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.
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.
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.
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?
I'm sorry, Councilman, if I may just ask your forbearance for one second.
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.
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.
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.
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?
When was your last conversation with the Controller, do you 28 11/19/03 - WHOLE - BILL 030663 recall?
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.
So this comes as some sort of a surprise, I guess, to you as well?
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.
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.
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?
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
And the others 7 are in some state of still discussion or 8 trying to move along or -- 9
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?
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.
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?
Madam Chair, could we try to make arrangements to have copies of the report given out to the Members?
And the breakdown on that is $11 million from Clear 36 11/19/03 - WHOLE - BILL 030663 Channel?
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?
Is that a part of the larger discussions going on in Harrisburg?
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.
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
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?
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.
A box. To name a named entity and then find that it ultimately ends up being a different affiliate.
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.
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?
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.
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.
I'm not sure that this is answering your question. The way the numbers are projected in the plan is it looks --
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?
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.
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
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.
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.
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?