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TOPIC: Fair Competition in Durant Ok?

Fair Competition in Durant Ok? 11 Apr 2010 22:59 #33732

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www.durantdemocrat.com/view/full_story/7...tance=home_news_lead

New movie theater for Durant is still in the picture
by Jamie Carrick, staff writer1 day 6 hrs ago | 814 views | 0 | 3 | | Although some Durant City Council members may have questions regarding a Durant Industrial Authority loan for a proposed new theater, the project is continuing as planned, due to a recent ruling from City Attorney Pat Phelps.

On March 9, the DIA approved a $500,000 loan, which would include two parts — $250,000 for 25 years at zero interest paid back monthly and a $250,000 loan that is forgiven if theater ticket sales reach 100,000 per each of the first 10 years, which would generate sales of $700,000 and provide Durant sales tax value of $31,000 annually.

The new state-of-the-art theater, which would be located on a 4.2 acre site south of University, will have an estimated investment of $4.5 million for land, building and equipment.

In a March 9 Durant City Council meeting, council members tabled the matter and asked the DIA to reevaluate the loan agreement with B&B Theatres and Rupe Development.

In a message to Tommy Kramer, executive director of the DIA, Phelps wrote on March 10 that he reviewed the DIA trust indenture and its supplements and “conversed with other Oklahoma lawyers who deal solely in the field of public finances.”

According to the message, the trust indenture allows the DIA “to provide funds for the cost of financing, refinancing, acquiring, constructing or purchasing” properties for the purpose of economic development.

Thus, a motion by the city council is not necessary in order to pursue the loan agreement. If the ruling had been required, the DIA would have honored the council’s opinion either way, Durant Mayor Jerry Tomlinson said.

The attorney’s opinion about the necessity of the vote would have been preferred before the council meeting because it would have eliminated confusion among the council members, Tomlinson said. During the meeting, council member Bobby Story asked many times if the council even needed to make a ruling on the DIA’s decision.

During the council meeting, Vice Mayor Tom Marcum said the large loan is unprecedented because the DIA has never given loan funds to for-profit private retail groups in the past unless they brought a large number of jobs and sales tax value.

“We have never chosen economic development funds for entertainment venues,” Marcum said. However, public funds have been given to not-for-profit venues.

Kramer spoke to the council, saying that the loan was approved on the basis that it is subject to a bankable loan.

John Rupe Sr. with Rupe Development is seeking a loan with First United Bank being the lead bank and wants other Durant banks to participate in the loan. Rural Enterprises would package the business loan with a SBA-504 loan program with the local banks.

Tomlinson said the theater group is still working with local banks on the finance end of the project. Once that process is complete, the bank loans will be a basis for the DIA loan.

Approximately $4 million of the funds will come from financial institutions. The finances could be completed in several weeks, Tomlinson said.

In regards to the $500,000 DIA loan, Tomlinson said he would not describe the amount as “big,” but rather the amount necessary to make the project a viable option for everyone involved.

Other theater groups have not been interested in coming to the Durant area, Tomlinson said, and B&B Theatres is the 20th largest theater group in the nation.

Kramer said the company has hired professional engineering and architect firms for the project, and final conceptual plans and designs could be complete soon, possibly in 60 days.

Once engineering and design blueprints are complete, they must be brought to city officials to make sure they meet Durant building codes, Kramer said.

The theater company approached the city in 2007, saying they had surveyed the market and saw the leakage of movie patrons that Durant was experiencing, Kramer said.

When asked why the project has taken three years to come to the forefront, Kramer said the occurrence is not uncommon. He worked with Chili’s between five and six years and worked for 10-plus years to bring a new Braum’s to Durant.

Kramer stressed that the funds used for the loan will come from a non-sales tax fund used for economic development projects. More than $500,000 is currently in the account, he said.

The DIA studied and reviewed the funding options for the project and decided that using the economic fund was the best option, Kramer said.

Tomlinson said part of the funds for the account comes from members of the original industrial foundation that was in place before the DIA.

When the DIA was founded in 1964, Kramer said the funds from the foundation were transferred over into a special account, which was to be used for economic development projects.

Kramer said the DIA has waited to use the funds on an economic project Durant citizens would stand behind. Because the DIA was founded 46 years ago, he is unsure if a portion of the funds have been used for past projects.

The new theater is expected to employ 20-25 part-time employees and two to three full-time management positions. It would have eight theaters, with the largest seating 238 patrons and the smallest seating a little under 100.

