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The Prescott Daily Courier | Prescott, Arizona

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8/2/2012 9:58:00 AM
Elks Opera House sale negotiations end
Cindy Barks
The Daily Courier

PRESCOTT - A non-profit organization's offer to buy the historic Elks Opera House for $500,000 apparently did not meet the approval of Prescott city officials.

In a Thursday-morning news release, the city reported that negotiations had ended with the Elks Theater Performing Arts Center group without a successful sale.

The organization earlier submitted a proposal to buy the Elks for $500,000 cash, as well as deed restrictions to assure continuing public benefit, and the establishment of an endowment for perpetual operation.

Mayor Marlin Kuykendall noted on Thursday that the offer fell far short of the $1.38 million that the city had put into the theater - a point that ultimately caused the end of negotiations.

"We felt like we would have to recover at least the amount of money the city had invested," Kuykendall said. When the offer came in short of that, he said, "The only thing we could do was to bring the negotiations to a halt."

The proposal stemmed from a request for proposals (RFP) by the city, after City Council members agreed during a May budget workshop to seek parties interested in buying the 1905 downtown theater.

Although the RFP did not list a minimum asking price, the city's press release refers to a minimum threshold of about $1.39 million - one-half of the $2.78 million appraised value of the theater.

"A substantial reduction from this figure (the appraised value), by 50 percent or more considering the significant deed restrictions to be imposed as to use and perpetual operation, was applied to determine a realistic market value range for negotiation purposes," the city's press release stated.

The city also has emphasized that a total of about $3.5 million has gone into the theater in the past decade or so. About $1.38 million of that total came from the city, while another $420,000 came from public grants, and about $1.75 million came from private contributions to the Elks Opera House Foundation.

The RFP generated only one proposal - from the Elks Theater Performing Arts Center, a local non-profit group. The city opened the proposal on June 29, but later declined to release the details of the proposal, maintaining that the matter was subject to negotiation.

The City Council then considered the proposal in closed-door executive session on July 24, after which the city reportedly asked the Elks Theater Performing Arts Center to increase its cash component.

"The city's request for a higher cash amount was declined by the Elks' Center, ending the negotiations and RFP process," the news release stated.

An attorney for the Elks Theater Performing Arts Center's anonymous donor says the differences between the two parties stem, in part, from the city's appraisal. "There is a huge problem with the appraisal," Quintin Lindsmith, a Columbus, Ohio attorney who represents the donor, said in a telephone interview Thursday morning.

He maintained that the city's appraisal did not take into account the deed restrictions that would come with the purchase of the theater, or the lack of income potential in the theater operation.

"(Historic theaters) are wonderful buildings, but there is no market for them, because they are money losers," Lindsmith said.

Because the Elks Opera House loses about $150,000 per year, Lindsmith said, the Elks Center group would "essentially be purchasing the red ink," which over the next five years would amount to about $750,000.

Along with the $500,000 cash offer, the proposal also included "a sizeable endowment" to help cover such costs, Lindsmith said, although he declined to disclose the amount of the endowment.

While Kuykendall acknowledged that appraisals on historic buildings are difficult, he said the city allotted for that by its 50-percent reduction from the appraised value.

"I could not go to the public (with a proposal) that just because we're losing money that we give the theater away," Kuykendall said.

Lindsmith says his client and the Elks Theater Performing Arts Center group were committed to developing a thriving performing arts center at the Elks, which would result in "significant injections of economic activity in the community."

Indeed, the donor has a track record of such endeavors, Lindsmith said.

The organization's proposal, which the city made available on Thursday, notes that the Elks project would be "the third major restoration project funded by the primary donor."

Earlier projects have included the Ariel Cultural and Performing Arts Centre - a historic 1895 theater in Gallipolis, Ohio, that is "very much like the Elks Theater building," stated the proposal; and the 'Tis facility in downtown Prescott, a visual-arts center that uses the renovated 1890s-era Knights of Pythias building.

Noting that the Ariel Centre offers a "proven economic benefit to the local community," the proposal states: "There is no reason why the strength of that program cannot be duplicated with the Elks Theater. All of the same support systems would be in place - a renovated building free and clear of debt, a cash reserve, a permanent endowment, and excellent management."

Lindsmith said his client and the Elks Theater Performing Arts Center have been disappointed by the recent developments in the negotiations. "We didn't back out on this," he said. "It is very frustrating. We would still like to go forward, but we're running out of time." He explained that the donor's grant for the project is available through September.

