In a sweeping announcement earlier this month, Mayor Dwight Jones' proposed budget prominently featured a $50 million renovation of the historic Landmark Theater.
To get to that figure, according to Jones, a planned $14 million capital budget allocation will leverage an additional $36 million in historic tax credits, sponsorships and private investment.
"Studies have shown that an improved facility will generate over $6 million dollars annually, doubling economic impact of tax revenue," Jones said March 2, when he announced the plan during the nearly four-week run of "The Lion King" at the Landmark. Officials touted the economic impact of the show, including 93,000 tickets sold. That generated $900,000 in admissions taxes for the city, officials say.
"This is a significant return on our investment," Jones said, "and underscores … Richmond's role as a cultural hub."
Increasingly, the city's cultural hubs are paid for by taxpayers. The mayor's plan to renovate the Landmark is almost identical to the taxpayer-funded renovation of the Carpenter Theatre, which reopened as part of CenterStage in 2009. Nearly three-quarters of the $73.5 million used to renovate the Carpenter came from the public kitty: $25 million from the city; $9.7 million from state and federal grants; and $20 million in historic tax credits.
Mayor Jones proposes allocating $14 million in city money for the Landmark renovation, but that only scratches the surface. His plan involves millions more in public dollars, primarily through diversion of state and federal taxes.
There's precedent: The CenterStage project engendered quite a bit of controversy and political mayhem, in part because of fundraising struggles and provocation from former Mayor L. Douglas Wilder. The project also remains something of a financial mystery. Despite receiving more than $40 million in city and state funds and $500,000 annually from the city for operating costs, CenterStage's comprehensive agreement with the city exempts the foundation from the Freedom of Information Act.
While the foundation receives more than half of its revenues from taxpayers, it isn't required to publicly disclose how it spends the public's money.
It's unclear whether the Landmark deal will include a similar secrecy pact. But in his announcement earlier this month, Jones didn't mention that the CenterStage Foundation and the Richmond Performing Arts Center, known as RPAC, are behind the Landmark deal. Because the city owns the Landmark, the mayor wants to lease the theater to the performing-arts center for 40 years; it likely will then lease the facility to CenterStage, which would manage the property.
The complicated structure is primarily designed to meet legal obligations that allow RPAC, or a similar taxable entity, to take advantage of historic tax credits. If the renovation work costs $50 million, the credits are worth $22.5 million.
"Right now we have a concept. We have got to bring all the pieces together," says Byron Marshall, the city's chief administrative officer. "The conceptual deal is that we work it out with CenterStage, much like the last deal was done."
The $73.5 million renovation and construction project that produced CenterStage also hinged on historic tax credits. RPAC received $19.08 million in state and federal tax credits, according to the Virginia Department of Historic Resources, which administers the historic tax credit program. It is designed to encourage private investment in older buildings that are otherwise unattractive to developers.
Those credits — both the 25 percent state credits and the 20 percent federal credits — were based on renovation work at the Carpenter Theatre valued at $42.4 million. The tax credits are typically sold — though the Department of Historic Resources refers to this as "syndicating" — to institutional investors and corporations, usually at a discount.
The beauty of the deal, according to Marshall, is that CenterStage will leverage the tax credits to raise millions of dollars more in private funds. How much more? Foundation officials couldn't say for sure; neither could Marshall. "The exact ratio of private donations to tax credits is not yet known and won't be finalized until further along in the process," CenterStage officials tell Style Weekly in an email.
But somewhere in the neighborhood of $13.5 million would be needed in private funds, assuming the Landmark renovations total $50 million, as the mayor's proposed budget outlines, with $14 million from the city and $22.5 million from historic tax credits.
CenterStage says it can raise the private funds needed to complete the work, noting the foundation's ability to raise "$20 million in a short amount of time" to complete the renovation and construction work at the Carpenter and adjoining facilities.
But many questions remain. For starters, CenterStage appears to be short on cash. In audited financials for 2009 and 2010, obtained by Style, CenterStage and its related entities burned through $8 million in cash in 2010, the first year they were open. Program costs — namely putting on shows and events — came in at $9.28 million, but program revenues came in at just $3.02 million.
The $6 million in economic impact that the mayor mentioned is based on the addition of new shows at the Landmark after renovations are complete. The new shows would attract an additional 50,000 attendees, according to economist Christine Chmura, who completed a study on behalf of the CenterStage Foundation. But it's unclear whether the study — CenterStage released only a two-page summary to Style — accounts for the enormous taxpayer subsidies required.
Marshall says the city still is working out the kinks, but he expects to have the final proposal to City Council for approval sometime in May. Because the historic tax credits are driving the deal, the city in essence will be working for CenterStage or RPAC, which will act as the project's developer. Marshall says the city will be the "construction manager" for the project.
At least one former critic of CenterStage, City Councilman Bruce Tyler, thinks the plan to renovate the Landmark makes "a lot of sense."
"There are several people on [the CenterStage Foundation's] board who have a proven track record of raising money, and a proven track record of doing what they say they are going to do," Tyler says. "I feel that at the end of the day … it's reasonable and I think we should allow them to do it." S