At What Cost? Tower Purchase Could Exceed $20 Million
The price of $6.5 million offered by the city of Fresno to buy the Tower Theatre could more than triple to over $20 million, critics of the deal say.
In a proposal introduced this week by city councilmembers Miguel Arias and Esmeralda Soria, the city would buy the theater property then turn around and sell a portion of it to a restaurant that is already a tenant.
“We are trying to preserve one of the major historical assets in the city of Fresno that’s the economic engine and anchor to the Tower District,” Arias said.
Money for the purchase would come from the general fund and Measure P — the voter-approved sales tax hike for parks and arts facilities.
But the price proposed by the councilmembers may only represent a portion of the ultimate costs. The deal would also have the city take over ongoing lawsuits and pay accumulated legal fees. Multiple legal disputes over the iconic Tower District landmark remain unresolved.
Adventure Church, which regularly rents the theater, had an offer in place in 2020 to buy the Tower Theatre for $4.8 million.
When the deal stalled because of another lawsuit, the church sued the owners of the theater. Attorney David Emerzian says the city could be on the hook for up to $15 million in attorney fees and damages.
“We’re just really disappointed in how the city has decided to use taxpayer dollars … to interfere with a private contract and then to purchase the theater, which had no interest in purchasing prior to us coming aboard in the fall of 2020,” Emerzian, an attorney with McCormick Barstow LLP, said.
Councilman Skeptical of Damages
Arias, who represents the council district adjacent to the theater, is skeptical of Emerzian’s estimate.
“I don’t agree with the premise of your question, nor the person who is making those estimates,” Arias said when asked about the potential cost of more than $20 million. “They have a little bit of bias in their estimate.”
Arias said he did not have an estimate on what litigation may cost.
More from Councilman Miguel Arias
Emerzian explained the cost in an email to the City Council on Tuesday. Potential damages include the city violating federal law and interfering with the church’s attempt to buy the theater. Punitive damages are also a possibility, Emerzian said.
He noted other potential damages, including:
— $9,575 a month for up to 20 years from lost rental income;
— $4,500 a month for up to 20 years from lost revenue from hosting events;
— $2 million in loss of value, the difference in the price Adventure Church offered in 2020 and what the city is offering;
— $162,834 in rental payments since February 2021, when the deal to buy the theater could have closed;
— $220,000 in improvements Adventure Church made to the theater;
— $100,000 or more in attorney’s fees.
“That’s what we see as the potential exposure,” Emerzian said. “To the extent we can establish damages for loss of use, whatever those numbers turn out to be will be substantial.”
Another tenant of the property, which operates Sequoia Brewing Company, successfully argued in court they have the first right to buy the property it currently rents for the restaurant.
The church filed its own breach of contract lawsuit in February. The complaint alleges Laurence Abbate, who manages Tower Theatre on behalf of his family, mislead Adventure Church during the sales process.
Abbate allegedly told Adventure Church “there was nothing to worry about” regarding Sequoia’s right to buy. The church argues that statement shows the theater negotiated in bad faith. The case returns to Fresno County Superior Court on June 8 for a case management conference.
David Camenson, lawyer for Tower Theatre, declined to make a comment.
City to Cover Legal Defense
One of the motions the City Council is scheduled to vote on is indemnification of the owners of Tower Theatre and Sequoia Brewing Company — in essence taking over the legal and financial liability resulting from any outstanding court case.
The city has provided no estimate to how much that may cost.
During its legal battles with Tower Theatre, supporters donated money to the legal defense of Sequoia Brewing Company. Kimberly Mayhew, an attorney representing the brewpub known by its corporate name of J&A Mash & Barrel in court documents, estimates $60,000-$70,000 in donations.
“Our client will be giving back to the community by donating all of the funds that were generously given by Sequoia’s supporters, to benefit the arts in the Tower District,” Mayhew said.
City to Loan Sequoia for Purchase
The City Council plan is for Sequoia Brewing Company to buy the building it leases for $1.2 million, less $250,000 in various credits for attorneys fees and improvements already made. The city would also provide another $125,000 in attorney fees.
City documents reveal that the city would loan J&A Mash & Barrel $950,000 as a 30-year loan at an interest rate of 3.5%. Monthly payments would be $4,265.92.
Mortgage industry sources say a loan at that rate for that time period is a deal.
Adventure Church pastor Anthony Flores was highly critical of the arrangement. He said he’s had trouble finding a loan.
“It must be nice to be a white, middle-class man in America and in (the) Tower District. I’m getting kicked out, and dude is getting a sweetheart of a loan,” Flores said in his Not Offended Podcast.
Councilman Garry Bredefeld said the city making such a loan would be unprecedented.
Dyer Has Limited Power
Mayor Jerry Dyer says he is powerless to stop the City Council from approving the deal. Land use votes are not subject to veto, though he says he has reservations.
“I’m not comfortable with any number when it comes to litigation. That is a concern for the city … the indemnification of the owner of the Tower Theater,” Dyer said on Tuesday. “Is it worth the risk of the potential litigation that may be brought forth from the Adventure Church? That’s really the crux of this thing.”
Dyer says the future of Tower Theatre has split the city.
“I don’t like the fact that the city of Fresno has been put in the middle of this from the onset. People in the Tower District, people on both sides have reached out, (and) wanted this city to take their side. And there are no winners,” Dyer said.
Whatever decision is made, Dyer said his administration will be tasked of enforcing the deal including who uses the theater and terms of the loan to Sequoia Brewing.
Where the Council Stands
Other Fresno city councilmembers are speaking out on the deal.
