Update on Redevelopment Agency Actions regarding the Cerrito Theater

The City of El Cerrito is pleased to announce the grand re-opening of the Cerrito Theater. On June 29, 2009, the El Cerrito Redevelopment Agency approved a lease with Rialto Cinemas to operate "Rialto Cinemas Cerrito".

Under Rialto's management, the theatre reopened on July 15, 2009 at 12:01 am with the premiere of Harry Potter and the Half Blood Prince.

Visit the theatre's website, rialtocinemas.com/cerrito

Rialto Cinemas was selected from among three proposals submitted to the Agency on June 8th, in response to an operator solicitation issued after the theater closed on May 18th.

Rialto's programming will be first-run films, complemented by independent, specialty and community programming. The food service will include small plates, pizza, sandwiches, salads and desserts, as well as beer and wine. To complement the theater operation, Rialto will be opening a wine bar in the adjoining space.

The Agency is confident in Rialto's ability to run the Cerrito, based on a good track record at other cinemas, the Lakeside Theater in Santa Rosa and the Elmwood Theater in Berkeley. The Agency was interested in returning the theater to operation as quickly as possible to ensure that the surrounded business community was not negatively impacted by the closure.

The El Cerrito Redevelopment Agency is proud to support our business community and promote El Cerrito as a great place for shopping, dining and entertainment!

BACKGROUND INFORMATION

on June 29, the City Council/Redevelopment Agency approved a five-year Lease Agreement with Rialto Cinemas, Inc. (dba Pleasantown Motion Picture Company, LLC) for the operation of a movie theater and restaurant operation at the Cerrito Theater.

Rialto Cinemas indicated July 15 is the goal for opening the theater.

Also on June 29, the Redevelopment Agency Board met in closed session. An item during the closed session was in regard to Anticipated Litigation Pursuant to Government Code Section 54956.9 (b) & (c) (exposure to litigation and initiation of litigation, respectively.)

After the closed session, Agency Chair Jones reported:
This action was taken in response to numerous recent threats made by Downey Street Productions, the former operators of the Cerrito Theater, against the El Cerrito Redevelopment Agency. Downey Street Productions has claimed that the Cerrito Theater is in fact the property of Downey Street Productions; not the City of El Cerrito Redevelopment Agency. Because they believe this to be true, they are threatening the Agency with filing an injunction against entering into a new lease with the proposed new operators Rialto Cinemas, and are claiming that the Agency owes them damages in the neighborhood of $4 million dollars. We have been informed that Downey Street Productions has been making similar threats of litigation directly to Rialto Cinemas.

Up to this point, it has not been the desire of the Redevelopment Agency to pursue litigation against or to seek monies due to the Agency by Downey Street Productions. Our interest has been in moving forward with a new operator once Downey Street Productions broke off negotiations by informing the Agency of their intent to close the Cerrito Theater. However, in the event that any litigation is filed against the Redevelopment Agency or the City of El Cerrito by Downey Street Productions, the Agency Board has authorized Agency Counsel to not only defend the Redevelopment Agency and the City against any potential litigation or injunction, but to also file a counter suit against Downey Street Productions to recoup all monies and attorneys fees due the Agency for unpaid rent, loans and taxes. While we hope this action will not be necessary, it is important that the Agency protect its investment in the Cerrito Theater.

On May 20, 2009, the Agency issued a Request for Proposals to seven potential operators for the Cerrito Theater. Proposals were due on June 8, 2009 and the Agency received three. The proposals came from Cinema West of Petaluma, Motion Picture Heritage of Franklin, Indiana, and Rialto Cinemas of Santa Rosa. A cross-departmental team reviewed all proposals and is recommending Rialto Cinemas as the operator for the Cerrito Theater. Rialto operates the Lakeside in Santa Rosa and the Elmwood in Berkeley. The Agency will consider a lease agreement on June 29, 2009. As required under Redevelopment Law, the proposed agreement was released for public review, along with a legally required summary report, on June 15, 2009. The reports are available below. Further information about the proposals will be available to the public in the coming week.

Download the Proposed Rialto Lease (PDF, 336Kb)
Download the Summary Report (PDF, 60Kb)

Download the "El Cerrito Seeks New Operator For Cerrito Theater" (PDF, 24Kb) Press Release issued June 4, 2009

On June 2, 2009, the El Cerrito Redevelopment Agency, in accordance with the Cerrito Theater Lease, deemed that Downey Street Productions had terminated their lease with the Agency and abandoned the Cerrito Theater by ceasing operations as of May 18, 2009. Downey Street Productions was notified that the lease was terminated and the Agency took possession of the building. Agency staff is in the process of inspecting the premises, determining the operability of all systems located in the building, and arranging for cleaning and any needed repairs in preparation for leasing the building to a new operator.

