Cory Jacobson boasts of running a number of successful cinemas and believes the Beacon can be a success under his management.
PITTSFIELD, Mass. — It wasn't really a difficult decision. But it was a wildly unpopular one late Tuesday night when the City Council approved by an 8-2 margin to forgive some $2.5 million in debt to the Beacon Cinema in order to help facilitate a sale of the historic downtown building.
The former Kinnell and Kresge building was renovated in 2008 through a public-private partnership to the tune of $22.1 million. The financial package was specifically designed to take advantage of federal New Market Tax Credits, which brought in $7.7 million. To maximize the number of new market credits, the city agreed to bundle $1,050,000 in state and federal grants with $1.5 million from the General Electric Economic Development Funds as long-term loans.
The cinema was eyed as a keystone project to revitalize North Street. But, the business wasn't successful.
In September, a consortium of banks that had financed the project began the foreclosure process. Pheonix Theaters entered the picture and put forth an offer to buy the North Street anchor. But they wouldn't buy it with an unsustainable amount of debt on the books. The banks agreed to write-off close to $3 million of the debt and the city was asked to do the same to facilitate the deal.
On Tuesday, the city councilors had to decide whether to lose the city's investment in the project through a foreclosure, which would likely mean the building goes dark, the businesses there get displaced, downtown foot traffic is reduced, and be shut out of the future say on that property.
Or lose the city's investment by forgiving its debt by writing off the state and federal grants immediately and then forgive the final $1.5 million at 10 percent each year for the next decade to let Pheonix take over and keep a downtown theater alive for another decade.
"We have to look at the big picture. Do we want an empty theater in downtown Pittsfield and take the risk of making it a dead, dark area? What about the businesses around them? We have to care about them," said Councilor at Large Earl Persip, later adding, "The two options that are on the table, there is only one that makes sense."
The renovated building has served as the keystone to filling vacancies on the city's main drag. The Beacon, Barrington Stage, the Colonial Theatre, and the Berkshire Museum became the anchors of the new vision of the downtown crafted some 20 years ago and put into action a decade later.
For some of the councilors, the $1.5 million in economic development funds — a pool of money given to the city from General Electric after it left town — served its purpose by going to the Beacon. The cinema was the only awardee from that fund ever to have a payback provision — the other allocations to multiple businesses were either straight grants like to the Colonial Theatre or forgivable after 10 years like to LTI Smartglass.
With a clawback provision on the Beacon loans, Mayor Linda Tyer countered the Beacon's request to forgive all of the debt at once to facilitate a sale to Pheonix with having the $1.5 million be forgiven at 10 percent per year, to which the buyers have agreed.
"I think the benefits to the community is a brand-new renovated building in our downtown," Tyer said. "It is the leveraging of all of the other benefits that come along with this kind of capital investment and this kind of development in our downtown."
The building's renovation added to the tax base even with a tax increment funding package to ease the tax burden on the increased value created. Tyer said the building was valued at $306,000 in 2007 and now the building is valued at $1,071,400.
Its renovation triggered other investment in North Street, which 1Berkshire President Jonathan Butler outlined as being coffee shops, pubs, art exhibits, new office space, followed by a "second wave" of investment with Hotel on North and now more buildings being converted to market-rate housing as has been happening most recently in a number of downtown buildings.
"It brings more business activity, it brings bigger business activity," Butler said.
Bringing more people downtown was the focus of a 1997 master plan released by Downtown Pittsfield Inc. setting a new vision.
"In the last decade, there has been so much great change in downtown Pittsfield," said downtown businessman Steven Valenti.
David Renner opened the Marketplace Cafe in the Kinnell-Kresge and said now he's paid off his bank debt and is just now looking to reap the fruits of his labor — provided he wouldn't get kicked out through a foreclosure. It was the opening of the Beacon that led him to Pittsfield to open his second cafe and he urged the council to help keep it open for another decade.
Supporters of the theater cited that the cinema brought jobs with the Beacon being personally responsible for creating the full-time equivalent of 27 jobs — 12 full-time and 47 part-time.
And that is what many feared they were poised to lose should the property have gone dark.
Director of Community Development Deanna Ruffer said the proposal for the council still gives the city some type of leverage in the project.
The buyers are paying $644,000 for the property and assets and that $1.5 million on the books from the city will be the only stake in the building that remains — so the city won't be in the same position if the cinema looks to shut down a year from now. At that point, the city would be in a primary spot to reclaim the money whereas now, the city's loans are subordinate.
Pheonix Theaters officials were on hand to answer questions about how they would turn a profit after purchasing it from Richard Stanley. Berkshire Bank had hired Phoenix's consulting arm two years ago to do an analysis of the Beacon's operations once the new market credits were out of the picture and the finances weren't adding up. Phoenix put forward a report with a number of recommendations.
