation to the Council.

You did what?

We took in the conclusions of that report and used it in our presentation to Council in our testimony, which can be summed up by saying that Philadelphia can support another performance venue of this type. But we can certainly make the report available.

Well, I can appreciate your summation, but do you have a copy with you?

We do, Councilman.

Madam Chair, could we try to make arrangements to have copies of the report given out to the Members?

Certainly.

The project is a total of -- is it 33 or $34 million?

Thirty-three.

And the breakdown on that is $11 million from Clear 36 11/19/03 - WHOLE - BILL 030663 Channel?

Correct.

The TIF is how much?

With the amusement tax included, 6.4 million.

And then the TIF note is?

6.4 million.

That's the TIF note. I'm sorry. And then what are the other -- what's the rest of the sources?

There's an additional equity investment by the developer for the land. So beyond the $11 million equity investment of Clear Channel, there is a $4.6 million investment by the developer for the land. And then the balance is a grant -- the balance in the amusement tax scenario, the balance of $11.1 million we hope to secure from the State Redevelopment Capital Assistance Program.

And has that 37 11/19/03 - WHOLE - BILL 030663 been approved?

It has not.

There's an application?

Yes.

Is that a part of the larger discussions going on in Harrisburg?

Yes, Councilman, it is.

Now what was the sale price of Boyd? I'm not actually old enough to know it as the Boyd; I know it as the Sam Eric.

So do I, Councilman.

Councilman DiCicco states for the record that he is old enough to have called it Boyd. (Laughter.)

I'm only going back as far as the Sam Eric. I did see the movie "Rollerball" there. It was a great performance in its premier. What was the sale price? 38 11/19/03 - WHOLE - BILL 030663

$3.8 million.

Let's talk a little bit about the project summary for a second. Now, what is the -- from your perspective at least, what's the primary difference between the document we received a couple months ago and the document we received yesterday?

I did in my testimony just make reference to the changes. I'll summarize them very quickly, Councilman. The designation of the developer was clarified. It is an affiliate of the Goldenberg Group. The TIF boundaries, the boundaries of the actual district --

I'm sorry, Mr. Cuorato. What does that mean? In the first Project Plan we received, it was the Goldenberg Group; and now in the second one, there's an affiliate situation?

That's correct.

Does that entity have a name? 39 11/19/03 - WHOLE - BILL 030663

Excuse me. The first plan that was circulated named a specific affiliate of the Goldenberg Group. And so what the revised plan says is just that it will be an affiliate of the Goldenberg Group.

So you're telling me we went from a named entity to an un-named entity?

That's right. So there's no reason to unnecessarily create a box there.

Create a?

A box. To name a named entity and then find that it ultimately ends up being a different affiliate.

Okay. Any other differences?

Councilman, I'm going to ask Leslie Smallwood from the Goldenberg Group to join us here, if I may. Some of the questions that you're asking, I think Leslie's probably best equipped to answer. Did you need further elaboration, Councilman, on the designation of the 40 11/19/03 - WHOLE - BILL 030663 development entity?

It would be helpful to know who it is that we're dealing with.

Currently, the theater is owned by an affiliate of the Goldenberg Group, Chestnut Theater associates. The reason why we made that revision, we wanted to have the capability of creating a new entity because the actual structure of the deal that we have created is possibly a joint venture with Clear Channel, so we wanted to have the capability of creating a new entity forming that.

And what's the status of that?

Actually, that is pretty much done. We have just not established the actual new entity. So we wanted to have the possibility and the capability of being able to do that. But the actual deal is structured and has been established.

But you're 41 11/19/03 - WHOLE - BILL 030663 saying that we don't know the name yet?

Not currently, no. 4

Who will run this entity?

It will be jointly ran by the Goldenberg Group -- well, jointly owned by the Goldenberg Group and Theater Management Group, which is a subsidiary of Clear Channel. But it will be operated and managed by Theater Management Group.

So it's going to be owned by?

The Goldenberg Group or Chestnut Theater Associates, which is an affiliate of the Goldenberg Group. And it will also be jointly owned by Theater Management Group, which is a subsidiary of Clear Channel.

I don't mean to be difficult, which will be a surprise to some, but just one more time take me through the structure.

Sure. The theater is currently owned by Chestnut Theater 42 11/19/03 - WHOLE - BILL 030663 Associates, which is an affiliate of the Goldenberg Group. Through our negotiations with the Theater Management Group, it has been decided that --

Theater Management Group which is a subsidiary of Clear Channel.

Clear Channel, correct. That the actual theater will be jointly owned by either them purchasing into the existing affiliate, Chestnut Theater Associates or we might create a new entity that would be jointly owned by Chestnut Theater Associates and the Theater Management Group.

But at moment, we don't have all the details of that and you could not tell me, for instance, what individuals were playing what role?

I would not be able to give you those details. The negotiations were actually very extensive and just recently concluded. So that particular entity has not yet been created and technically formed. 43 11/19/03 - WHOLE - BILL 030663

Okay. Mr. Cuorato, has the School District conducted their part of the sign-off on the project?

No, Councilman. We're expecting that to occur this evening. They're scheduled to meet at 6 o'clock to consider this. And we will be there and hopefully, if they approve it, it will fulfill a requirement that School Board approval be obtained on or before the day of the City Council public hearing.

And what is the net revenue impact to the School District? Knowing the Project Plan, it talks about revenues that the District will get as a result of the base that's established when you establish a TIF, but we've had discussion back in the regular hey day of the bulk of the TIFs we did were in a relatively short period of time, so you have me at a little bit of a disadvantage because we haven't done one in a couple years, seems like.

The number of TIFs 44 11/19/03 - WHOLE - BILL 030663 that have been requested is far less than what it used to be. I think that's primarily a function of the fact that most developers are using the 10-year real estate tax abatement. We just did -- Progress Plaza is the most recent one that I can recall. But other than that, you're right, Councilman.

So I'm a little rusty on my TIF stuff, so don't take advantage of me under the circumstance. What is the difference between what the District would receive if the project were developed without a TIF versus what the district would receive if the project is developed with a TIF? Something we used to call the TIF differential.

The School District would receive --

I'm not sure that this is answering your question. The way the numbers are projected in the plan is it looks --

I'm sorry.

The presentation in the 45 11/19/03 - WHOLE - BILL 030663 Project Plan looks at what would the school District receive if there were no development in the District versus what will it receive if there is development.

