|Beacon Cinema: From Blockbuster Hopes to Roll Credits?|
|By Andy McKeever, iBerkshires Staff|
06:05PM / Monday, November 19, 2018
|The Beacon Cinema project came to fruition through a somewhat confusing connection of grants, loans, investments and credits that relied heavily upon each other.|
Downtown was in rough shape when city officials set their minds to rehabilitating the former Kinnell and Kresge building on North Street. The result was the Beacon Cinema, which opened with high hopes of being a downtown destination that would draw up to 200,000 annually to North Street.
PITTSFIELD, Mass. — At midnight on Nov. 20, 2009, the "The Twilight Saga: New Moon" began its bite into the box office records.
The midnight showing across the country reeled in $26.3 million and the movie went on to shatter the single-day record — and hold it for another two years until "Harry Potter and the Deathly Hallows: Part 2."
It was a great day for Pittsfield.
Because that night 850 moviegoers flocked to what was a fairly vacant downtown to the brand-new Beacon Cinema. It had been nearly a decade in the making and the state-of-the-art theater was finally open in a completely restored historic North Street building. It was high-tech, it was digital, it had the best seats.
"No more mall," said one patron, comparing it to the Regal Cinemas in Lanesborough.
That was eight years after the Pittsfield Cinema Center had closed on West Housatonic Street. It was eight years after the city rejected a pitch to build a new baseball stadium and the Pittsfield Mets left. It was five years after KB Toys filed for Chapter 7 bankruptcy.
For years, the downtown was staked on retail but, in the midst of Pittsfield's freefall following the closure of General Electric, the city's downtown was emptying one shop at a time.
Downtown Pittsfield Inc. in 1997 released a new downtown master plan specifically calling for a movie theater. It had crafted a new identity for the city's core focused on arts, culture, and things to do. The business group wanted to drive more foot traffic downtown, which in turn, would end up creating new shops and restaurants.
The movie industry was booming then as blockbuster films created lines outside of theaters across the country. Nearly every town had a video rental store, with Pittsfield having multiple ones. A new theater was estimated to attract more than 200,000 people to the city's downtown.
In 2000, then-Mayor Gerald Doyle wrote to The Berkshire Eagle pushing for the theater.
"We need to construct a multiplex cinema center. Movies have been a dominant source of family entertainment for decades, and have a history in downtown Pittsfield. Think of the days when theaters used to run on North Street, add the hi-tech aspect of new theaters, and you have a winning combination. It would be yet another draw, and one that would function well with and benefit additional businesses in the downtown area," Doyle wrote.
"In most cases, people don't simply go to the movies. They go out to dinner beforehand or shop; they make a night of it, and downtown needs a clientele that will cover more than one industry. Along the same lines but to a much greater extent would be a 5,000-seat multi-use facility in the downtown area. We will lose professional baseball and millions of dollars in revenues without it, and we stand to gain a source of year-round affordable family entertainment from its other functions. Attendance figures from the Pittsfield Mets indicate that more than half of the attendees in past years have been from outside the area."
By 2002, the motor was running with Downtown Pittsfield's foot on the gas. But it needed a developer.
"If you really look at the issues over time, there's a thread that runs through everything. It's not usually the project, it's about whose idea it was, who might make a buck and what's the overall benefit to Pittsfield," Richard Stanley was quoted in The Berkshire Eagle at the time.
Stanley owns the popular Triplex Cinema in Great Barrington. But he wanted nothing to do with Pittsfield.
"I don't want to get involved in the politics," he said. "It seems like a big web, where no one can figure out how to make something happen."
Then-Mayor Sara Hathaway reaffirmed her commitment to the project and Downtown Pittsfield Inc. established a task force to get the cameras rolling.
"There are some natural areas where the government comes in or the private sector comes in," said Peter Lafayette of Downtown Pittsfield Inc. on April 20, 2002. "The city is going to be involved in any major building project, but when things are happening in private buildings, it has got to be the private sector that is driving it because it is other business people who are in the best position to sell downtown, sell the possibility of making money downtown to the people."