Kuykendall did not close the door on the possibility that negotiations could resume. But, he stressed the need for a higher cash amount. "This is a restored, pristine theater," he said.

The Daily Courier made an official public records request on July 12 to gain access to the appraisal and proposal information, but had not heard back from the city, apart from an acknowledgement of its receipt, until Thursday's press release.

Related Stories:
• Nonprofit buys top floor of Opera House: Performing arts group wants to purchase entire Elks building
• Local group makes offer for Elks Opera House

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Reader Comments

Posted: Saturday, August 04, 2012
Article comment by: @ BAD MOVE

Perhaps this was their intention from the get go ??? Antelope Hills golf course will be NO different , watch--wait and learn . Prescott leaders are using taxpayers $$$$ to prove a point , to former employees . Stupid -- stupid -- stupid indeed !

Posted: Saturday, August 04, 2012
Article comment by: Bad move Council, bad move

How many years of operating at a loss will it take for city to have made up the difference in the shortfall on the offer? This group was willing to take on a money losing facility and keep it intact for the citizens of this community. This offer will never come again. The city has repeatedly admitted it is not in the entertainment business. I can't believe they didn't jump all over this offer. MK says he couldn't let down the taxpayers with this deal. Just look at the opinion of taxpayers on this page. What taxpayers is he talking about? Not my or my neighbors who all thought this was a golden opportunity and win win for everyone. Stupid, stupid stupid and now we are stuck with it forever.

Posted: Friday, August 03, 2012
Article comment by: jeri smith-fornara

As a lifelong Prescott resident and supporter of the Elks Opera House, I am surprised and dismayed by the Mayor's and Council's rejection of the offer by the Elks Theater Performing Arts Center Group. This was not simply a $500,000 cash offer but an offer including deed restrictions to assure continuing public benefit and, most importantly, establishment of an endowment to assure operations into perpetuity. This made it worth far more than $500,000 and a package which any reasonable mayor and council should enthusiastically accept.

I cannot imagine anyone will step forward with a better offer. I agree with Sir Walter Scott and
Shocked Taxpayer on all the points they made.
The Opera House has been one of several indefensible drains on taxpayer funds and this was a golden chance to put it in competent, self-financing private hands. The mayor and council should put this back on the agenda and reconsider favorably.

Posted: Friday, August 03, 2012
Article comment by: Really .

You know who I blame? Barack Obama.

Posted: Friday, August 03, 2012
Article comment by: Can't Afford To Give It Away

Like with the racetrack in Fainland, the bid for this opera house was ridiculously low. And, like the Yavapai Downs, the bid was rejected. Do people really expect the city to sell it for 18% of its assessed value? If so, I'd like to buy your $300K house - I'll give you $50K for it. And when you reject it, I'll scoff at you and call you all kinds of ridiculous names. I knew the elderly of Prescott were a bunch of cheap cowboys, but COME ON!

Posted: Friday, August 03, 2012
Article comment by: And so it is

Incompetence in many jobs, mine included, gets one FIRED. Obviously we have to wait to "fire" elected officials until election time. And so it shall be. This is just another example of blatant incompetence displayed by city leadership. Buying golf carts for the money-pit golf course, bribing Trader Joe's to come to town, along with this fiasco and various other things should wake the citizens up.

Like it's really some big surprise that real estate isn't bringing in what has been "put in to it". Freaking DUH! And when you have something that is losing money, you could help yourself by selling it at a lower price. At least the city would reap some cash from it. Not like many homeowners who are selling and LOSING lots of money just to avoid a foreclosure.

p.s. With all this in mind, we should still not resort to the bungling ways of a certain former mayor. Just because he may be right on this particular matter, doesn't mean we need his services in the future. We can do better.

Posted: Friday, August 03, 2012
Article comment by: some oldguy

make it a package deal take the $500K and throw in Antelope Hills GC. CUT YOUR LOSSES.... How long before you have to ask for another take hike to pay for the losses you are running? NO MORE - Enough sell them or resign.

Posted: Friday, August 03, 2012
Article comment by: Clement R

Heck, they ought to pay someone to take this place off their hands. There is no way that place is viable.

Posted: Friday, August 03, 2012
Article comment by: Would Make A Great 'Church'

Stock market veterans know that sometimes you have to take a loss. Apparently the city feels free to ride those losses and continue to saddle us with them in the hopes that someday they will get our money back - haha! Everyone knows it would be wiser to unload it to a solid, trustworthy entity now.

