Councilors clash over Colonial Theatre project

LACONIA — Restoration of the 104-year-old Colonial Theatre, first proposed four years ago and yet to get off the ground, needs another $900,000 financial commitment from the city, Mayor Ed Engler told the City Council on Monday night.

If councilors approve the request, it would bring to $5.1 million the city’s ultimate investment in the refurbishment, which is intended to breathe new life into the struggling downtown area.

Councilors will have a month to consider the matter. Reserve funds and bonding would likely be utilized, minimizing effects on current operating budgets subject to the property tax cap.

Even if the city were to increase its financial participation, this wouldn’t be the final piece of the funding puzzle. Almost $4.9 million in federal New Markets tax credits are needed to complete financing for the $15 million project.

Word on those tax credits is expected in late February or early March, but that may be delayed. New Market tax credits are a program of the U.S. Treasury Department’s Community Development Financial Institutions Fund, which has a note on its website saying staff and services will be unavailable during the ongoing partial shutdown of the federal government.

Sharp words

Frustration boiled over near the end of a detailed, 90-minute discussion before the City Council, usually a  congenial group. 

Councilors Bruce Cheney and Andrew Hosmer, who both joined the council last year, had some pointed questions.

Hosmer wanted to make sure that the city would have its own attorney examine relevant documents and that there would be no surprises if and when the financing deal closes.

“The more that I can get in writing about the structure of this deal from an attorney who is making representations and interpreting that we are technically and in the spirit of the law, that would make me feel more comfortable,” he said.

“I’d hate to be the only one at the table without a lawyer.”

Cheney laid out a worst-case scenario.

“What happens if this doesn’t go through?” he asked. “I mean, what do we do with this sudden albatross that’s sitting there if we don’t come up with $15 million bucks?”

Henry Lipman, a longtime councilor, said such talk was not helpful.

“Putting on the negative hat doesn’t do anything in terms of trying to advance this,” he said.

Hosmer countered that he was wearing a “realistic hat.”

“City or public funds are still a significant investment in it,” Hosmer said. “I’m not here to rain on the parade of the Colonial Theatre.”

Lipman countered: “It’s not a parade, councilor; you’re making it harder to get the project done.”

Hosmer took issue with that.

“I’m not making it harder to get it done at all,” he said. “I’m asking questions here that I just want a little clarification. If you are asking for my vote on this to support it, I at least want to have my curiosity satisfied with some facts. I’m not here to rain on the parade.”

Lipman repeated, “It’s not a parade at all.

“I have no issue with having all the facts on the table, but the way we are talking about it this evening is destructive, not constructive.” 

Hosmer called that “a tad bit condescending.

“And if that’s the way you choose to proceed in this, that’s a mistake.”

Funding infusion

During his presentation Monday night, Engler said that hard costs, which have increased due in part to inflation, have reached $10.4 million — $900,000 more than the project’s budget.

“Realistically, there is no other source of revenue that can happen in a timely fashion,” Engler said. “We’re the last resort, if you will.

“We continue to believe this project is not only desirable but vital as far as the future of the city is concerned.”

Proponents say it could attract new businesses, residents, visitors and investment to a downtown area that has more than 100,000 square feet of unoccupied commercial space listed online for sale or rent.

Proposal’s inception

Three and a half years ago, the city loaned $1.4 million to the Belknap Economic Development Council to buy the ornate theater, which began its life as home to Vaudeville acts and then became a multi-screen cinema before being shuttered.

If the project were to die, the city could lose much of that investment, less whatever real estate value could be recovered from the theater building.

In an interview on Tuesday, Engler said that, in retrospect, project proponents initially did not have a thorough-enough grasp of how the financing would work.

“Clearly, there were sources of income in the original plan that did not materialize,” he said. “There were aspects of the earlier project budget that were not realistic.”

Funding delays

A setback came in 2017, when bids came in $3 million over budget and a cost-cutting exercise had to be initiated.

Delays cropped up in federal resources for the project.

“I think we were naive as to how the New Market tax program works and what it would take to get that funding,” Engler said.

The New Market tax 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, or a CDE — in this case, Mascoma Bank.

When the U.S. Treasury on Feb. 13, 2018, allocated $3.5 billion in New Markets tax credits, Mascoma was not one of the 73 recipient organizations. A total of 230 groups had applied.

City officials didn’t realize until June that Mascoma was not a recipient.

Engler and other leaders formed a task force, chaired by Gary Groleau of New Hampshire Ball Bearings, that has met 26 times since the summer to get the project back on track.

Delays in putting together the financing could have serious implications, Engler told the councilors.

“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 that, the less likely that this thing will ever come together,” he said.

To contact Rick Green, send him an email at

rick@laconiadailysun.com.