In May 2002, the task force got to work. "I don't think the money totally is going to come from a developer," Jack Rubin, co-chairman of the group, said, adding that Pittsfield is not in a position financially to help, the Eagle reported.
The main task was figuring out how to fund it. In the meantime, those involved kept ringing Stanley. He was local. He knew what he was doing. Finally, in 2002, Stanley agreed and purchased the Kinnell and Kresge buildings at 47-55 North St. for $150,000 — the same building where Arlo Guthrie had hoped to build a nightclub.
The following year, Downtown Pittsfield Inc. headed an effort to put the first batch of public funds into the production. The city chipped in from its federal Community Development Block Grant allocation. The Berkshire Chamber of Commerce, MassDevelopment, and Stanley matched to do a $100,000 feasibility study.
Could this really work?
That study didn't yield good results. The firm Barr & Barr had performed cost estimates and business plans that showed the initial script wouldn't work. The building had been eyed for a six-movie theater with retail space and three floors of high-end condominiums. The thought was to shrink the project to be just a one-floor movie theater with limited retail space.
At the same time, Pittsfield's other pillar of hope was moving along quickly. The historic Colonial Theatre was eyed as another one of those anchors to spur a redevelopment of downtown. There were thoughts about streetscape plans, more anchors, shops, parking garages to reinvent the entire downtown in the future.
But the numbers still weren't there to make the cinema project economically feasible. The entire building was in rough shape but had historic features that many wanted to preserve — particularly the Queen Ann style terracotta exterior.
In 2004, Mayor James Ruberto began working on the Beacon script. He had spent many hours in the Boston area talking up the project and the path finally became clear: the Massachusetts Housing Investment Corp.
The federal government had recently given Massachusetts some $90 million worth of tax credits to spur development. That could bring investors into the project who otherwise wouldn't have been involved and who could make the funding package whole.
"If we don't get the tax credits, we are not going to be able to proceed," Stanley said in 2004.
He believed it was possible to build the Beacon Cinema with less than $10 million (later the estimate was nailed down at $8.3 million). MHIC President Joe Flatley would later tease up to $18 million coming to the city for the two keystone projects.
"It's because both projects have had really enormous amounts of support from the community," Flatley said.
The support was there and businesses were already starting to look to return to downtown. In 2004, the owner of the Marketplace Cafe would be approved for opening a bistro. He would later become the next-door tenant, in the same building, as the Beacon.
But businesses were also leaving downtown. In December 2004, Dino's Fine Jewelers moved out, followed by CVS. A shift was being seen — restaurants, movies, theaters, destinations were replacing retail. That new vision for the downtown was somewhat starting to take shape.
In early 2005, Ruberto dipped into the Economic Development Fund for the first time for this project — but it wouldn't be the last time the General Electric funds would be used. Ruberto wanted $500,000 to be a match for a $1 million Community Development Action grant from the state. That money would help save the terracotta exterior so many had cherished instead of having it replaced in a cheaper fashion.
The council approved. The grant put the city in control of the facade and roof of the historic building, preserving its architecture.
The vision of having a new movie theater downtown had taken shape.
Berkshire Bank, Legacy Bank, Pittsfield Co-operative, TD Banknorth and Greylock Federal Credit Union were all on board, too. They combined their efforts to provide funding for the project in the form of a $1.85 million mortgage and another loan of $138,000.
More state aid came in March 2005 when Secretary of State William Galvin announced $900,000 worth of tax credits from the Massachusetts Historical Commission for the building.
The funding was taking shape. The banks were in nearly $2 million. Stanley was in $500,000. The state was in $1 million through a grant and $900,000 more in tax credits. The city was at $500,000. And the biggest piece was coming from Massachusetts Housing Investment Corp. with $3.2 million.