I understand that, and I did find that intriguing. I was going to ask you about that. I mean, the assumption is that there would be no development of that site for 11 years. I mean, is that really realistic at 12 19th and Chestnut, given the nature of that 13 location, the building in question? 14 Again, I understand the "save the 15 Boyd, save the Sam Eric," and I'd like to save 16 the building as well. But for comparison 17 purposes, if we're having a serious 18 discussion, is it really realistic to use as a 19 base of comparison what would happen if there 20 were no development for the next 20 years?

I think the question becomes one of what other assumption would you make that would be more or less realistic. And so that has been the assumption that we've used on this, that the TIF is necessary to 46 11/19/03 - WHOLE - BILL 030663 make the project go forward.

I understand that, we can get into that. But why don't we get a number here?

Point of information.

The Chair recognizes Councilman Goode for a point of information.

It's a follow-up to what Councilman Nutter is saying. At what point do you decide to use the Tax Increment Financing mechanism as opposed to some other form of public subsidy? Particularly since you haven't even gone to the state yet, don't know what type of flexible funding they may be able to offer.

Generally speaking, when a project comes into PIDC, obviously, we take a look at the project and we look at our various -- we identify whether or not we believe there's a financing gap. And if there is a financing gap, we look at what sources of funds we have to close that gap. And we would 47 11/19/03 - WHOLE - BILL 030663 view a TIF as the last one we look at.

When you have a 4 million or 6.4 million gap? 5

Actually there's a much larger gap. I don't suggest this is an easy project. This is a tough project. We started out with the goal of preserving the theater. To get back to Councilman Nutter's point, we didn't do a scenario and don't have a comparison that says, let's tear the theater down and allow the Goldenberg to build within zoning. The gap is actually --

Mr. Cuorato, now don't -- I mean, we're having a relatively civil conversation here. I mean, I don't necessarily know that we need to go to the extreme to try to scare anybody. And I know the developer is very serious and took out the permit and all that, but if we're just going to go to the hard baseline of it's this or nothing, that's a tough conversation.

Councilman, I was only responding to your question as to whether or 48 11/19/03 - WHOLE - BILL 030663 not we had done an analysis or scenario that looked at could there be any development there for the next years. 5

And the answer 6 is? 7

No. 8

Why? 9

Because our goal for 10 this project was to preserve the theater and 11 come up with a use that we thought would be 12 economically viable and successful. 13

And is this the 14 only possible use of this building at that 15 particular location? It's the only thing that 16 we can do? 17

Councilman, I will 18 defer to Leslie on this, but I personally am 19 aware of at least three different attempts 20 that they made to come up with plans for an economically viable reuse of the Sam Eric Theater, and is the only one that has come close to working.

What were the others? 49 11/19/03 - WHOLE - BILL 030663

Historically, the Goldenberg Group has been working on this project almost since the time of acquisition in 1998. Our original approach at this was with the Needer Landers (ph). I believe it was in 1999 or the beginning of 2000. And we did approach the City and we approached the Mayor at that time, Mayor Rendell, and we were met with, obviously, opposition at that point because the focus of attention was the Avenue of the Arts. Obviously, based on the size of this venue, being that it is a 2400-seat theater, we have all acknowledged and accepted the fact that this is not suitable any longer for movies, for first-run movies; it just does not draw those type of numbers and it cannot sustain itself. That's why when Regal Entertainment acquired United Artist they ultimately decided to vacate the premises. So with all this analysis and attending all kinds of conferences and seminars across the nation, and I believe that my learning curve in this industry has been 50 11/19/03 - WHOLE - BILL 030663 significant based on my having to work on this project, that changing this into a live entertainment venue is its only practical use at this point. Other than that, we would have to demolish the building.

The Sam Eric was in its time -- how many theaters were actually in the Sam Eric? I mean, originally, I guess it was one big space. And then was it subsequently chopped up into four or five screens?

It actually was not, Councilman. The actual address 1908-1910 is the main theater which is 2400 seats. In the 1980s they added three additional small theaters, 1912, 1916, and 1918 to be able to compete with the multiplex phenomena. Those actual theaters seat 333 per theater. And that's where you have the additional three theaters. But the actual main theater has never been broken up or it's original construction has never been impacted.

Just a last question on the theater issue. How do the 51 11/19/03 - WHOLE - BILL 030663 other -- some are independent, but how do some of the other movie theater venues in the City function and survive, whether it's Ritz -- in a variety of theaters they have or even that little small one off of Second Street between -- is it Chestnut and Walnut where the garage is there? I used to go to movies a long time ago. I don't get out much now. It's a world of DVDs. DVDs are wonderful, 5.1 home theater.

Madam Chair, if I may.

The Chair recognizes Councilman Ortiz.

You have made quite a few statements, and I want to know where you get the conclusions that you come to in terms of the aspect of theaters and the availability of theater and the ability of new theaters to be able to be profitable up in Chestnut or be in Penn's Landing. Because we've seen many projects come through here that have definitely been based at its core 52 11/19/03 - WHOLE - BILL 030663 that with the cine-plex involved within, you had one that Earvin Johnson, Magic, was going to do in North Philly. You had the Simon and so on. So there is, obviously, a grouping of people, a constituency, a market out there for more theaters in the City. And now you say that you have numbers that prove that that would not be competitive up on 19th and Chestnut. And I just would want to know just where you base it from and do you have that economic impact study in writing and if you can make that available to us?

Sure. First, if I can distinguish between the two, there is a distinct difference between movie theaters and live entertainment. We have seen over the years a strain on movie theaters because the world of DVDs that Councilman Nutter has mentioned. But what we are focused on at 19th and Chestnut is the live entertainment component or aspect of the entertainment --

You made a statement before, though, that you've come to the conclusion that it would not be profitable 53 11/19/03 - WHOLE - BILL 030663 to have a theater at Sam Eric because the market wasn't there. However, we have had proposals presented to this Council over the years in which cene-plexes where the core that was going to be developed and everything was going to developed around it. So those two statements about whether there's a market are contradictory. In one, the City comes before us, says, "we need a TIF for building the cene-plex." You come before us and say there is no market for a cene-plex up at 19th and Chestnut.

Point of information for Councilman Cohen.

The Law and Government Committee was scheduled to meet at 3 o'clock today. It's already almost 3:30. There were some witnesses coming that came out of town. We promised them they would be heard promptly so they get back to their original area. I was wondering if it was possible to postpone this for a brief time, at least to have those witnesses heard? It's going to be very difficult to reschedule it. This is a 54 11/19/03 - WHOLE - BILL 030663 hearing on the campaign bills.

We've had a number of people also waiting from the list that I see before me.

