110 W. New York Ave.
DeLand, FL 32720
It’s only temporary
By Pat Andrews
posted Jan 31, 2013 - 12:09:36pm
Patrons of the Athens Theatre have no doubt noticed the sold-out shows — South Pacific, Hairspray and Scrooge — as well as the hundreds of local children honing their skills in packed-house productions.
The restored historic theater is a success and a popular Downtown DeLand destination. Still, the Athens hasn’t managed to fully deflect a shadow of criticism that has dogged it since naysayers first predicted two decades ago that the expensive historic restoration would never be accomplished.
The latest gossip may have been triggered by a couple of changes at the Athens: sales tax added to the ticket prices, and no beer or wine at the snack bar.
Both are tied to the complicated financing method used to raise the final $2 million to complete renovation of the historic theater and get it open in 2009.
It’s called tax-credit financing. To take advantage of federal tax credits available to restorers of historic property, the Athens had to become — on paper — a for-profit entity, for five years.
As a for-profit, the theater must collect and remit sales tax, and must pay property taxes to Volusia County. It no longer qualifies to sell alcohol under easier and less-expensive rules that apply to nonprofits.
There was some question about whether the Athens would be eligible for county cultural-arts grants, but that was cleared up, and the theater received grant funding in 2012.
Although it is complicated, the financing method is legal.
Attorney Steve Sands of DeLand is vice president of Sands Theater Co., the nonprofit owner of the Athens since 2004.
Sands explained that to finance the last $2 million necessary to complete restoration of the 1926 theater, Sands Theater Co. took advantage of the U.S. Federal Historic Tax Program by partnering with U.S.-Bancorp Community Development Corp.
A firm in Virginia pitched the concept to the Athens volunteers, and brokered the deal, which had to be approved by the Internal Revenue Service.
“For-profit entities were created to allow Bancorp to take tax credits that would not be available to nonprofit entities, and this gave the bank incentive to provide funding for the restoration,” Sands said. “Operating monies have to go through Athens Manager Inc. instead of the Sands Theater because of this structure.”
Although the nonprofit theater company is the fee-simple owner of the building, the Athens Theatre is being operated under a for-profit called Athens Owner LLC, and two related for-profits.
The structure enables U.S. Bancorp to recoup the restoration money it invested through the federal tax-credit program. But rumors that the structure is being investigated by the IRS are just not true, Sands said.
After a period of confusion over what entities were required to file tax returns, and whether the Athens or U.S. Bancorp was filing those returns, all required federal tax returns have been filed, a former board member confirmed. Negotiations are ongoing with the State of Florida over taxes that may be due on tickets sold before the Athens realized its ticket sales were taxable.
The for-profit entities should collapse in 2014, and Sands Theater Co. will be allowed to continue to operate the Athens as a nonprofit endeavor.
“That will result in a tremendous savings to us, because we’ll no longer have to pay property taxes,” Sands said.
Volusia County Revenue Division records show the Athens paid $10,734.74 in December 2012 for its 2012 property taxes, and paid $11,284.86 in May 2012 for its 2011 taxes. The records show no property-tax charges for 2002-10.
Darlene Smolik, treasurer for the League of Historic American Theatres, said the financing method used by the Athens Theatre and Sands Theater Co. has been used in many communities to restore important historic properties to usefulness.
“There is a benefit to you and I as a taxpayer to see these theaters rehabbed,” Smolik said.
She agreed the complicated structure can look “weird,” but added, it “is a very standard process in the industry.”
Agreements are set up so the nonprofit owner doesn’t lose control, even though another investor is providing money for the restoration, Smolik said. For the investor, she said, there’s risk as well as a potential reward, as there is in any investment.
Smolik said studies have shown that successful projects like the Athens eventually generate more money than the federal government loses by providing the tax credits.
Steve Sands noted the financing structure doesn’t stand in the way of West Volusians supporting the Athens Theatre. Sands Theater Co. is still a nonprofit, 501(c)(3) organization.
“People can still make tax-deductible contributions to the Sands for the Athens,” Sands said.
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