LACONIA — A funding problem on Thursday threw into serious doubt long-delayed plans to restore the 105-year-old Colonial Theatre, a project intended to catalyze downtown revitalization.
A total of $4.8 million in federal New Market Tax Credits needed to complete the complicated financing package fell through.
The U.S. Treasury Department announced Thursday it awarded $3.5 billion of the tax credits to 73 community development entities to spur investment and economic growth in low-income communities nationwide.
Mascoma Bank, the community development agency involved with the $15 million Colonial project, was not on the list.
Mayor Ed Engler, a foremost proponent of refurbishing the theater, was out of town, but in a brief email, called the funding issue “very disappointing news.
“No way to sugar coat it, but the oversight committee will get to work exploring alternative courses of action.”
Dick Jennings, managing director of Mascoma Community Development, said much of New England was shut out from the allocation.
“It’s a devastating thing for the projects that we work with,” he said. “It’s heartbreaking to the entire staff.”
He said reasons for the decision are not clear.
“You don't get an explanation,” he said. “A debriefing document will come in a week or two, but no true explanation. It’s not a transparent program.”
The Colonial revitalization project was first conceived four years ago, but construction has been delayed amid increasing cost estimates for restoring the ornate theater and problems assembling money to pay for the work.
The city loaned the Belknap County Economic Development Council $1.4 million to buy the theater, which once hosted Vaudeville acts and was a multi-screen cinema before being shuttered.
The city has been receiving interest payments on its loan to the development council. City leaders have pledged significant additional support contingent on the rest of the financing coming together.
They promised to ultimately loan $4.2 million for the project and provide an additional $900,000 to buy theater equipment.
The New Market Tax Credits represented the final piece of the funding puzzle needed to close the deal and start construction.
Justin Slattery, executive director of the development council, said efforts will be made to replace the $4.8 million in tax credit financing. An oversight committee has had multiple meetings to confer about the project.
“While we are disappointed in the update today regarding New Hampshire not receiving an allocation, we look forward to next steps to make the Colonial Theatre a reality,” he said.
Slattery did not say what those next steps would be.
It will likely not be easy, said City Councilor Bruce Cheney.
He asked at a City Council meeting on Jan. 14 what would happen if the full financing package did not come together.
“I mean, what do we do with this sudden albatross that’s sitting there if we don’t come up with $15 million bucks?” he asked.
On Thursday, he reiterated his concerns.
“That was my question — ‘What was Plan B?’” Cheney said. “I was assured there was no Plan B, it had to be Mascoma.”
Engler has called the theater refurbishment “not only desirable but vital as far as the future of the city is concerned.”
There is much unoccupied commercial space downtown and project backers hope a revitalized theater could be just the thing to turn around the area.
Engler has also said financing delays are problematic.
“The further things get drug out, the more likely that something bad is going to happen on one of the funding sources, and costs go up,” he said.
“Everything has to come together at one point. The more we delay, the less likely that this thing will ever come together.”
In 2017, the project missed a deadline for New Market Tax Credits, so Mascoma Bank awarded the credits elsewhere.
Mascoma was not included in the 2018 round of allocations.
The New Markets program attracts private capital into low-income areas. Investors receive a credit against their federal income tax in exchange for making investments through community development entities.