Moochers at Multiplex

by | Oct 16, 2000

Grab a bag of popcorn and get out your hankies. This one’s a real tear-jerker — for taxpayers, that is. Movie theaters are shutting down all across America. The stock prices of major multiplex chains are plummeting. Cinema companies are declaring bankruptcy, defaulting on loans, and failing to pay their rent. So what are city […]

Grab a bag of popcorn and get out your hankies. This one’s a real tear-jerker — for taxpayers, that is.

Movie theaters are shutting down all across America. The stock prices of major multiplex chains are plummeting. Cinema companies are declaring bankruptcy, defaulting on loans, and failing to pay their rent. So what are city government officials doing? Raising taxes and doling out public subsidies to lure the debt-ridden movie-theater industry to downtown retail centers.

Proponents of cinema subsidies sing from the same dog-eared hymnbooks used by sports arena supporters and urban economic development gurus. If you build it, they will come, hallelujah, amen, and all that. Instead of putting tax money into roads, bridges, and other basic public amenities, politicians lavish public cash on private builders so they can erect deluxe movie houses with digital sound, stadium-style seating, and up to 40 screens.

The Denver Pavilions project, a “public-private partnership,” typifies the taxpayer financing of movie palaces. The retail block with a 15-screen multiplex, which anchors a downtown mall, was partially funded with $24 million raised by creating a local tax increment financing district. In Washington, D.C., the always cash-strapped city council somehow scrounged together $46 million — also through tax increment financing — to help private developers finance construction of a retail complex anchored by a 21-screen AMC movie theater with 4,300 stadium-style seats.

The Taj Mahal of all movie house builders, Florida-based Muvico Theaters, will soon open an ostentatious megaplex modeled after the Paris Opera at West Palm Beach’s CityPlace. It’s a half-billion-dollar, government-backed redevelopment project backed with $80 million in public subsidies. Other cities, such as Lincoln, Neb., give metropolitan movie theaters a boost by outlawing megaplex construction outside of downtown.

Urban renewal advocates say the theaters will bring in foot traffic and attract movie audiences to surrounding shops and restaurants before or after catching their favorite flicks. All that revenue will, they promise, leave city coffers overflowing. Movie-theater subsidies, the argument goes, more than pay for themselves.

It’s all picture-perfect in theory, but the economic reality looks more like a scene from the hit horror movie “Scream.”

Take the Loews Theater Newark Metroplex in New Jersey. Local taxpayers in the ailing city forked over $2.3 million to acquire the land on which the 12-screen movie house sits. Mayor Sharpe James celebrated its opening in 1993 with celebrities such as Joe Piscopo and Ruby Dee. But the promised jobs, neighborhood improvement, and increased tax revenue never materialized. As the Newark Star-Ledger reported last year, “the Newark Metroplex is on the edge of financial ruin.”

The theater failed to pay $100,000 in annual rent payment to the city for three of the last four years and threatened to default on nearly $4 million in construction bonds. Attendance at the metroplex has dropped sharply. Public officials believe the only way to rescue the theater is to pour more public funding into new construction of housing and a bowling alley in the neighborhood.

The scene is just as bleak at Regal Cinemas Inc.’s megaplex in North Bergen, N.J. Opened just two years ago as part of a government-supported urban renewal project, the 13-screen luxury theater now shows second-run pictures at discounted prices. According to the Wall Street Journal, ticket sales last year “would have scarcely supported a two-screen theater.”

Tennessee-based Regal, the world’s largest movie exhibitor, has amassed nearly $2 billion in debt as a result of overexpansion. To dig itself out of the hole, the Los Angeles Business Journal reports, Regal will spend almost $200 million on new movie-theater construction this year — although it only has $130 million available under its bank lines. Meanwhile, Loews Cineplex Entertainment, the nation’s largest publicly held theater chain, expects to default on a $1 billion loan; No. 3 theater chain Carmike Cinemas recently filed for bankruptcy.

Despite the industry’s failure to produce promised economic benefits, I found countless cities jumping on the movie house bandwagon — from Albuquerque, N.M., and Thousand Oaks, Calif., to Syracuse, N.Y., and Pittsburgh, Pa. Chances are, this cinematic boondoggle is coming to a neighborhood near you. When it does, don’t fall for rosy reviews. Give the multiplex moochers two thumbs down.

Malkin is a graduate of Oberlin College in Oberlin, Ohio. She lives with her husband in North Bethesda, MD.

Please contact your local newspaper editor if you want to read the MICHELLE MALKIN column in your hometwon paper.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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