The Phoenix Theatre is hoping to get some help from the city of Indianapolis to finalize financing for its $11 million new home.
The building is nearing completion downtown at the northeast corner of Illinois and Walnut streets, and has a grand opening scheduled for April 28.
The theater has raised about $8 million in its capital campaign for the project, but $1.2 million of that amount is pledged donations that will be paid over several years.
And Bill Simmons, capital campaign manager for the theater, said Phoenix officials still want to raise at least $3 million more.
So, in the meantime, the theater hopes to finance the project through a $4.5 million bond backed by the city and an allocation of federal New Markets Tax Credits that could generate $2.5 million in equity.
“It buys us time,” Simmons said. “It allows us to settle into our new home.”
The Indianapolis City-County Council has already signed off on the tax credits. But the bond—which is needed to secure the tax credits because organizations receiving those funds need to show they have the capital for the project—is still going through the approval process.
The city would not be issuing the bond, but would be pledging downtown tax increment financing dollars as a backup payment source. The arrangement helps developers, or entities like the Phoenix Theatre, secure a lower interest rate. The theater would be responsible for the bond payments.
Simmons said the theater expects to pay off the bond within seven years, based on what the theater has already raised and what it expects to raise from donations and ticket sales once the facility opens. If the theater falls short on the payments, that’s when the TIF dollars would be used.
For at least seven years, the theater’s new property will be considered collateral to the city to provide extra protection. If the theater needs more than seven years to pay off the bond, the city could have a longer mortgage on the building.
“We really think based on what the Phoenix has already raised that we’re— even at a conservative approach— really minimizing any risk to the city,” said Jeff Bennett, the city’s deputy mayor of community development.
Simmons said Phoenix officials initially only approached the city about the tax credits, but as project costs grew (at one point, the cost was expected to be only $8.5 million), they realized they wouldn’t have the required funds to leverage the tax credits.
The city received $55 million in the tax credits, which are meant to provide gap financing for "developments designed to jump-start economic development, create jobs in at-risk areas and revitalize distressed neighborhoods” in January 2017.
The Riverside High School project at the former Indianapolis Naval Reserve Armory is the only other project to receive tax credits so far.
“These kinds of allocations really are going to change the face of the city,” Simmons said.
The Metropolitan Development Commission is expected to discuss the theater's bond request at its Wednesday meeting.