This is just the first set of witnesses and apparently there are going to be many more on this bill. Many Councilmembers have not been heard on the Sam Eric.

Councilman Cohen, are you asking that we recess so that on your Committee only the people that are from out of town could testify?

Yes.

And then you would continue your hearing so that we go back to our hearing? Councilman Clarke.

Point of information, Madam President. Madam President, I have to think that the campaign finance bills, that particular hearing will be at least as lively as this one, if not more so. To suggest somehow there was going to be 55 11/19/03 - WHOLE - BILL 030663 limited discussion on two bills, looking at the press box over there, I anticipate that there will be a substantial amount of discussion. I understand that my good friends in the press box love culture, but I have to think that some of their interest lies within the campaign finance bills. So frankly speaking, I don't think that that particular hearing could be done in or minutes. 11

I would 12 agree. 13 I think we ought to go on, please. 14 Councilman Nutter, do you mind if we 15 recognize some Councilmembers on the first 16 go-around and then we can come back to you if 17 you have other questions? 18

Madam President, 19 I would never mind that; you know that. But 20 if you would let me ask one question, I'll go away for a while.

Okay. That is a promise, is it not? (Laughter.)

Well, Madam 56 11/19/03 - WHOLE - BILL 030663 President, that was a political promise. (Laughter.)

Subject to change at any time. The question is, we're having a money discussion which, you know, at the end of day I always like having a money discussion. Not that I have any, but I do love money. Your partner is Clear Channel; is that my understanding?

That is correct.

The issue here is how do we save the building and have another use? And you could generally ask the question why does it have to be a theater, but I'll torture you with that later. Clear Channel in a press release from their website on November 4th today reports results from its third quarter and its September 30, 2003. The company's reported revenues of $2.5 billion for the third quarter increased 9 percent over 2002 revenues of 2.3 billion. 57 11/19/03 - WHOLE - BILL 030663 They're obviously in for a fair amount already. And I don't mean to spend other people's money, but we're here trying to deal with the public's money. So I guess what I don't understand is if they're already at 7 and given the size, apparently, of this 8 company and they believe in the project so 9 deeply they have a variety of 10 entertainment-related talent that they, I 11 guess, utilize and place in the facilities that they run and operate, why don't they fill the gap? Why is the government being asked to fill this gap? I mean, we should be borrowing money from them. Their revenues outstrip ours about four times.

Councilman Nutter, if you would not mind, I'd like to defer David Anderson who is here from Clear Channel who could answer that question himself.

I think the young lady gets the award for the smoothest handoff I ever seen in the Olympics. It was very smooth.

Is Mr. Anderson 58 11/19/03 - WHOLE - BILL 030663 in the room?

Yes.

Please identify yourself for the record.

I am that Mr. Anderson. My name is David Anderson and I am the President of the Theater Management Division of Clear Channel Entertainment. I did not bring my checkbook, I'm afraid to tell you. We are a very eager investor in public assembly facilities around the country. From the theatrical standpoint, we currently operate and we are in the development 16 process construction of two other major projects, one in Baltimore and one in Boston. We do contribute significant amounts of our own capital to those projects. But invariably, the cost of the construction, the renovation, the restoration, whatever level of new theaters is going to result in far outstrips the ability of a commercial developer or commercial operator to justify it as an investment. We are a public company. 59 11/19/03 - WHOLE - BILL 030663 We have an obligation to our shareholders. I hope many of you are shareholders.

We probably can't afford to be.

You listen to the radio stations, though, so you're customers of Clear Channel and we're all grateful. There is a very practical criterion for return on investment. And an $11 million investment by Clear Channel is a very significant commitment on our part to the Philadelphia market and to the development of this particular project. We're proud of our ability to write that kind of a check, but there is a point beyond which the economics of a theater project are more expensive than what the return that a commercial company like Clear Channel can, in fact, justify. The theater in Baltimore, the project in Baltimore that is actually set to open in February, it's been almost five years in development now. Really, when you go through the process from the very beginning, it's almost 10 years in development. It's 60 11/19/03 - WHOLE - BILL 030663 about a $65 million project. Clear Channel has invested almost $10 million of that 65. The balance is coming from state, county, city and local not-for-profit investment as well as federal historic tax credits. It is a public private partnership in the truest sense. The market in Baltimore, we expect to sustain the investment that Clear Channel is putting into that project. Likewise, in Philadelphia, the public private partnership is an integral part of the financing plan. And without the commitment from the public sector to go along side of the investment that Clear Channel is making, not only in up-front money, but assurances that there is never going to be a request for subsidy for operating expenses as we move on down the road, those commitments by Clear Channel in combination with the public sector, the State and the City, I think are a winning project for all of us.

Okay. You'll be able to answer some other questions. Thank you, Madam President. 61 11/19/03 - WHOLE - BILL 030663

You're welcome. The Chair recognizes Councilwoman Brown.

Thank you, Madam President. Mr. Cuorato, good afternoon. My question is actually a follow-up to Councilman Nutter's question regarding our School District because I don't think I heard an answer. And if we would replay this afternoon, you mentioned that you disputed a number of assertions in Mr. Saidel's letter. If we look to Paragraph No. 3 which says, "Despite this increase in local public money requested in the Project Plan and decline in tax revenue, that will accrue to the School District and the City," can you state for the record what the impact of this transaction will have on the School District? I don't recall hearing an answer to that.

A couple of things --

Please identify yourself for the record. 62 11/19/03 - WHOLE - BILL 030663

My name is Sam Rhoads. The change to which the Controller is referring to in the November 19th letter does not impact -- there is no change to the impact to the benefit to the School District of the change. In terms of your underlying question, what is the benefit to the School District, we project that the School District will net $4.2 million over years as a 12 result of this project and that that 13 represents a net gain over what they would 14 otherwise get of 2.8 million net new dollars 15 to the School District. 16

You're 17 referring to of your testimony, 18 correct? 19

of the Project 20 Plan.

Now, you mentioned this new phenomena called TIFing. If that happens, will that have an additional negative or positive impact on the anticipated revenues to the School District? 63 11/19/03 - WHOLE - BILL 030663 You mentioned TIFing of amusement taxes, which is a new phenomena since I've been here. So will there be any impact on the School District should that come to pass?

No, there will be no 7 effect on School District revenues.

Could this possibly increase the revenues to the School District should the State approve this?

No portion of the amusement tax goes to the School District.

Thank you. Thank you, Madam President.

You're welcome. The Chair recognizes Councilwoman Tasco.