Garry Bredefeld held a news conference Tuesday to condemn the sale. He called it a “bogus deal.”
“Government has absolutely no business interfering in a deal between private parties, as is being done here,” Bredefeld said.
Tyler Maxwell would not make a commitment. He is concerned about how much future litigation would cost. He said he wants to know more about where the base purchase price of $6.5 million is coming from.
“My comfort level is going to depend on the funding source from these dollars. If we could secure a good chunk from Measure P, I think that’ll help some of my colleagues digest this transaction,” Maxwell said.
Councilman Mike Karbassi told GV Wire on Monday he is taking a wait-and-see approach.
The remaining councilmembers, Luis Chavez and Nelson Esparza, have not publicly revealed their position.
Church Currently Rents the Theater
If the city does become owners of the theater, any public group — including religious institutions — would have a right to rent the theater.
Emerzian says the church has a valid lease with the theater through 2023 to use the facility every Sunday morning and one Wednesday a month. The church estimated rent at $18,000 a month.
Pastor Anthony Flores estimates his church has 2,000 parishioners. They hold multiple services at Tower Theatre any given Sunday.
The proposal under consideration would allow Laurence Abbate, the current owner, to continue to operate the theater under an $8,000 a month contract for one year.
Could Settlement Happen?
For the past few months, the parties involved — the city, Sequoia Brewing, Tower Theatre and Adventure Church — have met in mediation sessions.
Flores said he is limited about what he can talk about because of a non-disclosure agreement, but did say at a news conference “If it was a good deal, I don’t think I’d be here.”
A settlement is unlikely, the church’s attorney says.
“This isn’t about money for the church. A deal is a deal. And when you start having municipalities interfering in private contracts, I think that presents a problem for people,” Emerzian said.
ADA Improvements Needed
The parking lot behind Tower Theatre would be included in the purchase, with 108 total spaces. Arias said the city could install paid meters in the lot.
He also said the lot would need to be upgraded to meet ADA standards.
Kelly Bray, a Fresno-based ADA inspector, said retrofitting a parking lot could cost hundreds for just restriping to $10,000 if the lot needs to be repaved. Standards include minimal sloping of the lot.
Although Bray has not officially inspected Tower Theatre itself, in his experience, nearly every building he looks at needs some level of ADA upgrades.
A recent ADA upgrade at the city-owned water tower cost more than $400,000 Arias said.
Pastor Criticizes Deal
Flores was heavily critical of the deal during his video podcast. He said the city’s real motivation is the parking lot.
“It’s a land grab,” Flores said.
Flores called protestors who demonstrated near the theater on Easter Sunday “nasty,” saying some of them wore disrespectful costumes.
“They are doing it just to antagonize use,” Flores said of the weekly Sunday protest gatherings.
When asked how the church would be funding its purchase during a Tuesday news conference, Flores said they have their own money. Previously, Flores said an anonymous “angel investor” helped.
“All the money that is in escrow, 100%, it belongs to Adventure Church. No more angel investor. It’s all ours. It’s ours. Our bank is still behind us,” Flores said.
Flores said the church and its staff has sacrificed and worked hard to provide the funds.
Split Opinion Among Council Candidates
Tower Theatre falls within District 1. Current Councilwoman Esmeralda Soria is sponsoring the motion to buy the building.
Four candidates are running to succeed Soria, who is termed out and leaving office in January. They have varying opinions on how to handle the dispute.
“The city purchasing the Tower Theater is not the best case scenario in the sense that I would have preferred to see a private investor come in and purchase it,” Annalisa Perea said. “The city is stepping up to purchase is best case scenario in this case, and I’m proud to be the only … candidate to support the city purchasing this.”
Perea also had doubts about Adventure Church’s $15 million damage estimate, calling it “pie in the sky numbers.”
Cary Catalano said the city should have made an offer in January 2021.
“If the city had made a legitimate offer some 14 months ago, the division and pain this caused so many in our community never would have transpired. Having said that, while still supportive, I am very concerned about future litigation against the taxpayers of the city of Fresno, the impact it will have our general fund, and our ability to fix our street, sidewalks and so much more,” Catalano told GV Wire via email.
The other two candidates in the race strongly oppose the purchase.
“I don’t think the city should even get involved. Why waste tax payer money on another purchase they can’t even take care of?” Jeremy Preis said. “All this council wants is what’s best for me and not for we.”
Both Preis and Mike Briggs said the city has a poor track record of running event venues.
“I do not think it is in the best interest of the people of Fresno for the city to own and operate the Tower Theater. From the Convention Center to Granite Park, the city has not had a good record of owning things that should be in the private sector,” candidate Mike Briggs said.
When protests against the sale of Tower Theatre to Adventure Church began in January 2021, one argument was a church at that location would be a violation of city zoning laws.
The city sent the church conflicting letters in December 2020 and January 2021, first saying that religious services could still take place, then saying it would be a violation.
Jaguar Bennett, a member of the Save the Tower Theatre Demonstration Committee, holds to that theory.
“Religious assembly is not permitted under current zoning at the Tower Theatre. If it’s going to be used by religious groups, it would have to be within existing zoning unless there’s going to be a zoning change,” Bennett said.
But others disagree.
Arias said church services at a city-owned facility would be incidental to the regular purpose of Tower Theatre and allowed without rezoning.
Emerzian says enforcing such zoning laws would be a violation of religious liberty.
Bennett said it is likely sale opponents will be there this coming Sunday.
“If the solution is satisfactory, we might have a gathering in celebration that I guess would not be a protest,” he said.