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 approved the attached Financial Incentive Agreement (the “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, the City would 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 Agreement required that the renovated theater open to the public prior to December 31, 2017 or it would expire.     

Galaxy Theatres experienced substantial delays in their renovations to the theater that prevented re-opening of the theater prior to the December 31, 2017 deadline. Syufy therefore requested a nine-month extension, to September 30, 2018, of the completion deadline in the Agreement. To facilitate access for its tenants and customers, Syufy and Galaxy also requested City approval (via amendment of a separate “Parking Agreement”) to install a direct entrance between the theater and the City-owned parking structure adjacent to the theater. This alteration requires a reduction in the number of auditoriums from fourteen (14) to thirteen (13). These changes to the Agreement were approved by the City Council on October 9, 2017 as Amendment No. 1. 

Syufy also requested and obtained 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, for the above-referenced Parking Agreement between Syufy, the City and the Redevelopment Agency. 

Galaxy Theatres is nearing completion of the renovations to the theater and may partially or completely re-open it prior to the September 30^th deadline. However, construction has been slowed this year by the general shortage of construction workers in northern Nevada. Syufy Enterprises has therefore requested a 45-day extension of the Agreement, to November 14, 2018, to provide for the possibility that re-opening of 13 auditoriums will not occur prior to September 30^th.   

This agenda item requests approval of the proposed Amendment No. 2 to the Agreement. Specifically, Amendment No. 2 would:

• Extend the Completion Date in Article I, Subsection B (The Project), and Article III, Subsection A.1 (City Conditions) from September 30, 2018 to November 14, 2018.
• Extend the Termination Date in Article V, Subsection A (Default and Termination; Term) from October 1, 2018 to November 15, 2018.

Amendment No. 2 does not modify any other provisions of the 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. For this reason, and because City staff believes that Galaxy Theatres has diligently pursued renovation of the theater property, City staff supports Syufy’s request for a time extension.

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

I move to approve Amendment No. 2 to the Financial Incentive Agreement between the City of Sparks and Syufy Enterprises.