Good afternoon. of the Project Plan, just for the record, I'd like for you walk me through and explain to me the tax revenues. Where it says, "Real estate taxes assume a base market value for real estate tax assessment..." blah, blah, blah, and you have a base line. All of 64 11/19/03 - WHOLE - BILL 030663 the real estate will -- explain that to me. Explain the bottom of of the Project Plan.

All we're trying to establish is that currently the market value of the district for tax purposes is two and a half million dollars. We expect that after the substantial investment in renovation and expansion of the building that the market value of that project will be $13.8 million. So all we're doing is describing the increase to the market value of that project as a result of the investment.

And the two million would still go to the School District?

That's correct. The base value of that, the taxes associated with that two and a half million dollars would continue to be split as they are today between the School District and the City General Fund. The City General Fund plus or minus 45 percent of the real estate tax, and the School District gets plus or minus 55 percent.

I guess my 65 11/19/03 - WHOLE - BILL 030663 question is, as a result of the project, there will be no increase to the School District?

Not from real estate taxes. The increase to the School District will come from use and occupancy taxes, which there are currently no use and occupancy taxes paid on the project. So what Council is being asked to approve here is a pledge of 50 percent of the use and occupancy taxes towards this project so the School District will get the other 50 percent. Those are net new revenues to them. In addition, liquor will be sold in the theater and what's called liquor by the drink tax is pledged to the School District and they will get those net new revenues. So those net new revenues in addition to continuing to collect what they collect today from the vacant building adds up to the $4.2 million.

Okay. So if the building were -- I thought it was a historic building, but I understand that it can now be demolished?

It is currently not 66 11/19/03 - WHOLE - BILL 030663 locally designated, so it could be demolished, yes.

If we don't have anything there, we don't get anything, right?

Correct

Nothing, we get nothing.

Correct.

So after 12 years, all of the taxes and all of the sales 13 tax and all the taxes that you would dedicate 14 to the TIF loan would go to the School 15 District or go to the City. 16

That would be right. 17 When the TIF District terminates, all of it 18 would go to the General Fund, into the School 19 District, or sooner should the TIF note burn 20 off early, which is possible.

Now, what happens -- I know there are a number of partners in this project. What happens if they decide to pull out of this deal? Who is held responsible for the TIF repayment? Does 67 11/19/03 - WHOLE - BILL 030663 it follow the -- is the TIF the building or the TIF the developer. Who pays if something happens to this developer?

Ultimately, the responsibility would go to the owner of the building.

So the new owner?

Correct.

So when you negotiate a sale, all the responsibility and obligation is transferred to the new owner?

Correct.

Is there any point where we're ever left holding the bag?

No, Councilwoman.

I note we have gotten some letters of concern about the competition of the venue. Would you not be concerned about competition also? Are all of our theaters in the area thriving to the point that we need another production facility?

Those concerns have been expressed to the Goldenberg Group, and 68 11/19/03 - WHOLE - BILL 030663 that is one of the reasons why we had Econsult Corporation do an impact study in reference to this project and how it would affect existing theaters. Based upon the findings of that report, as well as actual conversations with other operators, we feel as if this will not negatively impact on existing theaters, that the existing demand can support it and that it will actually enhance and help the performing arts community to grow and will also help the City to continue its actual initiative to become a destination City. There are people here that are willing and able to testify on how these type distinct venues, these historical theaters after being renovated and restored have served dynamic impacts and effects on existing performing arts communities as well as the economic revitalization and development in the areas in which they sit.

And one last question for me. Would you maintain the decor? I believe it's the art deco that is so 69 11/19/03 - WHOLE - BILL 030663 passionately felt by the supporters?

If we didn't, I think Howard Hass would personally slay me. (Laughter.)

But, yes, part of our funding is actually historical tax credits, and there are certain standards that we have to withhold that are set by the Department of Interiors and the National Park Service. And based on those standards, we have to do a certain level of restoration to be able to achieve that funding. So it is our absolute goal to be able to do a full restoration and renovation and maintain all of the art deco glory that originally existed in the theater. We have a dynamic team of people that have come down and are ready to work on this project, esteemed people like Evergreen Studios that does conservation and restoration projects across the nation in regards to paint restoration. We have architects that are well versed on this type of restoration projects. And Keiss, Strong, Colidner (ph), which is actually the original architects that prepared 70 11/19/03 - WHOLE - BILL 030663 the application for the Federal Historic Tax District is preparing our application for those tax credits. So, yes, it is absolutely our goal and objective.

Just as an aside, I had my first date with my first husband at that theater years ago. (Laughter.)

Thank you, Madam President.

The Chair recognizes Councilman Rizzo.

Thank you, Madam President. I have a question for Mr. Cuorato. I believe I understand it's a very basic issue, but I think for the record it's important. The TIF itself and the use change, if any use change would occur, the TIF is basically canceled; is that correct? Could you just for the record state if, in fact, the TIF is implemented, what exactly would happen if the developer would 71 11/19/03 - WHOLE - BILL 030663 decide to shift gears and do something different than the TIF would authorize?

Councilman, just so I understand your question, it's if the developer changes the use of the property?

Let's say the TIF is granted. Three or four months from now the project doesn't become exactly what we had in mind here. What happens to the TIF?

Councilman, the TIF agreement specifies the use so that will be agreed to up front by the City and the developer, so no change would be permitted.

In other words, it's a black-and-white issue? In other words, if it deviates even a little bit from what is presented, it is --

It will not be permitted.

Okay. Thank you. Thank you, Madam President.

You're welcome. The Chair recognizes Councilman 72 11/19/03 - WHOLE - BILL 030663 Clarke.

Thank you, Madam President. Good afternoon. I just wanted to follow-up on a question by Councilwoman Tasco with respect to this particular venue, the need to have additional venues. Can you briefly go through some of the other comparable municipalities and the number of like type of theaters or operations that they have? Obviously, we know what's going on in New York, but some of the other municipalities that you wouldn't ordinarily think that there were these types of venues. Can you just briefly run through those? Tell us where we are as a City.

I would like to be very -- I don't know what Councilman Nutter said, but I'd like to pass this off also. We have people here that are much more well versed in that than I think either myself or Mr. Cuorato. So I would like to recognize, if I can, Craig Morrison or Adrian Fine from the National Trust who I think can speak to that. 73 11/19/03 - WHOLE - BILL 030663

Just so we understand your question, because I think Leslie and I may have had a different understanding. Were you talking about situations in other cities where renovations such as this --

No, no. 8 Existing venues. Some of the residents and actually some of the constituents that I represent had some concerns about another theater coming in and the competitive nature of that theater. And I would just like to get a sense of other municipalities, how many they have, where Philadelphia ranks within those top ten municipalities.