The $8 million was accounted for through a rare public-private partnership. That number was confirmed in May 2005 when the $1 million grant was finalized by the state.
Permitting began. But there was still a bit more to do. The price tag had risen.
The state passed an economic surplus bill in 2006 bringing in another $1 million to the project through a cultural facilities fund.
"We've been trying hard to bring a cinema complex into the downtown," said then state Sen. Andrea Nuciforo Jr., D-Pittsfield, at the time. "That, I think, is going to help us put an additional key piece of the puzzle into place in downtown Pittsfield."
Massachusetts Housing Investment Corp. continued to negotiate and settled on $4.7 million. The banks upped their contribution to $3.5 million. And in October 2006, Ruberto was back before the City Council asking for more money from the General Electric fund.
But Ruberto's ask wasn't without its hitches. The mayor wanted $500,000 more, which was structured as a loan to ensure the project met the requirements needed to reel in the money from the Massachusetts Housing Investment Corp. The sale of the federal New Market Tax Credits from the housing corporation was dependent on the money going to the project in a loan form instead of cash income. In order to maximize the credits, the money was added to a larger pool of loans, which included the original $500,000 allocation from the GE fund.
The city's loan was crafted as being subordinate to the other loans on the property, meaning everybody else would get paid back before the city did. The repayment of the loan was expected to be within 18 years. The proposal also included a tax increment financing package to lessen the immediate increase in taxes expected to come with the renovations.
The council's approval was unanimous.
This was a year moviegoers flocked to theaters outside of Pittsfield to see "Pirates of the Caribbean," "Cars," "300," and "The Da Vinci Code."
This was also three years before the global economic collapse really hit the Berkshires, three years before banks across the country took huge lumps after being too generous with loans.
It was one year before Netflix started streaming movies online.
The state's cultural facilities money for the project had a bit of an up and down. After it was secured, former Gov. Mitt Romney cut it. The Legislature then overrode his cuts. But Romney then cut the entire state budget, which included cultural facilities dollars.
Gov. Deval Patrick took over and, in late 2006, restored the funding. Construction was on pace for February 2007.
But then the National Parks Service determined that the design hadn't met its requirements. The historic tax credits weren't coming because the design didn't preserve enough of the historical aspects of the building.
"I'm disappointed by the delay, but I refuse to be discouraged," Ruberto would write in June 2007. "We're going to build that movie theater! We've had so many obstacles, and we've confronted so many issues in trying to get this project off the ground. There have been so many times that I saw the potential for this project to be dead, so I absolutely believe we will build it on the sheer will of all the parties involved — the local business community, the state government, the developer Richard Stanley, who's knee-deep in seeing this through, and the city."
The project went to a redesign. Costs rose to $12.6 million and the project was $900,000 short because of the loss of those historic tax credits. Officials were now thinking 2009.
In April 2008, Ruberto was back before the City Council for more money. The prices were going up and the delays blew up the project's budget. The $8.3 million had become $12.6 million and was now up to an estimated $22.3 million.
"This has gotten to be a pretty big project," then City Councilor and later Mayor Daniel Bianchi said, starting to get worried about the city's role in it. "I think only so much money should be committed to it."
Ruberto was asking for another $1.1 million from the Economic Development Fund. Again it was proposed to be a loan, $600,000 of which was a short-term bridge loan and $500,000 of which would be a long-term loan. The city was going raise its investment to $2.1 million — $1.5 million structured as a loan with a 2 percent interest rate over 35 years and $600,000 that was short-term.
The banks were up to $4.6 million. The Massachusetts Housing Investment Corp.'s New Market Tax Credits were in for $7.7 million.
"We will be repaid all of the money that the city puts into this," Director of Community Development Deanna Ruffer was quoted in the Berkshire Eagle of the plans at the time.
The City Council questioned the financial structuring. It was the first project for which the city had used the General Electric money as a loan, instead of just a grant.
There was debate among the councilors as to whether the city should continue to treat the money as loans or as grants. To date, it is the only expense out of the fund without a forgivable provision.
