The Bureau of Governmental Research held a breakfast briefing Friday morning at the Chateau Bourbon on Bienville. The topic was the plans for the redevelopment of the Theater District in New Orleans, namely the area that includes the Saenger, Orpheum, Palace and Joy Theaters. The panel included Kurt Weigel, President of the Downtown Development District and Lynne Sagalyn, Director of the Paul Milstein Center for Real Estate and the Earle W. Kazis and Benjamin Schore Professor of Real Estate at Columbia University. She is also the author of several books including Times Square Roulette: Remaking the City Icon and Downtown, Inc.: How America Rebuilds Cities with Bernard Frieden. Her Times Square experience was referenced quite a bit through the presentation relating back to the differences and similarities between the two cities’ circumstances.
Financing a Theater District
Kurt Weigel spoke first. In comparing New Orleans Theater District to Times Square, he recognized the difference in scale and associated cost. There are some tools that won’t be available to New Orleans that were used in New York. The PILOT program (payment in lieu of taxes) which allows municipalities to receive income from a designated district in the form of payment that is directly applied to a special project is not a commonly used tool in Louisiana. And upzoning, which allows the city to increase the allowable square footage to be built, works well in a highly dense urban environment such as Manhattan but is less desirable in New Orleans where the scale of the city, including the French Quarter, is to be preserved. Also, eminent domain, which was a tool used to gain control of much of the privately owned land around Times Square is a politically charged tool that would likely not be used for this purpose.
Instead, Mr. Weigel, noted, New Orleans has some other significant tools available; the State Historic Tax Credit of 25%, the New Markets Tax Credit and the Performing Arts Tax Credit.
Mr. Weigel pointed to the Saenger as an example of using the funding sources that are available. A $38.3M project, the funding is compiled of $23.2M in tax credit financing and other equity and $15M from a Louisiana Recovery Authority Grant. The Saenger is scheduled to reopen in Fall 2011 and he says, construction is beginning soon. Construction has been scheduled to start in late 2009.
The critical point to the financing of theaters, says Mr. Weigel, is that they can operate in the positive but there can be no debt service or loan on the project. It is important, he says, that theater projects be recognized as economic catalysts for areas and treated as such in the financing. In most cases, he noted, the state funding sources make up about 80% of the financing needed on these projects and the remaining gap must be solved. His proposal is to begin to look at tax increment financing, something that many New Orleans are familiar with but hesitant to approve.
Vision for the Theater District
Mr. Weigel spoke of the importance of developing the area around the four primary theaters and indicated that based on two different market studies, it appears that the theater district could support 1-2 more theaters. This raised concerns from the audience of developers and theater management who questioned whether there is critical mass in New Orleans to support more theater and not take away from the entertainment venues which are already here. Mr Weigel and Dr. Sagalyn both pointed to tourism as supporting the additional demand beyond locals. “You have to create theater that you don’t already have so that you don’t compete with yourself”. Dr. Sagalyn pointed to the first theater to open on 42nd Street after the redevelopment which was a children’s theater (The New Victory Theater) which New York had not seen before and which was profoundly successful. “New Orleans needs to think outside the box.”
Mr. Weigel cited the investment in the Downtown Development District since the storm. Over $610M in new construction starts in just the last few years including the Roosevelt Hotel which was just completed with a total budget of $170M. He also pointed to the $17M of investment in the Canal Street streetscape and the new storefronts along Canal. Second and third floor residential is also evidence of progress in the area, something that was difficult to attract in the past.
He envisions a gathering pavilion at Basin Street and Canal which would provide a focal point and a center for the district. Something, he says, that the area does not have now.
Dr. Sagalyn speaks on New Orleans Theater District
For her part of the presentation, Dr. Sagalyn wanted to make three simple points. “Create, Cultivate and Protect” these districts. She stressed the importance of looking at the redevelopment of a district rather than individual projects and to manage it as such. She pointed out that New Orleans has many of the preconditions that many cities who want to develop a theater district don’t have. New Orleans is already a draw for tourists and already has a brand that just needs to be cultivated.
Three lessons that New Orleans can learn from New York’s experience are:
1) that preservation of the building structure in and of itself is not enough. For this district to thrive there needs to be active cultivation and she continued to stress the importance of looking at the endeavor as an overall district rather than individual projects. In New York, a non-profit entity whose sole task was to shepherd the redevelopment of the district through the process was critical. By being an independent or quasi-independent entity, it was able to avoid much of the restructuring caused by mayoral turnover and to maintain their focus through political changes. This entity was set up operationally to be funded by the ground rent (99 year leases) provided through the eight theaters in the district.
2) The redevelopment needs to seek something that is not already here. The goal is not to compete with the existing entertainment in and around New Orleans but to reinforce and enhance it.
And finally 3) it is important to think in a flexible way about the program for the district. She cited the importance of the supporting facilities needed for the theater, including costuming, make up, wigs, lighting and rehearsal spaces. In New York, these facilities have been supported and funded through the non-profit entity created in the Times Square District. These support facilities are able to take the less desirable second and third floor spaces and reinforce the districts strength. This has been an important economic development tool for Times Square and should not be forgotten in New Orleans, she says.
Dr. Sagalyn emphasized the importance of good leadership to create the vision and steward a coalition of stakeholders through the process. The Times Square redevelopment took over twenty years and to maintain the focus, strong leadership was critical. This coalition is also important to manage and cultivate the marketing of the district to create a strong image and identity.
And, she says, it is important to “protect the baby.” The independent structure of this non-profit entity and the vision of a comprehensive theater district has survived 4 mayors in New York and twenty years so far.