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Letter to the Editor from Emil Marzullo, Director EDA

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Dear Community Resident and Leader,

A petition is circulating throughout the community that contains an errorfilled memorandum regarding the reopening of the downtown movie theater.

On January 10, 2011 the mayor and common council will conduct a public hearing to consider a 34 year lease agreement with the Regal Entertainment Group (operator of Edwards Cinemas, United Artists, and Regal Cinemas). It is apparent from the information contained in these memoranda, that legally confidential information is being disseminated to advance certain private and political agendas. More troubling, is the fact that this information is so factually inaccurate that its purpose is clearly to misinform the public about the proposed reopening of the movie theaters.

I am writing this letter to provide you the facts, in the hope our City does not once-again “shoot itself in the foot” because of self-interests, as we have done so often in the past. It is time for San Bernardino to make decisions guided by professionals and experts, not politics and self-interest.

Our residents deserve this and our businesses need this.

Historically, public investment in downtown San Bernardino intended to create economic growth has often failed to produce results because the plans and decisions did not give sufficient consideration to ensure that the public investment was a true catalyst for private investment. Past public investments have been made with insufficient plans to ensure it encouraged private investment. The original movie theater and the baseball stadium built during the mid-1990’s are good examples. Neither public investment was tied to plans for additional private investment. As a result, both have sat for 15 years in isolation doing very little to spur private investment and economic growth.

Thus, if our City is to reopen the downtown movie theater, the only measure of success should be whether the reopening of the movie theater spurs additional private investment and business in downtown restaurants, shops, and entertainment. Merely reopening the movie theater and hoping it stays open would not be a success – that would simply repeat the failures of the past.

To ensure success, the City retained several expert consultants to evaluate options for reopening the movie theaters.

These consultants have proven track-records in the disciplines of theater development and operations, retail development and modern urban planning and design principles. These consultants have assisted other cities in our state and nation in making decisions that ensure targeted public investments are a catalyst for private investment.

I attach and share with you, comments received from the Fransen Company, one of our retained retail and entertainment experts for this project. John Fransen, principal of the firm has successfully aided communities across the nation in these types of projects.

The City solicited proposals from cinema operators to reopen the movie theater and asked these experts to evaluate not only viability of the proposals to successfully reopen the theaters, but also to evaluate which proposals had the best chance to succeed on the only measure of success that counts – the ability to immediately attract additional private investment and business to the city.

The consultants’ concluded that of the 8 proposals received, Regal Cinemas not only created the greatest return on investment of the public dollars, but also had the greatest chance of attracting additional private investment and business in and around the movie theater complex. In fact, once it became known the City was negotiating with Regal Cinemas, development groups and businesses began contacting the City regarding the opportunities adjacent to the Regaloperated movie theater.

Why? Very simply, Regal Cinemas is a known commodity that other investors trust and are willing to assume that if Regal believes there is a good market in downtown San Bernardino, then they are willing to make their own investment. It is very similar to an “anchor tenant” in a shopping center. The type of anchor tenant largely dictates what secondary tenants sign leases. If you attract a strong anchor, you attract strong secondary tenants.

Does that mean only Regal Cinema could be successful in reopening the downtown movie theater? No. Other theater operators could certainly operate the cinema. The fact that the City received eight proposals is evidence of the market for a theater complex in downtown. Merely reopening the movie theaters is absolutely the wrong measure of success. Success will only be achieved by movie theaters that attract additional private investment and business into downtown.

It is unfortunate the error-filled memorandum being circulated by certain local self-interests ignores these basic principles of commercial real estate and economic development. The memorandum advocates the City immediately sell the theater property to a northern California real estate speculator, so this company can profit from leasing the theater to an operator like Regal Cinema or worse, a small unknown theater franchise. Does anyone remember the name Cinemastar?

The problem in selling the property without a well capitalized operator, is that the City has no ability to ensure the theater actually reopens; the City has no ability to ensure the theater is operated by a company that will attract other private investment and businesses to downtown; in fact, once the City sells the property, it has no ability to ensure it’s even reused for movie theater at all.

If we are committed to having a movie theater in downtown San Bernardino (which the market indicates strong support for), then let’s make sure this time around our efforts result in spurring other economic development around the theater.

Experts with a proven track record of success have advised the City that Regal Cinemas provides the best opportunity of ensuring a successful outcome.

I am hopeful that City will follow the professional advice and recommendations it has received to best ensure that our limited public investment spurs economic development – a formula for success seen in other cities like Ontario, Riverside, and Rancho Cucamonga, but rarely in San Bernardino. To do otherwise would be to once again follow the mistakes of the past and let self-interest prevail over the collective and long-term economic health of this City.

Emil Marzullo, EDA, Director, City of San Bernardino

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