Falls Church movie deal could offer tax revenue as incentive

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For nearly a decade, Falls Church officials have worked to revive a decaying strip on a main road with an ambitious development project meant to include a bit of everything: apartments, retirement homes, retail and office space, all anchored by the premier movie theater for decades.

This small Northern Virginia suburb could close the deal on this movie theater with an unusual boost: its own taxes.

City lawmakers are due to vote Tuesday on a deal that could award up to half a million dollars each year for the next three decades to the developer behind the Founders Row project. The pay-as-you-go arrangement would essentially reinvest tax revenue generated from the sale of movie tickets and concessions as a way to offset the cost and economic risk of bringing in the theatre.

Although the deal was first conceived nearly a decade ago, the plan has drawn criticism from the city’s planning commission in recent weeks. This voluntary organization voted against the agreement’s recommendation after some of its members questioned whether a movie theater was an appropriate use of city money.

“We generally offer tax incentives for public goods. We would love to have a movie theatre, but it’s not a public good,” planning commissioner Derek Hyra said. stated at the September 21 meeting. “It’s not a public school. You have to pay to go there. »

But in this affluent, dark-blue city of 15,000 — sandwiched between Fairfax and Arlington counties — supporters of the plan say such incentives are needed to attract a business that might otherwise choose to locate in the city’s much larger and better endowed neighbors.

“We try to create a balanced community that has [the] the kind of things people want, and entertainment is important,” said Falls Church Mayor David Tarter. “Being able to walk to a movie theater is something people in our community have been asking for.”

The deal was originally signed about seven years ago between Falls Church and a business entity tied to Mill Creek Residential Trust, a Bethesda-based developer, and it transformed the site that once housed a gas station and convenience store.

Paragon Theaters, a small chain that also has movie theaters in Florida, North Carolina and Fredericksburg, had been retained as the theater operator for the project and is expected to create a facility with seven or eight screens and between 750 and 850 seats.

After the coronavirus pandemic dealt a blow to the theater industry nationwide, the company changed its plans to offer a smaller 550 seats. That change — along with another tweak to create an arcade area in the lobby — forces city lawmakers to vote on the economic development agreement again.

The first $20,000 generated in tax revenue from movie ticket sales would remain in city coffers, but any money raised beyond that — up to $340,000 — would go to the developer. A similar setup exists for food and beverages sold in theaters: the first $10,000 of tax revenue generated from these items would go to Falls Church, while up to $150,000 beyond that would also go to the developer.

This plan is supposed to be in place for the next 30 years. If the theater earns $13 million in four consecutive fiscal years, the grants are removed.

Joe Muffler, the company’s senior managing director of development, said the incentive was an innovative way to attract a movie theater at a difficult time for cinemas nationwide.

“We have identified a creative solution to extremely challenging market dynamics that creates a win-win situation for the city by bringing unique equipment [and tax revenue generator] which the City would likely not be able to accommodate otherwise,” he wrote in a statement.

Tarter, the mayor, also noted that the movie theater would serve as a magnet for visitors and keep residents close to home. And all those theatergoers could also spend their money at nearby shops and restaurants, generating more tax revenue for the city.

When it comes to economic development deals like this, “the devil is in the details,” he said. “You have to make sure you’re wise with taxpayers’ money.”

Falls Church had signed a similar deal in 2008 to attract a BJ’s Wholesale store. To occupy a location that would otherwise likely have gone to a car dealership, the city agreed to provide $250,000 in annual tax breaks to JBG Smith, a major regional developer who owns the property.

But for Hyra, who noted that a nearby attraction would be a plus for her children, aged 11 and 14, it wasn’t worth dipping into funds that could service some kind of public infrastructure – parks. , school facilities or even a swimming pool.

If his kids want to go to the movies, he said, he can take them to Ballston, Arlington.

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