I have seen a fringe religious group with lots of money (from God knows where) buy a downtown theater and turn it into a church, bringing it's own form of 'worship' - parties, rock concerts and other wild and noisy theatrics to appeal to the young folk. Pastors are now primo entertainers, in case you missed it on the teevee, and they bring in other 'acts'. Google 'Skull Church' to read for yourself about this one.

The previous private owners of that downtown theater got their price, but it is the entire community who are paying the price in the continuing loss of a valuable downtown community asset that had broad appeal to everyone.

In the case of churches, they hold special privileges and tax-exempt status that the average citizen could only dream of. Don't expect to peer into the finances or control what goes on in their protected places of 'worship'.

Posted: Friday, August 03, 2012
Article comment by: guy noir

I recently sold a house for less than I paid for it nine years ago plus the improvements I had put into it. I didn't like selling at a loss, but felt it was the best offer I was going to get, and it allowed me to stop paying for maintenance, insurance, utilities and property taxes. I also had to be realistic about the real estate market.

I'm not very smart, but I'm pretty sure I'm smarter than the dim-bulbs who said "no" to $500,000 for the Elks.

Please: Admit a mistake and reconsider.

Posted: Friday, August 03, 2012
Article comment by: Easy Writer

His Excellency seems to be losing his grasp of reality. Back when he was amassing his fortune selling used cars, I'm sure he had to sell a few just to stem a loss. But this is why the City has no "business" engaging in these sorts of activities in the first place as it inevitably results in losses of taxpayer money...

Posted: Friday, August 03, 2012
Article comment by: @ JACK WILSON

City leaders will never sell city owned and operated . Many of these poor investments will never turn a profit, and Prescott city manager doesn't have the power or the drive to turn them . I but a simple nave can only post knowing all too well, nothing will ever be done to stop the insane cash loss to the general fund . As long as this group of city leaders are making the taxpayers decisions, all one can do is sit back laugh and enjoy the show .

Posted: Thursday, August 02, 2012
Article comment by: Look at the numbers

The City of Prescott is trying to recoup its “investment” dollars in the Elks Opera House. Perhaps an actual accounting of those “investments” including the sources of the funds would be illuminating. Some of the money came from the Federal government. We might also want a financial analyst to calculate the present value of the $100,000 plus negative cash flow that is draining the General Fund. My guess is the net present value of that analysis would be around a negative $2-million.
Jack Wilson, Former Mayor

Posted: Thursday, August 02, 2012
Article comment by: Shocked Taxpayer

This is an incomprehensible decision. The bid for the Opera House, the only bid, was from a reputable group which has been quite successful in operating such venues elsewhere.
It apparently is going forward with purchase of
the building surrounding the Opera House.

The mayor, city manager, and city council
have a lot of explaining to do to taxpayers who
are just plain fed up with their flow of taxpayer funds to the Opera House, Antelope Hills golf course, the so-called Centennial Center, and the Trader Joe's developer. This is our money they are spending... in which the city should play no role.

All of these city officials call themselves conservatives. But they are not conservative with taxpayer money. ... Tea Party needed at city hall.

Posted: Thursday, August 02, 2012
Article comment by: Sir Walter Scott

The Council must need every penny they can get to (try to) settle their lawsuits! It's obvious that they don't know how to negotiate, especially in a delicate situation like this. A few years ago, the City was willing to donate the theater to the Elks Foundation - now, they refuse an offer from someone who is willing to buy the whole building and the theater!

The $500,000 figure had been shopped around for years with no takers. They should take the money and run since they claim to lose money on it every year. Let's see, just how much is an investment worth if it loses approximately $100,000 a year aka "a negative cash flow?"

Posted: Thursday, August 02, 2012
Article comment by: Bad Decision

The city was offered $500,000.00 by the ONLY bidder to step forward. Apparently the city council thought that a miracle was in the cards and that a venue that continues to be a sinkhole for city funds would generate a higher offer. Anyone with a modicum of business acumen understands that will not happen. In previous years the city has actually considered donating the Elks Opera House to the Elks Opera House Foundation and there were also discussions of selling it for $500,000.00. It is time for the citizens of Prescott to tell city council members it is time for the city to get out of the entertainment business.
Jack D. Wilson
Former Mayor

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