Report of Redevelopment Agency 5/18/09 Closed Session

The Agency Board confirmed the previous direction to staff to continue to negotiate the termination of the Cerrito Theater Lease Agreement with Downey Street Productions and to continue the process of transitioning to a new operator.

Action Taken by Redevelopment Agency Board at meeting of May 4, 2009

Action: Moved, seconded (Lyman/Abelson) and carried unanimously to authorize the appropriation of $100,000 of redevelopment funds for the acquisition of equipment from Downey Street Productions contingent on Agency Board approval and on Downey Street Productions obtaining a dismissal of the Agency and the City from litigation with BBI Construction, Downey Street’s contractor, to which the Agency and the City are parties.

Moved, seconded (Potter/Lyman) and carried unanimously to authorize Redevelopment Agency staff to transition operation of the Cerrito Theater from Downey Street Productions to a new operator, including the acquisition of Downey Street Production’s equipment and fixtures at the Cerrito Theater to aid in this transition.

Moved, seconded (Potter/Cheng; Ayes – Abelson, Cheng, Jones and Potter; Noes – Lyman) and carried to authorize staff to take the necessary steps to terminate the current Cerrito Theater Lease Agreement with effort towards a cure with Downey Street Productions in conjunction with finding a new operator for the Cerrito Theater.

Click Here to read the full minutes of the May 4, 2009 Special Concurrent City Council/Redevelopment Agency Meeting

Report of Redevelopment Agency 4/08/09 Closed Session

Based on notification received on April 7, 2009 from Downey Street Productions of their intent to close the Cerrito Speakeasy Theater, the Agency Board will not be going forward with consideration of proposed amendments to the lease and DDLA with Downey Street Productions on May 4, 2009 as was previously reported. The Board has given direction to Staff and Agency Counsel to work with Downey Street Productions on an orderly transition of the Cerrito Theater to a new operator, as was suggested by the CEO of Downey Street Productions. In addition, the Agency Board gave direction to Staff to begin the process for selecting a new operator. Staff was also given direction to begin to the final determination of lease obligations to the Agency, including the transfer of equipment and fixtures to Agency ownership. The Agency remains committed to the Cerrito Theater as a community asset.

Click Here to read the Summary of actions of the April 8, 2009 Special Concurrent City Council/Redevelopment Agency Meeting (33Kb)

Report of Redevelopment Agency 4/06/09 Closed Session

The Agency Board gave staff and legal counsel direction on how to proceed with matters regarding the Cerrito Theater. Agency negotiators will bring back a draft amended agreement for Board consideration at a Public Hearing on May 4th.

Click Here to read the Summary of actions of the April 6, 2009 Special Concurrent City Council/Redevelopment Agency Meeting

Report of Redevelopment Agency 1/20/09 Closed Session

The Agency Board gave staff and legal counsel direction on how to proceed with matters regarding the Cerrito Theater. A letter to Downey Street Productions was developed with legal counsel. The Agency Board further appointed an ad-hoc subcommittee of Agency members Lyman and Abelson to meet with Downey Street Productions.

Click Here to read the letter to Downey Street Productions.

Report of Redevelopment Agency June 30th Closed Session

City staff has been working with the staff of Downey Street Productions, operators of the Cerrito Speakeasy Theater, for several months regarding the financial status of the Theater. After initially meeting all of their obligations for the first twelve months of the operation of the Cerrito, Downey Street Productions has fallen into arrears on their monthly lease payments to the El Cerrito Redevelopment Agency, and financial reports were not provided to the Agency as of the Apri1 1 due date as required by the lease between Downey Street Productions and the Agency.

In an effort to gain a better financial picture of the Theater’s operations, staff has requested detailed financial information from Downey Street Productions. However, the data provided to date has not been sufficient to determine what the issues are and if the Agency can facilitate any solutions. Therefore, staff has recommended to the Agency Board that certain provisions of the current lease be invoked at this time, enabling the Board to require an audit of the Theater’s financial operations.

The Board, in closed session, unanimously directed staff to enter into a contract with an independent audit firm, preferably specializing in the theater and/or food and beverage industry, to conduct such an audit. The Agency Board believes that the Cerrito Theater is a community asset and is interested in ensuring the viability and success of the Theater. Staff will report back to the Board with the results of the audit and any resulting recommendations for action.