Tomlinson said citizens have been been excited about the project and he has heard people ask if the theater is still coming to the area.

Kramer said he is unaware of opponents to the project and that the reaction has been overwhelmingly positive. Also, he feels that the theater will have a positive effect on other retail businesses in the community.

“I’ve never seen so much excitement from the citizens about a project [before],” Kramer said.

A new theater has been the No. 1 request from citizens, he said, and additional restaurants is a close second.

Rene Lemons, general manager of the Durant Twin Cinema and Bowling Center, disagrees with the funding plan for the new theater, saying that Jerry and Ann Wann did not receive any financial help from the city when they opened Durant Twin Cinema in 1993.

“The city officials want to give them a loan. Jerry had to do it on his own,” she said at the DIA meeting in March, adding that the loan proposal for the outside company is like a “stab in the back.”

Before the vote, Lemons asked why the Mr. Wann was not approached about upgrading and renovating the Durant Twin Cinema

Addressing the policy question, Kramer said that projects come to the city in a multi-facet of ways and in that the DIA does not approach businesses. Rather, businesses approach them with project ideas.

He said that local businesses are more than welcome to approach the DIA with projects.

The DIA’s job is to improve the workforce in the community and help businesses, Kramer said.
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Re:Fair Competition in Durant Ok? 11 Apr 2010 23:08 #33733

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For those who do not know much about B&B see:
www.bbtheatres.com/index.asp

Current population of Durant approx. 16,000. Closest theater for "leakage" 35 miles away.

I spoke to the GM of the current theater in Durant www.durantbowl.com/Theater.html

There beef is the free loans. If this is such a great idea, then why not put your own $$ into it.

Seems like a lot of money for such few jobs. I can't see both theaters staying. So you gain 3 full-time jobs but probably lose 2? So you might gain 10 part-time min. wage jobs?

I also doubt that there is much leakage to a theater 35 miles away.
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Re:Fair Competition in Durant Ok? 12 Apr 2010 00:11 #33734

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A POPULATION OF 16,000 CAN SUPPORT 3 SCREENS AND MAKE MONEY.
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Re:Fair Competition in Durant Ok? 12 Apr 2010 01:33 #33735

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I disagree. If the screens are all owned by 1 co. 5-6 might be ideal. The cost to operate 8 over 6 is pretty minimal however. Plus if the city is giving you free money........

B&B operates at least 10 6-8 plexes in towns of less than 18,000 population. They have a 8 plex in a town of 12,000 within 25 mins of me.
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Re:Fair Competition in Durant Ok? 12 Apr 2010 18:39 #33740

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pretty cruddy that the town will fund a new theatre and bottom line: put the local one out of biz. I wonder if they gave them the option. 16K but how many within 15 miles? That is plenty people for 10 screen. You big city dudes don't know nuthin about hicksville. :)
Michael Hurley
Impresario
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Re:Fair Competition in Durant Ok? 12 Apr 2010 21:42 #33741

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16 k for a ten screen---better not think it can make money.............That theater will be in the red for a decade.
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Re:Fair Competition in Durant Ok? 12 Apr 2010 22:36 #33743

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Mike,

Do you think 2-first run theaters can operate successfully in a 16k town? Know of any towns that size that size that support 2 first runs?

BTW, the Durant Twin has 4 screens (might be time for a name change). If look at what they play, they seem to be in the 2800 location range on movies.
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Re:Fair Competition in Durant Ok? 12 Apr 2010 23:22 #33744

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Not if you want to make money . Out of 16k how many of those go to the movies per week/year. 3/4 screens it can support ....
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Re:Fair Competition in Durant Ok? 13 Apr 2010 14:55 #33747

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I know these stats are general and blended for the entire country, but according to NATO, average person goes to the movie approximately ~6.5x per year. Let's apply the national averages to the Durant, OK population.

* 217 million moviegoers bought 1.4 billion tickets in 2009

* 305 million people in the US = 71% penetration for filmgoers

* 16,000 ppl in Durant, OK = ~11,300 moviegoers (assuming 71% penetration)

Assuming this 16,000 person town/county conformed to the national average, then the trade area would be pumping out ~73,500 tickets annually, which using the 2009 average MPAA ticket price, would equate to ~$551,000 in admissions for the year.

For the new 10-screen theater from B&B plus the 4-screen existing theater, that would average about ~$39,400 per screen on an annual basis.

Nominal conditions, then this population would generate about half the gross box in concessions, so you're sitting at ~$275,500 in concessions revenue, or ~$19,700 in concessions/screen.

