Plaza Theatre renovation to cost another $10M; city of Palm Springs could front extra $20M

Renovating downtown Palm Springs' Plaza Theatre will now cost about $10 million more than estimated, and the nonprofit foundation behind the effort is asking the city to put up $20 million more to cover that and any other unexpected costs.

On Thursday, the city council will consider an agreement that would see the city front the bulk of the renovation costs, then be reimbursed as the Palm Springs Plaza Theatre Foundation raises funds from other sources.

Why has the cost increased?

The campaign to raise money to fund the renovation of the historic theater, which has gone mostly unused since the Palm Springs Follies ended their run at the theater, began in 2019. Former City Councilmember J.R. Roberts has overseen the campaign, which held fundraisers and brought in millions in contributions from local bigwigs such as fashion designer Trina Turk.

David Lee, the co-creator of the TV show “Frasier,” gave $5 million and it was later announced that his contribution had included naming rights for the theater, which would be renamed the David Lee Plaza Theatre.

In July 2022, Roberts announced that the campaign was increasing its fundraising goal from $12 million to $16 million as inflation had increased the cost of renovating the theater. In March, the campaign announced multiple big-dollar donations and said the effort was about $2.3 million away from its goal.

However, Roberts told The Desert Sun on Tuesday that the foundation had not estimated how much the bids would differ from earlier estimates at a time when inflation has been pushing up the cost of construction projects nationwide.

In June, the city solicited bids from firms to do the construction work, which it had estimated would cost about $16.5 million. The city received five bids, including one for $2.7 million and another for $17.3 million. However, the report states those bids were later found to have included accounting errors. The remaining three bids ranged from about $26.3 to $29 million, which the report states shows the project’s true cost.

The report states that the total amount raised by the foundation so far is about $14 million, which includes a previously approved $2 million contribution from the city. While construction is now expected to cost about $26.3 million, the city and foundation have revised the project budget to $34 million to include a 12% contingency for further cost overruns, other costs related to construction and $2.5 million in startup costs for the theater.

On Monday, a link was posted on the theater’s Facebook page to a video on the city website promoting the economic value of a remodeled theater to the city. The page also posted the following statement: “Just to remind the community: The Plaza Theatre restoration project will not negatively impact other city initiatives.”

Why is the money needed now?

Roberts said the bids for the project are set to expire on Jan. 10, under a city rule that requires them to expire 90 days after they were first received. He added that if the city fronts the money, the project could start in the next month or so. However, if the bids were allowed to expire, the bidding process would have to start all over, which could stall the project for years.

How would the city pay for this?

A memo from city staff to the council shows the new $20 million in funding would come from money now slated for other projects, including a fire station and future police and workforce services. The staff report, however, said the council could pledge to replenish those funds by fiscal year 2027.

Under the proposal the council will consider Thursday, the bulk of the $20 million would come from the city’s Measure J fund, the 1% extra sales tax that is used to fund infrastructure projects.

About $9.5 million would come from funds currently allocated for future projects that could be suggested by residents while another $5.85 million would come from Measure J funds that were set aside this year to fund a new Palm Springs fire station.

Another $4 million would come from funds described in the report as having been budgeted this year for future study and services related to the police department. And $1.6 million would be money the city says was generally allocated for "workforce development" but has not been committed to any specific project.

But, the staff report says, "The Council could also approve this diversion of funds with the commitment by the City to replenish these funds to their original intent in the FY26 & FY27 budgets." The report also says the city could also choose to issue new debt to fund the fire station.

A draft agreement included in the memo to the council includes a section that would commit the Palm Springs Plaza Theatre Foundation to continuing to fundraise. That section includes a blank for the amount the foundation would commit to repay the city, which the council will presumably discuss during the meeting.

Will the city eventually be repaid?

Roberts said that if the city provides the $20 million the foundation is requesting, there is “every reason to believe the whole $20 million the city fronts will come back.” He said some of that repayment will come from dollars the foundation is planning to continue to fundraise.

However, he said the other way that repayment will occur is when the city starts collecting what he said the foundation conservatively believes will be $2 to $4 million in additional tax revenue that the city will collect as a result of the plaza reopening and again holding events. Roberts also noted that the foundation is applying for historic tax credits that could bring in an additional $5 million for the project.“Unlike any other investment the city makes in its infrastructure where it spends it and its gone, the Plaza will actually pay it back and that’s what it all comes down to” he said.

Could there be a need for more city funds down the road?

Roberts said a 12% contingency is about the industry average and usually about what is required to cover any cost overruns. However, he acknowledged that you can never be sure if more funds will be needed to finish construction until it begins. However, Roberts said he is actually confident that the final project will cost less than the $35 million that is being budgeted for it, rather than more.

Will all residents have a chance to go to the theater?

Roberts said there is already an existing requirement that the city be able to use the theater for any event it wants for 21 days a year. He said the Oak View Group, which operates Acrisure Arena and is the planned operator of the theater, also intends to regularly program events at the theater that are either free or have a low admission cost.

“We will definitely have programming that is affordable and free so that everyone can enjoy the theater and it’s not just high dollar ticket events,” he said.

This article originally appeared on Palm Springs Desert Sun: Palm Springs may put another $20 million toward Plaza Theatre work