City buys Rosebud

Samantha Newburn

EFFINGHAM — In a unanimous vote, the Effingham City Council approved purchasing the Rosebud Theatre in Effingham Tuesday night.

With very little discussion among council members, commissioners agreed to buy the theater for $3.3 million. A small group of people who supported the city’s purchase of the facility applauded the decision after commissioners officially approved the measure.

Commissioner Karen Flach commended city officials who put together the purchase agreement. She said she felt there were positive and negative aspects to buying the theater building, but she thought the agreement was good for the city because it included an option to give the theater back to the banks after two years.

The theater will be city-owned but will be operated by Arts Connection of Central Illinois, a nonprofit group that includes Tom Henderson, Dr. Ruben Boyajian, Joe Fatheree and Rosebud President and Chief Executive Officer Janie Oldfield.

According to the agreement, the building will be leased to the nonprofit group for $1 a year, allowing the theater to reduce overhead costs of rent, property taxes and other expenses associated with the building.

Arts Connection of Central Illinois members stress the money used to buy the theater will pay off the existing bank notes and will not go to investors of the Rosebud, who will take a $2.3 million loss on the building. The nonprofit group intends to run the theater similar to the way it operated before by bringing in well-known and local acts. The group believes the theater can be successful because the cost of purchasing or leasing the building is eliminated at least for those first two years, which will allow it to get firmly established.

Now that the city council has officially agreed to purchase the Rosebud facility, the arts group is expected to immediately begin planning for the 2010-2011 season, which typically begins in September. Members of the group have indicated they hope to book well-known acts, as well as local draws.

According to the agreement, the city will pay $3.3 million for the theater over the next 20 years at a 4.5 percent interest rate, or $250,000 per year.

During a December council meeting, City Attorney Matt Hortenstine said the arts group is interested in a possible .5 percent food-and-beverage tax increase in the city, which has been discussed as a way to help fund the purchase of the theater.

However, the proposed food-and-beverage tax was not discussed at Tuesday’s meeting.

Currently, the city does not have the power to impose the tax. However, the nonprofit group has indicated it may be interested in trying to get community support and legislative action that would give the city the authority to impose the food-and-beverage tax.

If imposed, the .5 percent sales tax increase would be assessed on prepared food and beverages purchased at restaurants and bars, not grocers or convenience stores. The sales tax increase would make a $10 meal at a restaurant cost 5 cents more. Hortenstine estimated the tax could generate about $300,000 per year. That revenue would be used to pay off the bonds on the Rosebud facility.

The arts group initially suggested the city purchase the Rosebud using hotel-motel tax funds. However, city officials indicated last month that because other projects are already slated to use hotel-motel tax funds, there is not enough remaining funds in that account to sustain payments to purchase the Rosebud over the next 20 years.

If the food-and-beverage tax is not implemented, the city will make payments on the theater for the next two years for a total of $500,000. Those funds will come from hotel-motel tax revenues, which can only be used to promote tourism and overnight stays in the city. As part of the purchase agreement, the city has the right to give the theater back to the banks after those first two years.

This scenario allows time for the nonprofit group to gain support for the food-and-beverage tax and to get legislation passed that would give the city authority to impose the tax. If that doesn’t happen, then the city may give the facility back to the banks holding the bonds.

If the city hands the facility back to the banks and the nonprofit group has been successful in financially operating the theater, then the banks will transfer the facility to the nonprofit group, which will be responsible for future payments.

Samantha Newburn may be reached at 217-347-7151 ext. 131 or samantha.newburn@effinghamdailynews.com.

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