Primarily citing increased construction costs, Plaza Theatre Foundation asking city for additional $20 million in funding

Faced with a $10 million gap between initial construction cost estimates and current bids to restore the city’s historic Plaza Theatre, the foundation managing the project has asked the city for an initial funding and repayment agreement totalling $20 million. The request will formally come before the City Council at its next regular meeting on Thursday.

The theater, located at 128 South Palm Canyon Dr., is a city-owned property that has been out of commission for several years. The Plaza Theatre Foundation, formed in 2021, has raised approximately $14.3 million to support renovation of the facility. The city had pledged an initial $2 million.

However, while initial estimates put the cost of the construction portion of the project at $16.5 million — and one of five bids for the work submitted earlier this year came close to that amount — that bid and another “contained significant errors in their accounting/costs,” according to city staff. The remaining three bids ranged from $26.3 million to $27 million, which staff said is more realistic.

While construction costs are the largest single expense associated with refurbishing the nearly 90-year-old theater, the total project is estimated to cost $34 million. Needing $20 million above and beyond what it has raised, the foundation has turned to the city, promising to repay the money.

“The city is in a unique position financially,” the foundation’s board of directors wrote in a letter to the city made public last week. “Measure J funds, designated to enable infrastructure projects, especially for downtown restoration, are available.”

The agreement will be up for discussion at Thursday’s City Council meeting. In a report to the Council prepared for the meeting, city staff said there could be $15 million in existing Measure J funds, $10 million from budget reserves, and $5.6 million from budget set-asides available to supply the $20 million request. All the money would be returned to the city through payments starting Dec. 31.

If those funds are used to help reopen the theater, city staff said other city projects could be temporarily impacted. Among those projects are a proposed new downtown fire station, community-initiated projects being paid for by Measure J funds, and a police needs study earmarked in Council set-aside funds.

Foundation members, however, said money for those projects would be paid back well before they were ready to get underway.

“Since our project is ‘shovel ready,’ these funds can be deployed immediately as construction will start in (the first quarter of 2024),” they wrote. “The city also has other funding sources that could be tapped to move this project forward.”

Helping pay for the theater’s reopening could also prove a financially sound decision, theater foundation board members maintained. In the letter to the city, they claimed a refurbished facility will generate more than $40 million in economic activity and $4 million in new taxes annually.

“The sooner the project is completed,” they wrote, “the higher and sooner the city’s revenue from the increased economic activity will be available to fund other city projects.”

---