Essentially the council agreed to have it be a loan but having it be a loan that was subordinate to the others. That way if the project was as wildly successful as planned, the city would eventually get paid back for its involvement.
The Pittsfield Gazette reported that then Ward 5 Councilor Jonathan Lothrop "now grasps 'the complexity of the deal' but needs more precision about the details, specifically assurances regarding the security of the city's loan. Lothrop said many residents want to know 'what happens if the project fails.' He determined that 'we are a secured creditor but not in the first or second position."
Many who were around at that time say they never thought the city would get repaid at all, saying none of the other money spent from the GE funds before or after have been repaid.
But the reporting at the time shows there was a lot of debate over whether the city would or would not be repaid and questions about how much further the city would go in support of the cinema.
The labor unions weren't happy with what was happening. There was a lot of public money going to the project but they didn't have a chance to bid on it. Instead, Allegrone was hired to do the work and the union carpenters felt they hadn't a fair shot at the contract.
Tim Craw of Pittsfield, president of the Berkshire County Building Trades Association, asked the City Council to table the request in hopes of convincing Stanley to hire union labor.
"Wouldn't it have been nice for Stanley to have given work to some of these local guys?" Craw said.
Craw was unsuccessful and the labor unions haven't forgotten it.
In June, former Lt. Gov. Tim Murray came to the steps of City Hall and announced another $825,000 through a Massachusetts Opportunity Relocation And Expansion grant.
On Sept. 18, 2008, Stanley would compare the complicated finance package to the "Perils of Pauline." More than once, the project seemed in danger as the precarious financing package was cobbled together.
The funding package is a maze, as a flow chart tracking the various matches and mortgages created in the final days before closing shows.
In total there were four different mortgages placed on the property for more than $15.6 million. There were some $2.9 million in state historic tax credits. State grants accounted for $1.8 million in grant funds. Another $868,000 from the new market credits came to the project through a lease agreement with a Beacon subsidiary company. Stanley was in for $500,000. and Downtown Pittsfield Cultural Association was in for $500,000.
Together, it was a total of $22.1 million
The entire funding package was primarily focused on maximizing the Massachusetts Housing Investment Corp.'s New Market Tax Credits.
The city bundled the three $500,000 loans from the Economic Development Fund with the state's Cultural Facility's $1 million grant for the facade, and a $50,000 allocation from the federal Community Development Block Grant program for accessibility improvements — which is typically in grant form — and packaged that as a loan.
That $2,550,000 loan from the city was coupled with the bank loans and financing from the Downtown Pittsfield Cultural Association and was used to leverage more than $7 million from the Housing Investment Corp in New Market Tax Credits. That was all rolled into mortgages.
The $600,000 bridge loan from the Economic Development Fund leveraged state historic tax credits. The Community Development Action Grant previously awarded for the facade was moved and bundled with the last $825,000 state grant and put toward the project. Stanley had put $500,000 of equity into the project up front.
"I don't know of another community where the banks pull together like this one," said J. Williar Dunlaevy, president of Legacy Banks, at the groundbreaking.
The joke was that the media would have to use a wide lens to get all the participants lined up with their golden shovels.
By September 2009, construction was humming along. The Marketplace Cafe would be the first tenant in the building other than the theater. The project was trending on budget and on time.
Two months later, Ruberto would say "that is what this theater is all about ... It is the crown jewel of the revitalization of downtown" as the Beacon had finally opened.
North Street started to come alive. The state invested millions in a streetscape project along South and North streets. The theater itself created 39 new jobs. New restaurants and bars started opening and filling up storefronts. Numerous other historic buildings have since been purchased and renovated.
More recently, buildings have been selling and turned into market-rate housing. Just a few years ago, Hotel on North completely renovated the Besse-Clark building into a boutique hotel.
Since 2008, downtown property values jumped by 21.5 percent, which in turn added $45,765,268 to the city's tax roll.