I understand. Councilman, I just respectfully will just modify Leslie's comment. I think that David Anderson from Clear Channel is best able to answer that, because they have experience in so many other cities.

Whoever you need at the table is fine with me.

Mr. Anderson, again, I would ask you to identify 74 11/19/03 - WHOLE - BILL 030663 yourself, please.

My name is David Anderson and I am with Clear Channel's Theater Management Division. I just did a little bit of quick comparison again. We run theaters in cities. We have theaters. Several of 8 them are in major cities like Philadelphia 9 with a significant number of competitive 10 venues. 11 For example, in the City of Boston 12 there are currently five theaters that -- 13 there's lots of different ways to categorize 14 them, but for the purpose of this comparison, 15 I'm talking about theaters that are capable of 16 hosting touring Broadway attractions. So this doesn't count a theater that is a local theater, resident company. It doesn't count a venue that is exclusively a symphony hall, but a theater that's a multi-purpose venue that is capable of hosting touring Broadway. The City of Boston currently has five such venues. And when the Opera House opens in July of this coming year, it will have six. 75 11/19/03 - WHOLE - BILL 030663 In Cleveland, with Playhouse Square Foundation and two other theaters that surround Playhouse Square, there are six venues that are capable and actively do present touring Broadway as well as a wide range of performing arts attractions. In Minneapolis, St Paul, which is a far smaller market than Philadelphia, there are five venues that host touring Broadway, dance, and local and regional performing arts. The City of Houston has four, including one that they just opened about a year and a half ago after having spent $90 million, and they are already at the point where there are not enough venues, there are not enough dates and they're looking to how they're going to solve that problem as they move forward. Dallas, Fort Worth, the regional market has five theaters. Washington D.C. has seven venues that are in the same comparable category of multipurpose performing arts venues capable of hosting touring attractions. 76 11/19/03 - WHOLE - BILL 030663 And the City of Chicago has and eight. Philadelphia has currently three that fall into the same category. Again, if you start adding smaller theaters or specifically symphony theaters -- that doesn't count the Kimmel Center, for example. But it has three that are in this same category.

At the end of the day, we're pretty low on the list.

Way, way below what you would expect a market of this size to be able to tolerate and to be able to encourage.

Councilman Goode, you want to be recognized?

Thank you, Madam Chair. Just a point of information. Are all those venues public/private partnerships?

No, certainly not. Not all of them. Many of them are. Chicago, for example --

What percentage of them are public/private partnerships? Because you're here asking for the use of 77 11/19/03 - WHOLE - BILL 030663 public tax dollars, so I'm not sure how relevant it is particularly if you're saying we're nowhere near the saturation point in terms of the market. Wouldn't the market definitely be able to support this in terms of public/private financing then?

Well, the City of Houston who just developed the new Hobby Center currently sustains its existing performing arts facilities with a subsidy of almost $3 million a year. So --

I'm talking about in terms of development of the sites.

The City was a partner in the development of the Hobby Center along with the local not-for-profits

Out of all of the different venues you named, you can't tell me how many of them are public/private partnerships?

I could, given some time. I can't tell you off the top of my head.

Can you tell me 78 11/19/03 - WHOLE - BILL 030663 of your knowledge of those venues how many sought out philanthropic support before they came for public tax dollars?

My most recent experience in Baltimore, it was all done simultaneously, the state, the city, the philanthropic community, and the for-profit community all came together.

How many of them utilized Tax Increment Financing?

You know what? That's a good question. I don't know.

How many of them determined the level of local public subsidy even before they sought out philanthropic support?

Oh, I think most of them do that. The philanthropic support typically comes at the end because the private developer --

Well, according to Mr. Rhoads, the TIF financing comes at the end, the TIF mechanism comes at the end.

When you're looking 79 11/19/03 - WHOLE - BILL 030663 to raise private funds, when you're going to wealthy foundations or corporations or private individuals, they typically want to know that the money that they're putting there is going to be -- it's part of the project that's going to happen.

This project is already going to be supported potentially by HUD 108 dollars, potentially by state dollars. Before there would be the use of Tax Increment Financing, wouldn't you seek out philanthropic support first? In the end, I'm really trying to figure why this is a public/private partnership and does it have to be a public/private partnership?

My experience around the country in doing this is that very few ever work without significant public sector support.

See, you can't have it both ways. You can't say that the market in Philadelphia, the greater Philadelphia region is nowhere near saturated 80 11/19/03 - WHOLE - BILL 030663 and then at the same time say that you're at the point where you need public support this early. You can't have it both ways.

What I can tell you is that performing arts in general is not like professional sports.

Why not just knock it down?

Why not knock it down?

And develop something else?

I don't own it.

So you were essentially asked for your portion of the money, not necessarily asked on how the deal should be structured?

My business is performing arts venues, it is saving, restoring, redeveloping and operating multipurpose performing arts theaters. Of the 16 that operate, 14 are historic movie palaces that have been reclaimed. It is a very important part of our past. 81 11/19/03 - WHOLE - BILL 030663

You would agree then if the answer to the question of why not knock it down is for the preservation of a cultural site that if we sought out philanthropic support early on, we might be able to answer Councilman Nutter's question of how much money the School District would have over the next years. 10

I think it's not a 11 fair question. I can't tell you what the 12 not-for-profit philanthropic support for such 13 a project would be. I don't know -- 14

Yet you can say 15 that we should be taking money away from 16 school children over the next 20 years or else 17 the project won't happen. 18

I'm the wrong person 19 to answer those questions. 20

Madam Chair, if I may, point of information.

Councilman Ortiz.

Mr. Anderson, that's your name, right? 82 11/19/03 - WHOLE - BILL 030663

Yes, sir.

You represent Clear Channel, right?

Yes, sir.

What's your position at Clear Channel?

I run the Theater Management Division of Clear Channel Theatrical.

What's your title?

I'm the President of the Theater Management Division.

And Councilman Nutter said that in the quarter you had earnings of $2.5 billion?

Most of that's radio. That's way beyond my knowledge.

But that's Clear Channel?

The corporation, absolutely.

Because I keep hearing the word philanthropic here, and 83 11/19/03 - WHOLE - BILL 030663 you're not a philanthropic institution, are you?

We are making an investment, a capital investment in a business venture.

And what are your projected profits over the extent of the deal?

What are my projections?

