City signs letter of interest to pursue federal historic tax credits for Plaza Theatre restoration

The Palm Springs City Council on May 28 authorized city staff to enter a letter of interest with the Plaza Theatre Foundation and a nonprofit intermediary to pursue federal historic tax credit financing for the city’s downtown Plaza Theatre restoration.

City Attorney (presenting) told the council that the proposed approach would use private investment to monetize federal historic tax credits and could provide significant funding for the restoration while preserving city ownership of the property through long‑term lease structures.

“This proposed tax credit financing for the theater is being facilitated by an organization, a nonprofit, National Trust Community Investment Corporation,” the city attorney said in the staff presentation. He summarized the financing mechanics: a private investor would provide equity and receive tax credits, while the city and foundation would negotiate the structure and return to council for approval of any final deal.

Staff and foundation representatives described the likely financial outcome. The city attorney said the structure under discussion could provide more than $5 million in investment equity for the restoration and “net more than $2,800,000 with a successful historic tax credit financing.” He warned that pursuing the financing requires legal and accounting work and that any final agreement would return to the council for a public vote.

John Rotchaffer, partner at BBK (legal counsel on public finance and tax matters), emphasized the ownership and title limits in the proposed structure. “Title to the theater will not transfer out. So it'll still remain a city asset,” he told council members, describing how long‑term leases and operating agreements would convey the tax benefits to an investor while preserving municipal title.

Judith Blanchard, a board member of the Plaza Theatre Foundation, said the foundation considered but declined to pursue new markets tax credits in addition to historic tax credits because of legal complexity and the “but for” requirements for new markets credits. “We were advised that it would be even more complex for us to pursue new market credits, especially in addition to the complexity of the historic tax credits,” she said.

Council discussion focused on transparency, cost risk and timing. Counsel and foundation representatives told council that if negotiations do not result in a deal, the city and foundation would be responsible only for their documented negotiation costs (staff estimated consultant/legal review costs likely would not exceed roughly $100,000), and that any final tax‑credit financing would return to council for a public meeting and vote.

Action: council approved the letter of interest to pursue federal historic tax credit financing with National Trust Community Investment Corporation as intermediary and instructed staff and city legal counsel to continue work with the foundation and investor parties. The council emphasized that any final financing agreement would require a subsequent public vote.

Ending: foundation and city officials said the tax credit option could recover public funds and support the theater restoration, but they stressed the complexity of the transaction and the need for more detailed legal and financial work before a binding agreement would be executed.