Downtown Pittsfield's vision was starting to come to fruition. The Berkshire Museum, the Colonial Theatre, the Beacon, and Barrington Stage were the drivers of a new revitalization that would in 2010 be described as "The Brooklyn of the Berkshires."
But in 2010, the recession hit the Berkshires and, particularly the movie industry, hard. With numerous loans on the property, keeping pace was difficult.
Stanley spent $30,910 on capital improvements and is claiming to have covered operating deficits to the tune of $379,620.
Regal Cinemas at the Berkshire Mall turned up the heat and invested more into its theaters to draw more patrons there.
In 2016, the writing was on the wall as the investors involved in the New Market Tax Credits exited the picture and the loans on the property were restructured. The banks involved hired a consultant to provide a fresh set of eyes on its operations to find a profit. Insight Management Consulting, which owns Pheonix Theaters, was brought in and put forth recommendations for management and recommended seat upgrades to compete with Regal.
Stanley returned to the City Council in 2017 as the tax increment financing piece was phasing out, adding to his losses. He wasn't giving up on the Beacon. He asked for an extension and essentially used the savings to put in brand-new seating. That raised his investment another $127,488.
City officials say Stanley's investment to date has been $1.1 million.
He had support from those who said it isn't just about a theater but about the efforts to revitalize downtown as a whole.
"That revitalization is not yet complete but there has been tremendous progress," Berkshire Chamber of Commerce President Jonathan Butler said. "That momentum over the last 10 years have led to tremendous investment in downtown."
The seating did work as more patrons began to return to the theater. The recession has long passed, but the Berkshires always seem to recover slower than elsewhere. But the movie industry isn't like it was in the 1990s; last year, movie attendance dropped to a 25-year low. Video stores no longer exist. The buzz for new movies in theaters isn't quite the same. Entertainment is found on every handheld device possible.
Insight Management Consulting has now put forth an offer to buy the cinema. It boasts of a good track record in running successful cinemas elsewhere in the country. But it won't buy with debt still on the books.
Former Mayor James Ruberto celebrating the Beacon Cinema's first birthday. The party was Harry Potter themed.
With the sale, Stanley is willing to take on $106,000 or so of the remaining debt on the property — bringing his total spending on the project somewhere in the $1.2 million range.
But he isn't the only one prepared to take a loss. The banks are still owed about $3.7 million and are now writing off all but $750,000 to facilitate a sale. The buyer will be paying $500,000 of that remaining debt, leaving Stanley with the rest — though offset by about $144,000 of personal property being sold to the new buyers.
The city is being asked to write off the debt it's owed. The $600,000 short-term loan was almost entirely paid back by 2011 but there is still $2,550,000 on the books as loans from the city.
Mayor Linda Tyer approved a plan to forgive $1,050,000, a total that consisted of the $1 million state cultural facilities grant and $50,000 of federal Community Development Block Grant funds to make accessibility improvements. Both were originally packaged as loans.
But she isn't looking to let the remaining $1.5 million, the money which came from the GE fund, go for nothing. She has put forth a plan to forgive the $1.5 million over the next 10 years — 10 percent a year — provided Insight Management keeps the theater running.
"The Beacon Cinema is a unique historic landmark and vital anchor in downtown Pittsfield. The restoration of the formerly distressed structure was a critical catalyst in our downtown revitalization," wrote Tyer in a letter to the City Council.
The other option city officials are presenting at this point is for the banks to foreclose. The theater would shut down and the building would be empty. The city would still be without the GE funds that were put into the project because of those loans being subordinate.
"The proposed sale of the property to an experienced independent theatre owner has been determined to be the best option; with the only reasonable alternative being foreclosure which could result in the immediate closing of the Beacon Cinema and elimination of all of the city debt," Ruffer said.
It's a rock and a hard place. 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.
What the councilors will have to decide is whether the city's $1.5 million investment worth what the Beacon did and could continue to do in the next decade.