Yes. What are your projected profits out of this deal?

I'm not in a position to go into detail on that, but I can tell you that we have a very strict criterion for return on investment. And we're making an $11 million investment in this project.

So what is that criteria? Can you let us know what -- because, obviously, within that criteria, you have to have some understanding or some idea of how much return you're going to get on that and the stockholders are going to get on that $11 million; is that not so?

Absolutely. 84 11/19/03 - WHOLE - BILL 030663

So can you give us an idea of when you sit down and you say, you know, this is project here that we can get the State to give so much, the City to give so much, and we can and the stockholders in the company can come away or the project of the year with so much profit? You must have that.

I have a projection --

So can you --

What difference does it make in this discussion?

It's because it's taxpayers' money. You see, capitalism is fantastic when you can use the City's and taxpayers' money to make the profits. It's good and I'm not against it. But I just want to know -- what does it have to do? It has to do that City taxpayers, the School Board, the state monies and so on are all coming out of the citizens of Philadelphia and Pennsylvania. The word philanthropic is getting thrown around as if this is a philanthropic thing that you guys are doing. And I just want to 85 11/19/03 - WHOLE - BILL 030663 know -- and I want to see it. I want to see before a vote is taken on this what your projections are and how you came -- that criteria you say that you have before you make an investment of this sort. Because we're all here for historical preservation and we don't want that theater to be torn down. But we've also got to see how much of the city taxpayers' or state taxpayers' money is also involved in it and what the return of investment is going to be from this side of the ledger. So I want to know what your criteria is and what your projections are. And if you don't have them now, you can get them to us.

I don't have them with me.

If I may interject. The final conclusion in regard to that is based upon the criterion that they've established as a corporate company. We have come to a negotiated agreement as to what, based on their projections, they can commit to this project. In addition -- and I know that 86 11/19/03 - WHOLE - BILL 030663 $11 million is a number that everyone has in their mind -- they have also committed to purchasing the federal tax credits. They have also committed to covering any cost overruns that we might incur.

Excuse me. They're committed to purchasing federal tax credits? I don't understand that. You purchase, you go to the federal government, you say, "I want to buy so many tax credits"?

No. In this particular project, we qualify for federal tax credits because --

So the federal government gives you federal tax credits that you don't pay taxes to the federal government on your investment. So it's again the government and the taxpayers giving you more on investment than your overall investment.

In addition to that though -- but that's not actually --

But, you see, you've got to use language correctly. You don't purchase federal tax credits. 87 11/19/03 - WHOLE - BILL 030663

They will be, and in essence it is a purchase transaction of tax credits.

The federal government gives you some tax credits for an investment that you're going to make in a certain urban area.

That would be the tax deduction. But tax credits are structured a little bit differently.

We know what tax credits are. We pass bills here to give people to come in to get tax credits for creating jobs in different neighborhoods.

In this particular instance, we could sell those tax credits to another entity. But Clear Channel is committed to putting in that additional to do that.

Excuse me. Excuse me, please. I believe Councilman Clarke is asking for a point of information.

Thank you, Madam President. Madam President, I just wanted to 88 11/19/03 - WHOLE - BILL 030663 get back into my questioning before I forget what the second question was going to be.

Before you get back into your questioning, as long as Mr. Anderson is at the table, I'm just rather curious, and I know it won't take him more than two seconds to respond to my question. You said in Philadelphia we have only three theaters that would be comparable to what the other cities presently have?

Comparable to what the Boyd would be.

What are the three that you're referring to?

I've included the Merriam, the Forrest, and the Academy of Music.

How about the Kimmel Center?

The Kimmel Center doesn't host touring Broadway. It is a concert hall. It's a beautiful facility, but it's a symphony hall.

The Walnut 89 11/19/03 - WHOLE - BILL 030663 Theater?

Is smaller than the level that I drew the line at. If you're going to include theaters like the Walnut Street Theater, there are many more theaters like that in Boston and in Chicago and in other markets as well. I tried to draw the line at -- I think I probably used the 1500 seat up to 4,000 seats, which includes things like the Wang Center in Boston, the Colonial Theater in Boston. In Chicago, it's the Area Crown and the Opera House and the Auditorium Theater. We tried to come up with --

Thank you. I was just curious of the three that you were referring to. Thank you. The Chair recognizes Councilman Clarke.

Thank you, Madam President. A couple of brief questions. One, I wanted to go over the chronological order of the discussion with the City Controller, and subsequent to that, the issuance of this most 90 11/19/03 - WHOLE - BILL 030663 recent letter as of today.

In terms of when we circulated the Project Plan and the ordinances introduced, we also circulated to the Office of the Controller for their review, as well as to the Finance Director and the Revenue Department of the City of Philadelphia. So we provided it to them and arranged for -- give them some time to review it and set up subsequent meetings to discuss any questions or concerns they had. So that's all unfolded over the last 30 days.

And the most recent discussion was a week ago?

Yes, I believe we spoke with them towards the end of last week.

Was that prior to or subsequent to any change in the Project Plan, the most recent change in the Project Plan?

The final changes to the Project Plan were made on and circulated to City Council and the School District on Monday, so it was prior to that. 91 11/19/03 - WHOLE - BILL 030663

Monday as in this past Monday?

That's right.

One last issue. With respect to the community component about the decision-making process as it relates to the use of this particular site -- and I'll probably need Ms. Smallwood. I just wanted to briefly talk about my knowledge of the community component and the determination as to the ultimate use of the site. I recall, I believe it was in 1998, there was an earlier proposal as a supermarket. What exact was it, it was a supermarket and there was rather lengthy discussions about that with community and then there were other ideas that were raised and there were lengthy discussions with the community. And ultimately at the time of this request for demolition permit, there were lengthy and somewhat boisterous discussions with the community about that proposal. Can you just kind of walk me through the people that you talked to, the level of 92 11/19/03 - WHOLE - BILL 030663 outreach to residents and how you came to the conclusion, other than the financial aspect of the project, but in terms of the use and what the particular community of interest -- not necessarily just in that particular area, but because of the preservationists' interest and other entities, can you just kind of briefly tell me about that?

Yes. May of 2002 when Regal Entertainment decided to close the doors, there was a significant public outcry in regards to saving this theater. And Howard Hass actually was leading the way in starting the Save the Sam Eric non-profit organization with its mission to make sure that this building continue standing and that it would be restored and renovated and used some type of multi-entertainment purpose. I have made great strides to keep in the loop Howard Hass and we have kept the lines of communication very open and he is very connected with the historic community as well as the community in which he lives. He lives in Center City, and he has given me his 93 11/19/03 - WHOLE - BILL 030663 basic stamp of approval as to this project. He is here today, and I would like, if I can, defer to him for a moment so that he can speak better to that.