Total Estimated Annual Revenue/Screen: ~$59,100

IMHO, seems like a bit of a stretch for this trade area to support 14 screens. I really think that the 10-screen alone would probably be running in the red on those kinds of numbers, but maybe B&B has some management trick up its sleeve that I don't know about.

Regardless, my guess is that the internal rate of return for this theater project will probably never justify the investment, even with the government money involved.
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Re:Fair Competition in Durant Ok? 13 Apr 2010 22:14 #33750

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ON MY SINGLE SCREEN I CANT MAKE MONEY ON $551,000 BOX OFFICE GROSS .The average 10 screen complex is about 30,000 sq feet. The electric bill alone will be $5,000 per moth --at least $10,000 per month on salaries ,Insurance $15,000 per year,cable & phones $400.00 per month,workers comp $6,000 per year at least ! Xenon bulbs alone per year will be $10,000 per year ,garbage ,payroll taxes, advertising,
Would not touch that with a ten foot pole.
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Re:Fair Competition in Durant Ok? 14 Apr 2010 09:29 #33751

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We are talking about a new 8-screen not 10.

Does anyone think the 4-plex can make it with a brand new 8? I do not.

So BWT's analysis comes down to approx. $68,000 ticket gross per screen.


So Slap says it can't be done (8 screen in a town of 16,000). B&B operates over 30 locations with aprox. 1/3 being just like this project. Sorry Slap, I am going to believe it can be done. Ceratinly so if you can get free money.

Keep in mind that all of B&B's new facilities are all digital. I am sure they are getting VPFs. So since they are not replacing paid for film equipment,equipment costs are lower for them than us.

They will be having 2-3 full-time employees. I would imagine the GM gets paid $30,000 with an asst. man getting $24,000. A 4-plex and and an 8-plex can be operated with the same wages.

Building expense: The same size lobby will handle 8 as well as 4. Rooms 5-8 need be no more than 100 seats. Some can be 60-70. The cost for a auditorium amortized over 20 years that is added to a 4-pex at the beginning....I bet they can get an addiitonal auditorium for no more than $1000 a month which is a pretty minimal cost. Certainly worth having when the studios pump out 2-3 big new movies each week during the holidays and summer mos. It is pretty easy to fill an 8-plex with just maintream movies most of the year.

So pretty much all of your costs would be variable (film rental and cogs).

I also think your est. utility bill is a bit high. I pay on ave. $1000 per mo, on 11,000 sq ft. That is in a 30 year old building far from being energy efficient.
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Re:Fair Competition in Durant Ok? 14 Apr 2010 15:30 #33753

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This thread seems to have gotten off point. The real issue here is should public monies be used to subsidize a new for-profit multiplex for B&B and (as we all know will happen) help put the current existing theatre serviung the town out of business.

Obviously B&B used its political clout and corporate razzle dazzle to get public monies. Its done all the time. It is always sold to the public as "creating jobs". But just like Obahma's stimulus package no one actually determines just how much it costs the taxpayers on a per job basis.

In this case they will create probably create at most three to five full time jobs and few part time jobs at the new theatre but then you really should factor in how many will be lost when the older theatre closes. IN reality it is probably a wash from job creation point of view. But even if the older theatre continues is it a good use of public monies to spend 500,000 to create at most 5 full time jobs? That comes out to 100,000 per full job. You never hear that discussion.

The point is that taxpayers are always subsidizing some enterprise which then gives it a competitive advantage against a for profit taxpaying entity. For example the non profit health recreational facilities operated by the YMCA or hospitals often enjoy exemption from local real estate and other taxes while the identical facilities operated by Gold's Gym or another for-profit rehab facility pay full taxes. Is this fair? No. Will it continue? You bet. Sadly its the American way.
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Re:Fair Competition in Durant Ok? 14 Apr 2010 17:58 #33754

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NO WAY
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Re:Fair Competition in Durant Ok? 15 Apr 2010 13:12 #33755

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I would also say "No". Unfortunately, I have seen it done. A nearby community has a single screen and a drive-in which has continuously been run by its founding family since 1947. Some time ago, several government-savvy people presented a financial package to the city, which provided grants and loan guarantees to build a new twin.

Now, the original family, which has done nothing but provide entertainment, jobs and taxes to its community has competition... financed, in part, by same said community.

Seems like it should be illegal, but it happened, and the competing theatre has now been in operation for nearly 20 years.
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