Taxpayers could be on the hook for Wheaton theater plan

Ray Shepardson says he's convinced that a revamped and reopened Wheaton Grand Theater would be a financial success.

"I think it's a no-brainer," said Shepardson, the driving force behind the renovation of the 84-year-old theater in downtown Wheaton.

The question facing city leaders is whether they are willing to gamble taxpayer dollars to find out if Shepardson is right.

The Wheaton Grand, which is located along Hale Street, fell into disrepair years ago as it was ending its run as a movie theater. More recently, money has been funneled into improvements and now the building is being used part-time by a church.

In a move that could have the theater open for live performances by the end of 2011, Wheaton Park District officials are considering a plan to take ownership of the building and borrow $19.3 million to renovate and expand it.

The Grand Theater Corp., the not-for-profit group that oversees management of the theater, then would pay an annual licensing fee to the park district. Money raised from the fee would be used by the park district to repay the 20-year loan.

"The only thing we are doing is using the clout of the park district to allow the project to happen," Shepardson said.

However, park district officials are asking the city and Downtown Wheaton Association to serve as a partial financial "backstop" in case the theater fails to raise enough cash for the loan payments.

That idea is expected to be presented to the Wheaton City Council during its Monday planning session.

Michael Benard, park district executive director, said the partnership is needed before the park district can move forward. If the Downtown Wheaton Association and city both sign on, the association would serve as the first backstop.

Then if the theater doesn't raise enough money to pay the debt during a given year, the Downtown Wheaton Association would contribute up to $250,000 per year to help cover the shortfall, according to the park district proposal.

The city is being asked to provide the second backstop payment - up to $250,000 a year - if there is a shortfall beyond the revenue provided by the DWA.

If the shortfall exceeds $500,000 in a year, the park district would pick up the rest of the annual debt service payment.

According to preliminary estimates provided by the park district, the annual debt payments for the first seven years would be roughly $1.1 million. Then the loan could be refinanced to keep the remaining payments at that amount. Otherwise, the yearly debt service payments would climb to roughly $2.1 million.

Shepardson said he's confident that the theater could generate enough money to meet all of its financial obligations.

"This is the lowest risk project I have ever been involved with," said Shepardson, who has spent his entire career restoring theaters and making them profitable.

Shepardson's vision is to transform the Wheaton Grand into a 1,150-seat venue that would have a "wonderful melding of the arts and entertainment," including music, magic and comedy acts.

"I am first and foremost a preservationist," he said. "And if you want to save a building, the best way to save it is to make it economically viable."

At least one feasibility study supports Shepardson's view that the theater's biggest asset is its location.

"When you have 2 million people within 15 miles who currently spend $2.2 billion a year on entertainment, it doesn't get any more fertile than that," he said.

Originally, theater officials wanted to use the city's bonding authority to borrow the millions needed for the renovation. That proposal would have left the city with zero financial obligations to pay back the debt if the theater faltered.

But City Manager Don Rose said the economic downturn made it difficult to secure funding in that manner.

"There are very few, if any, lenders out there who are willing to lend just to a private entity," Rose said. "Now if the government is willing to back the debt, there is a better chance they would be able to finance it."

Mayor Michael Gresk said he's undecided on whether he can support this newer proposal, which could end up costing taxpayer dollars.

"We will seriously consider this," Gresk said. "But you also have to understand that we are in extremely tough economic times. And like any situation that deals with the city, our primary concern is level one services - police, fire, streets, water.

"Any other considerations would have to be long and well thought out," Gresk added.

Benard stressed there would be "no exposure" for Wheaton because the plan calls for the city to be reimbursed for any money it might have to contribute.

"They would not be investing permanently one dollar in this project," Benard said. "If they make the pledge and ever have to be called upon to meet it, they will be paid back within 365 days."

Plan: Mayor isn't sure if he can support funding