We have a list of witnesses, and Mr. Hass will be called at the appropriate time. Thank you.

But we have made efforts to make sure that we have reached out to the community. I've made presentations to the William Penn House. I've made presentations to the performing arts community. I've made presentations to their Board. I have also met with the Cultural Alliance. We have made a concerted effort to try to involve everyone in the community, especially the preservation community to make sure that we are doing exactly what the public was asking of us and what we promised the public. And that's what brings us here today. But in order to accomplish that, it takes a public/private partnership, not only in this theater, but this is how it's been 94 11/19/03 - WHOLE - BILL 030663 constructed in theaters nationwide. And it really does take that partnership to make this actually happen.

Thank you. Thank you, Madam President.

You're welcome. The Chair recognizes Councilman Cohen.

Thank you, Madam President. I was going to remark in response to the young woman's fine statements that the trouble is the public's pockets usually get picked. For example, with this advantage of a long life is you see things turn around. It used to be when I first came into Council we worried about the public purse, and government always took the position that we're not going to commit any money until business really shows it's committing the money. Now it's the other way around. From Mr. Anderson I learned that a public corporation consisting of private monies is not ready to make an 95 11/19/03 - WHOLE - BILL 030663 investment unless it's sure public money is going to be there. So public money now has become the means of prospecting, the means of investing. If you're going to run a risk, take it with public money, not private money, as the Daily News indicated today about Disney Quest. I remember all the funny costumes that Governor then Mayor Rendell wore in support of Disney Quest. He would come in City Hall dressed in all funny man's clothing to advertise Disney Quest. Today, I learn what appears to be, at least part of the cost, the City is hooked for 44 million. There's no 16 indication that Disney Quest has been hooked for anything. And I don't even know whether that 44 million includes the cost of the beautiful underground garage that can handle some hundreds of cars at Eighth and Market which has now been covered over because there is no Disney Quest. And Disney just felt -- and I guess the business has to survive -- felt it didn't have enough support or for some reason its interest was elsewhere. 96 11/19/03 - WHOLE - BILL 030663 I think that's a wrong twist. I think public money, tax money, is sacred money and it ought to go back to the way it was. " But business seems to move in the other direction these days. It doesn't want to take any chances but it wants to get the same kind of profits it would get if it took chances. And I don't think that's the way it ought to be. I think this development ought to go forward only if business is committed to it fully. And then if a little help is needed, then maybe there's room for some public help. But to build a structure and a proposal like this with about one third of the money, probably before it's done, probably half the money coming from public sources, and I suspect its half already, isn't it, with the State as well as the City? We're only being asked about City money. " And that's the wrong way to go. We have a lot of problems with your proposal because a TIF is presented to us basically as a loan to be repaid over 7 years; is that not so? 8 And it's weighted heavily on the 9 repayment coming from gross receipts and other 10 forms of taxes. We have a Tax Reform 11 Commission. I happen generally to disagree 12 with it, but in any point of view, the 13 business privilege tax and the gross receipts 14 tax are under serious question. The Tax 15 Reform Commission and I think the Mayor of the 16 City has spoken out on the need of repeal for 17 those taxes. 18 So I think, first, we're not talking 19 about a loan at all; we're talking about a 20 gift. And that gift will go to a lost investment if Clear Sound or the Goldenberg Group at any time decides it's not in their best interest. Therefore, I'm going to vote in opposition to this proposal because I don't 98 11/19/03 - WHOLE - BILL 030663 think it's at all in the public interest. Sure, I think the Sam Eric ought to be saved. It is a historic treasure. We've had some before; we've lost them. The City has survived. Maybe not as well as it would have survived if they continued it. " It seems to me that we need a proposal here that concentrates on paying for itself, the way business presents most proposals when it doesn't involve government contribution.

And that's the reason I think that having seen what happened with Disney Quest and all the excitement that it caused in Philadelphia at the thought of having a Disney Quest focus right here in Center City -- it still seems to me to be a wonderful idea, but for some reason Disney Quest thought it was not as attractive as any other City. The only thing I can object to -- and I address this to you, Mr. Anderson. I 99 11/19/03 - WHOLE - BILL 030663 believe that's your name; I apologize if I have it wrong. It seems to me that business now moves in two ways. First, they force cities to compete with each other to compel the cities to give them a much better deal. And now today I heard this other proposal. Now we're being shamed by the fact we're not as good as other cities. These other cities that are only partly our size have many more theaters of appropriate size than we have. So if we're not being forced by competition to lower our standards, we're forced to contribute more because we're shamed into it. I don't think that's a direction to go. I would like to see a proposal in which business has confidence, which business says, "We're going to take the risk because that's what we're in business for. " Is Mr. Goldenberg here today?

He is not.

I would like to know why in late October he contributed to Mayor Street's campaign 160,000 or 165,000. 100 11/19/03 - WHOLE - BILL 030663 It seems to me clear that that was a totally improper gift because by that time you certainly must have been discussing the question of this program or project. Probably you've already had discussions with the Controller, with Mr. Cuorato, with other City developments. And I think that kind of a gift has to be explained away. I don't know what the percentage of return that is as an investment. You contribute $160,000 around October 20th when the Mayoral race seems to be locked into dead heat and then you come back for a good number of millions thereafter. The rate of return, it's a wonderful investment, campaign finance. And that's why in the next hearing that will be held today we're going to be discussing the bad effect of it. But I wish Mr. Goldenberg were here so he could tell us all about why he decided on that day to contribute other than the reason he gave to the Inquirer this morning, that he liked Mayor Street. I guess he doesn't like the Sam Eric because he was ready 101 11/19/03 - WHOLE - BILL 030663 to give Mayor Street what Mayor Street felt he needed, but he's not willing to give Sam Eric what the Sam Eric needs to be a private enterprise. So that, Madam President, the question I really had in mind was to find out who's going to suffer the loss. Will it be a repeat if Goldenberg Group or Clear Sound pulls out? Will it be a repeat of the Inquirer article today: City of Philadelphia loses certain millions of dollars investment? Or will it be that the Goldenberg Group has befits business that invests money? Sometimes you invest money; it doesn't work. But the rate of return on a campaign financed contribution, there's nothing like it, nothing that can smell as sweet or return as great a dividend as a campaign finance contribution. And I wish Mr. Goldenberg were here so that if he feels that charge is unfair, he could have an immediate chance to answer it. Thank you, Madam President.

