SECTION 7: IMPLEMENTATION
Kenosha Theater The Kenosha Theater is one of Kenosha’s more architecturally and historically significant buildings and its rehabilitation can serve to diversify Downtown’s cultural and entertainment offerings, as well as catalyze additional investment in buildings and businesses along the Downtown’s southern edge adjacent to Library Square. The Kenosha Theater Restoration Project (KTRP), a non-profit organization formed to spearhead the Theater’s rehabilitation and reuse, currently has a multi-year lease with an option to purchase the building once it secures project financing. The Theater has been largely vacant and unused since its closure in 1963, and during the 1970s, its ornate plaster ceiling was extensively damaged during a roof repair project funded through a Community Development Block Grant. The building remains structurally sound and can be feasibly restored and rehabilitated. According to KTRP, rehabilitation expenses are estimated to be $24 million, with an additional $5 million for construction of an adjacent parking garage. Municipal revenue bonds are proposed by the KTRP as the primary financing vehicle. It is unclear if the KTRP has developed a capital stack – the totality of different capital sources committed and available to defray and underwrite the cost of completing the Theater’s rehabilitation. It is also unclear whether the KTRP has explored the use of Historic Preservation and New Markets Tax Credits as a source of syndicated project equity. Both tax credit programs could potentially provide more than $13 million in project financing (see Table 7-3 on facing page). The following are recommended implementation steps and polices for rehabilitating the Kenosha Theater (recommendations for operating the Theater have not been considered for this planning assignment): ■
The KTRP should move forward in developing a capital stack that includes the Historic Preservation and New Markets Tax Credits as critical project financing along with other sources of revenues, including private sector fundraising and corporate contributions, donor gifts, foundation support, conventional bank loans and Federal and State grants (see the following section on the available tax credit programs). The City could contribute gap financing to the capital stack, in the form of low-interest loans or grants, when the KTRP has secured other capital sources, including the tax credits.
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Most likely, the KTRP will need to expand and enhance the capacities of its project team to undertake the development of the capital stack and the overall project financing and operating plans. The project team should include a professional fundraiser to assist in undertaking a proactive capital fundraising campaign and writing grant proposals, a preservation architect experienced in dealing with the Historic Preservation Tax Credits design review process that will be required by the Wisconsin State Historic Preservation Office, and tax credit consultants that can prepare the necessary tax credit applications and facilitate the tax credit syndication process. Government and foundation grants are available to secure start-up funds to underwrite the costs of consultant fees and feasibility studies to develop the overall financing plan and begin the process of securing capital sources.
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In seeking the tax credits, the KTRP will need to form a Limited Liability Company or Limited Partnership that takes ownership of the Theater property, accomplishes the rehabilitation project and receives the benefits of tax credit financing. The investors in the LLC contribute cash equity in exchange for the rights to the earned tax credits, thus their reducing Federal and State tax liabilities. Essentially, the LLC becomes the new theater owner until recapture penalty periods are lapsed, which are generally five for the HPTCs and seven for the NMTCs. The KTRP would continue to raise other capital sources, donations, and grants to complete the capital stack and even operate the Theater after the rehabilitation period.
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Using the New Markets Tax Credits will require securing the credits from a Community Development Entity (CDE), which in turn receives an allocation from the U.S. Department of the Treasury. Active CDE’s within the region include the Wisconsin Community Development Legacy Fund, a program of the Wisconsin Housing and Economic Development Authority, and the Johnson Community Development Company based in Racine.
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A City contribution to the project could be in the form of a low-interest loan or grant for gap financing purposes, drawn potentially from a new Tax Increment Finance District. The City should retain professional development advisors to evaluate the feasibility and strength of the KTRP’s capital stack, and other financing and operating plans before approving a gap financing deal.
CITY OF KENOSHA, WISCONSIN
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KENOSHA DOWNTOWN STRATEGIC DEVELOPMENT PLAN IMPLEMENTATION
FINAL DRAFT