Sparks City Council Meeting 10/9/2017 2:00:00 PMMonday, October 9, 2017 2:00 PM
Council Chambers, Legislative Bldg., 745 4th St. , Sparks, NV
General Business: 9.4
A Business Impact Statement is not required because this is not a rule.
This agenda item asks the City Council to consider and approve changes to the Financial Incentive Agreement between the City of Sparks and Syufy Enterprises. The City Council approved the agreement on February 27, 2017. Per its terms, if Syufy and Galaxy collectively invest at least $6,100,000 to renovate and re-open the theater with fourteen auditoriums, the City will contribute $1,500,000 from lodging taxes, as follows: i) $1,000,000 upon the opening of all 14 auditoriums of the theater to the general public; and, ii) provided the theater remains open to the public, $100,000 per year for five years. The Financial Incentive Agreement currently requires that the renovated theater open to the public prior to December 31, 2017, or it expires.
Syufy has requested a nine-month extension – from December 31, 2017 to September 30, 2018 – of the date by which the theater must reopen to the public to provide Galaxy Theatres, Syufy’s new tenant for the theater, additional time to fully renovate the property. In addition, Syufy and Galaxy have requested approval from the City to install a direct entrance between the movie theater and the City’s adjacent parking structure to facilitate access for its tenants and customers. This change may reduce the number of auditoriums in the facility from fourteen to thirteen, as one auditorium may be used partly or wholly to accommodate the alternate entrance. Syufy is, therefore, requesting that the Financial Incentive Agreement be amended to reduce the minimum number of required auditoriums to thirteen.
In 2003, the Nevada Legislature enacted, and the Governor signed into law, Assembly Bill 205. This legislation, subsequently codified in Chapter 432, Statutes of Nevada, imposed an additional tax at the rate of 2.5% on the gross receipts from the rental of transient lodging in the City of Sparks (“Lodging Tax”). Proceeds from the Lodging Tax may only be used for projects or capital improvements in Victorian Square, or that would provide a direct benefit to Victorian Square. The City Council may expend these proceeds after obtaining the “advice and recommendations” of the Sparks Tourism Facility and Revitalization Steering Committee (“Committee”), which was created per Chapter 432.
In late 2016 Syufy Enterprises, which owns the currently closed Victorian Square cinema property, requested that the City provide Lodging Tax proceeds to fill a financial gap in the cost of renovating that property as a state-of-the-art movie theater. Syufy negotiated a lease with Galaxy Theatres, which operates the Galaxy Imax Luxury+ Theatre in the Legends shopping center, to renovate, re-open and operate the theater property. Syufy estimated the costs of the upgrades at approximately $7.6 million and informed the City that, but for the provision of $1.5 million of financial assistance by the City, Syufy and Galaxy would not find it financially feasible to undertake the project.
On January 31, 2017, the Committee considered and approved a resolution that formally advised and recommended to the City Council that it expend up to $1,500,000 of Lodging Tax proceeds to incentivize a full renovation and re-opening of the Victorian Square theater property.
On February 27, 2017, the City Council accepted the Committee’s resolution and then approved the attached Financial Incentive Agreement with Syufy Enterprises. Pursuant to the agreement, if Syufy and Galaxy collectively invest at least $6,100,000 to renovate and re-open the theater with fourteen auditoriums, the City will contribute $1,500,000 from Lodging Tax proceeds, as follows: i) $1,000,000 upon the opening of all fourteen auditoriums of the theater to the general public; and, ii) provided the theater remains open to the public, $100,000 per year for five years. The Financial Incentive Agreement currently requires that the renovated theater open to the public prior to December 31, 2017, or it expires.
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. Syufy has therefore requested a nine-month extension of the deadlines in the Financial Incentive Agreement. To facilitate access for its tenants and customers, Syufy and Galaxy have also requested approval (via amendment of a separate “Parking Agreement”) 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 Financial Incentive Agreement, proposes the changes requested by Syufy and Galaxy.
Syufy is also seeking the same ninth month extension of the deadlines, as well as the above-referenced request to create a direct entrance between the theater and the parking garage, in a separate Parking Agreement between Syufy, the City and the Redevelopment Agency of the City of Sparks. The proposed amendment to that agreement is also anticipated to be considered by the City Council on October 9, 2017.
Specifically, this proposed Amendment No. 1 to the Financial Incentive Agreement would:
- Extend the Completion Date in Article I, Subsection B (The Project), and Article III, Subsection A.1 (City Conditions) from December 31, 2017 to September 30, 2018.
- Extend the Termination Date in Article V, Subsection A (Default and Termination; Term) from January 1, 2018 to October 1, 2018.
- Modify the Payment Schedule in Article II, Subsection B.2 (Financial Contributions) to delete the reference to the year 2017 and insert a reference to the year 2018.
- Change Article I, Subsection A (The Project), Article II, Subsection B.1 (Financial Contributions), and Article III, Subsection A.1 (City Conditions) to reduce the minimum number of required auditoriums to satisfy the conditions for payments from the City from fourteen (14) to thirteen (13).
Amendment No. 1 does not modify any other provisions of the Financial Incentive Agreement.
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 the City of Sparks as well as Silverwing Development and other parties who have invested in the Victorian Square area.
Syufy and Galaxy Theatres estimate the total cost of renovating the theater property to a standard similar to Galaxy’s facility at the Legends will cost in excess of $7.6 million. Syufy and Galaxy maintain that, but for the provision of $1.5 million of financial assistance by the City, Syufy and Galaxy would not undertake the project. Galaxy also maintains that providing a direct entrance between the theater and the City’s parking garage is critical to their future success at Victorian Square, to the point that Galaxy may sacrifice an auditorium to provide for such access.
While an extension of the deadlines is needed, Galaxy has been issued a permit for, and has undertaken demolition work in, the interior of the theater. Galaxy also submitted an application and plans for building permits.
For these reasons, City staff supports Syufy’s requests for a time extension and a reduction in the minimum number of required auditoriums and recommend approval of Amendment No. 1 to the Financial Incentive Agreement.
- The City Council may approve Amendment No. 1 to the Financial Incentive Agreement.
- 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 Financial Incentive Agreement with Syufy Enterprises.
A. Amendment No. 1 Financial Incentive Agreement w Syufy signature.pdf
B. AC 5343 Incentive Agreement.pdf