You're welcome. 102 11/19/03 - WHOLE - BILL 030663 Councilman Nutter is next for questioning. I would just like to remind my colleagues that we do have a number of witnesses that would like to be heard. And we have also the other Committee that I know we have people here waiting for the other hearing. Councilman Nutter, please.

Thank you, Madam President. Mr. Cuorato, let me ask you about -- there's been a lot of discussion about other venues and the impact on those venues. Has there been a study conducted which indicates whether there are a lack of these types of entertainment venues in Philadelphia?

The developer had a study done that covered the market demand for performance venues in Philadelphia.

Is that the Econsult?

Yes, Councilman.

Was the purpose 103 11/19/03 - WHOLE - BILL 030663 of the study to determine whether or not the project would work or was the purpose of the study to determine that there was a lack of venues in the City?

The purpose of the study was to determine whether or not the market existed for another venue of this type, whether in fact we had reached a saturation point and another performance venue of this type would do nothing more than drain patrons from other facilities.

And I'm sorry, and I did ask you a question; I apologize. The gentleman from Clear Channel, his name is?

David Anderson.

David?

Yes.

Anderson?

Yes.

What I didn't understand in response to a question was I heard you talking -- and I heard you say it a couple times -- talking about three venues in Philadelphia. I actually, unfortunately, 104 11/19/03 - WHOLE - BILL 030663 don't recall what the question was; I only heard the answer. So what were you responding to?

I believe I was asked by Councilman Clarke to compare the inventory of comparable theaters in Philadelphia with other cities around the country. And I used as the criteria theaters of mid range, 1500 seats up to 3 to 4,000 seats that are capable of hosting touring Broadway and other performing arts attractions. And Philadelphia has three of those.

What are those?

They are the Forrest, the Merriam and the Academy of Music.

Now, what category do you put the Walnut Street Theater, Annenberg Center, the Mann Center, the Keswick, and the Kimmel? Are they not venues that have the same type of performances that you're talking about?

That's pretty much correct. The Mann is an outdoor facility, much larger. The Kimmel Center is primarily a 105 11/19/03 - WHOLE - BILL 030663 concert hall, and the other theaters are much smaller in seating capacity, audience capacity.

Let me just ask you a couple questions and see what your reaction is. I've been told that there are two venues with to 1800 seats, the Forrest and 10 the Merriam and that combined they are, I 11 guess in your language, dark, 40 to 50 weeks a 12 year; is that correct? 13

I can't speak for the 14 Forrest, but the Merriam is a theater that we 15 operate in conjunction with the University of 16 the Arts and the Theater League of Philadelphia. The Merriam is booked approximately 250 events a year, which when you consider that the summer is typically a very slow period of time is an incredibly busy venue. We've turned requests for use down frequently because we don't have available dates.

Now you operate theaters in Baltimore, Chicago, and Boston; is 106 11/19/03 - WHOLE - BILL 030663 that correct?

Among other cities. We operate in cities. 5

And are any of 6 those markets, from your estimation, 7 saturated? Or were any of those markets 8 saturated when you came? 9

I will tell you that 10 we made the case in both Baltimore and Boston 11 that there was still additional room for theater venues and, in fact, have contributed to the development of a new theater in each of those markets. In Chicago, when we came into the market, the theaters were already in existence. The most recent two had been added when the City introduced TIF legislation that funded a huge portion of both the Palace and the Ford Theaters in Chicago. I would tell you now that it will be a long time before there is a large theater that gets added to the Chicago inventory. But there are nine that are there now.

Now, Clear 107 11/19/03 - WHOLE - BILL 030663 Channel has a Live Entertainment Division; is that correct?

Yes.

And do you -- I don't want to use an inappropriate term -- either own or control talent for the live entertainment venues that you determine to some extent either how they're booked or where they're booked? How does that work?

I can really only speak from the theatrical standpoint. The largest segment of the entertainment division of Clear Channel is music, concerts and amphitheaters. In this market, Clear Channel operates the -- I guess it's Tweeter Center now, the amphitheater in Camden, and the Tower Theater here and I believe the TLA, the former Electric Factory Company is now a Clear Channel Entertainment subsidiary. But I have little involvement with them. I can't really speak to how they do their talent and talent buying. In the theatrical business, the touring productions that come through 108 11/19/03 - WHOLE - BILL 030663 Philadelphia and tour around the country are generally produced in New York by a wide range of producers, one of which is frequently Clear Channel or an investor amongst those productions. But to say that we control the entertainment and the product, that is definitely an exaggeration; that's not true.

Well, let me just ask a practical question. To the extent that you -- I mean, I don't know what the percentage might be, but if it's a significant number, in all likelihood if there is a Clear Channel talent under contract, is it more or less likely that you would book that talent into the entertainment venue that you are co-owner of versus some other venue?

Again, from a theatrical standpoint, there are no shows that I can think of where we have the controlling ability to make a decision like that that is counter to the best interest of the show.

Well, I wouldn't think you would do anything that's counter or not in the best interest of the show. I mean, 109 11/19/03 - WHOLE - BILL 030663 you might legitimately believe that your co-owned facility is the best place for the show to be.

If that's the case, then -- but the question I thought I heard you ask was whether or not we would put shows into a Clear Channel controlled venue without considerations. And we just do not do that.

Okay.

Point of information, Madam President.

The Chair recognizes Councilman Rizzo for a point of information.

If you've already addressed this, I apologize. Twenty-four hundred seats, not the venue for rock concerts, obviously. Is there going to be anything sprung on us -- you talk about Broadway shows. Two months after it opens, we start seeing concerts that empty out at two o'clock in the morning. Could you put on the record what you plan to do and not do there?

If you're familiar 110 11/19/03 - WHOLE - BILL 030663 with the programming at the Merriam which is of Avenue of the Arts, it is a wide range of diverse programming. It is performing arts, it is touring theater, it is music, it is comedy, it is local business meeting uses, corporate events. It's a wide range of activity, and we would envision a similar mix at Boyd if it were to be renovated and reopened. Preponderantly, touring Broadway, performing arts, the type of attraction that can use the expanded stage and the 2400 seat capacity. We would hope to do film premiers. We would hope to have an active film program because of the recent history of the Boyd as the Sam Eric. But I would tell you that music would be a small -- not nonexistent, but a small component of the programming. And the concerts that you're talking about wouldn't happen in this type venue.

My last question is, is this facility going to be able to be rented by a particular --

Anybody who wants to.