In 1996, the Redevelopment Agency, the City of Sparks, Syufy Enterprises (“Syufy”) and Century Theatres entered into a Real Property Disposition and Development Agreement (the “DDA”). Pursuant to that DDA, Syufy Enterprises acquired property from the Redevelopment Agency and developed the 14-screen movie theater at Victorian Square. The Agency, in turn, agreed to construct various public improvements including a parking structure containing at least 700 stalls available to Syufy for the use of the theater’s customers. In 1997, the City built the parking structure adjacent to the Victorian Square movie theater building, which now contains approximately 696 public parking spaces.

Syufy sold the Century Theaters business to Cinemark in 2006 and leased the Victorian Square theater facility to Cinemark for a period of ten years.  In August 2015, the City Council and Redevelopment Agency approved an agreement with Cinemark to continue providing the theater free parking in the City’s parking structure. That parking agreement failed to become effective, however, when Cinemark did not extend their lease and closed the theater on September 30, 2016.

In mid-2016, Syufy informed the City that the availability of free parking for the theater in the City’s parking structure was essential to securing a new operator. On October 10, 2016, the Redevelopment Agency and the Sparks City Council approved a Parking Agreement (the “Parking Agreement”) with Syufy Enterprises. Per the terms of the Parking Agreement, the City agreed to provide free parking for the movie theater in the adjacent, City-owned Victorian Square parking structure, subject to certain limitations. The Parking Agreement automatically terminates on January 1, 2018 if the theater is not open for public operation by December 31, 2017.

Galaxy Theatres has experienced substantial delays in their renovations to the theater that will cause its re-opening to occur after the December 31, 2017 deadline set in the Parking Agreement. Syufy has therefore requested an extension of the deadlines in the Parking Agreement. To facilitate access for its tenants and customers, Syufy and Galaxy have also requested approval from the City to install a direct entrance between the theater and the City’s parking structure. This agenda item, requesting approval of Amendment No. 1 to the Parking Agreement, proposes the changes requested by Syufy and Galaxy.

On February 27, 2017, a separate “Financial Incentive Agreement” was entered into between the City of Sparks and Syufy. Pursuant to that agreement, the City agreed to pay Syufy up to $1,500,000 provided Syufy and Galaxy collectively invest at least $6,100,000 in renovating the Victorian Square theater property and re-open it to the public by December 31, 2017. A separate agenda item addresses a requested extension of the deadline in that agreement.

Syufy has requested a nine-month extension of the deadline for re-opening the theater to the public to gain additional time to fully renovate the property. In addition, Syufy and Galaxy are seeking permission to install a direct entrance between the theater and the parking structure to facilitate access for their patrons. Specifically, this proposed Amendment No. 1 would:

• Change the date in Section 2 (Term) by which the theater must be open for public operation from December 31, 2017 to September 30, 2018 and extend the automatic termination date from January 1, 2018 to October 1, 2018.
• Grant Syufy the right to construct, at their sole expense, an entrance in the western exterior wall of the City’s parking structure. The City retains the right to approve the design of, and deny any entrance or other access that, in the sole determination of the City, will result in an unreasonable risk of danger to public health or safety. Syufy’s right to maintain an entrance between the theater and the parking structure would run with the term of the Parking Agreement.
• Add a section providing for the City and Syufy to indemnify, hold harmless and defend each other from and against all liability to the extent caused by the negligent act, omission or willful misconduct of the other party. On the part of Syufy and its tenant, this includes indemnifying the City from liability arising out of the use of the parking structure.

Amendment No. 1 does not modify any other provisions of the Parking Agreement, including the City’s right to:

• Charge a fee for parking in the structure, on a permanent or intermittent basis, to users who are not customers or employees of Syufy or its tenant; and 
• Charge theater patrons whose vehicle occupies a space(s) in the parking structure for longer than 4 consecutive hours or theater employees whose vehicle occupies a space(s) for longer than 8 consecutive hours. 

As discussed in the Background section above, in the 1990’s, the City and Redevelopment Agency worked with Syufy Enterprises to develop Century’s theater facility as an anchor for the Victorian Square redevelopment project.  Until its closure in the Fall of 2016, the theater remained one of Victorian Square’s principal entertainment options. Reopening the theater is important to the redevelopment efforts of Silverwing Development and other parties who have invested in the Victorian Square area. 

Syufy and Galaxy Theatres strictly maintain that their investment in and operation of the theater is conditioned upon access to free parking in the City’s parking structure. Provided Syufy and Galaxy meet the proposed new deadline of September 30, 2018 to re-open the theater, the Parking Agreement will remain effective for as long as a motion picture theatre is operated or September 30, 2040, whichever is sooner.

While an extension is needed, Syufy has made progress by securing Galaxy Theatres to operate the theater. In addition, Galaxy has been issued a demolition permit for the interior of the theater and submitted an application and plans for building permits.

For these reasons, City staff supports Syufy’s requests for a time extension and permission to install a direct entrance between the theater and parking structure and recommend approval of Amendment No. 1 to the Parking Agreement.

1. The City Council may approve Amendment No. 1 to the Parking Agreement.
2. The City Council could reject or modify Amendment No. 1 subject to the consent of Syufy Enterprises.

I move to approve Amendment No. 1 to the Parking Agreement between the Sparks Redevelopment Agency, the City of Sparks and Syufy Enterprises.