Phoenix owner Cory Jacobson said not all of his company's recommendations were followed. He compared it to baking, saying without all of the ingredients, the cake doesn't taste the same. Jacobson said Phoenix has a very successful track record raising revenues in theaters elsewhere and envisions the Beacon attracting some 200,000 people a year.
"This year business is up over 10 percent and our company is up over 10 percent," Jacobson said.
It was Pheonix that recommended the Beacon lower prices and install new seating. That led to the Beacon attracting a record 120,000 people in the last year. Before the new seating, the Beacon attracted some 86,000 people with more seats and higher prices.
Jacobson said emphasis must be made on the concession and getting as many people in the door as possible. He said he'd be expanding staff so it is easier for patrons to get concessions. He'd be opening earlier in the morning and staying open later at night.
"I would rather make sure the concession stand becomes the priority and not the ticket price," Jacobson said, saying he wants people to keep coming back and not treating the movies as infrequent events.
Pheonix officials said their financial modeling to turn a profit at the Beacon doesn't include the rental spaces available. The group said the building has suffered from a significant amount of deferred maintenance and would be looking to use tenant's lease money to make improvements. Chief Financial Officer Braden Alan said box office revenue has increased by 25 percent every time Pheonix took over a theater.
The City Council expressed confidence in Phoenix's ability to run the cinema. But the vote wasn't an easy one because of how vastly unpopular it is among constituents.
Councilor at Large Melissa Mazzeo was one of the two votes in opposition. Taking the floor for more than 45 minutes with lines of questioning to nearly all involved, Mazzeo voted against the forgiveness saying the city should be getting something back.
"We need something. We need some revenue back. We need a goodwill gesture," Mazzeo said.
She said the city is about to embark on a $74 million wastewater treatment center and just opened a brand-new $120 million high school, and that forgiving such a debt doesn't send a good message to the residents who are concerned about tax and fee increases. She is concerned that the debt forgiveness could set a precedent.
"The citizens didn't get to choose to do this, the powers that be and administrations before us made these decisions," Mazzeo said. "It is the wrong place at the wrong time for this to be happening."
Mazzeo also particularly felt rushed to make a decision. According to Stanley's attorney Michael MacDonald, the banks are looking to close out their books and be out of the picture completely by the end of the year. She said the writing was on the wall for years but it wasn't until Nov. 8 of this year that the City Council was brought into the fold. She said she would have liked to have had a seat at the table in negotiating an outcome.
Ward 2 Councilor Kevin Morandi, who prides himself on being a representative of his ward and voting as such, sided with Mazzeo in saying the residents of the city want to simply cut ties with the project altogether.
"It was a failure from the start. It shouldn't have been done. But it was done," Morandi said. "I don't like a lot of the things that have been done. I certainly heard a lot of negative things from my constituents."
Ward 4 Councilor Christopher Connell typically sides with Mazzeo and Morandi but didn't this time. He pushed the mayor to consider having Pheonix donate 10 percent of its net profits back to the Economic Development Fund or to extend the forgiveness to 15 years instead of 10 to get more out of the deal but received no traction.
"I will probably vote yes on this. I would have liked the city's and the residents' end to be sweetened a bit," Connell said.
He apologized to those in the community who wanted him to vote against it but said ultimately avoiding foreclosure was a better option.
"I'm sorry to those people who asked me not to vote for this, but I'm going to have to to keep this place going," Connell said.
Ward 5 Councilor Donna Todd Rivers found herself straddling the same issue. She voted in favor of the forgiveness but she struggled with explaining to her constituents why she took the vote. Ultimately, she believes that allowing Phoenix to take over is in the city's best interest.
Persip agreed that the vote wasn't going to be a popular one. But he believed his job as a councilor is to dig into the weeds of the issue and make the right decision, regardless of its popularity.
"We're all in a position and we don't like the position we are in," Persip said.
Ward 1 Councilor Helen Moon said voting in favor of the forgiveness is "the only rational decision" to make.
"The Beacon is in foreclosure and we will lose all of the investment the city put in. We would lose the jobs that were created. We would lose the community impact. There is a host of things we would lose if we voted down this order," Moon said. "For me, it is an easy vote to make."
The vote needed a super majority to pass. City Council President Peter Marchetti recused himself because he has a legal conflict of interest because of his full-time job at Pittsfield Cooperative Bank. It needed seven votes to pass and received eight.
After meeting for three and a half hours with the prospective buyers of the Beacon Cinema, at least five city councilors are on board with the mayor's proposal to forgive $1 million in loans immediately and $1.5 million over 10 years to help facilitate a sale. Pheonix Theatres is offering to purchase the former Kinnell and Kresge building on North Street and the assets of the Beacon Cinema. The group is planning to continue running a cinema out of the historic building and hopes to fill curr
It is a situation nobody wanted to happen, and one nobody really thought would happen given the way the movie industry was more than a decade ago. But now the City Council is asked to take the unpopular vote of forgiving the debt to save the cinema or to take the unpopular vote of letting the theater die.
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