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Murphy gives AMC a break on 5% tax Downtown cinema deal riles opponents Tuesday, February 08, 2000 By Tom Barnes and Dan Fitzpatrick, Post-Gazette Staff Writers
If AMC Entertainment Inc. builds an 18-screen cinema Downtown as part of the Market Place at Fifth and Forbes project, the city and a Chicago developer would reduce AMC's tax burden by as much as $300,000 a year.
For background articles on the Fifth and Forbes redevelopment project, visit PG Online's Renaissance III page.
Members of City Council said the proposal would make the Fifth and Forbes project a harder sell, and some in the arts community said it gave an outside for-profit corporation a benefit that has been denied to local not-for-profit institutions.
AMC, one of the largest theater chains in the country, is expected to anchor Market Place at Fifth and Forbes, a $480 million project that calls for the acquisition and demolition of more than 60 Downtown buildings.
Like other sports and entertainment organizations in Pittsburgh, AMC would have to pay a 5 percent amusement tax on all movie tickets sold.
But AMC requested a deal, officials of Mayor Murphy's administration said yesterday.
Hoping to make it easier for AMC to compete with suburban theaters where there are no amusement taxes - and needing a powerful draw for Market Place - the city and its partner, Urban Retail Properties of Chicago, agreed to reimburse AMC for the amusement taxes paid on the first 1.5 million movie tickets sold, with a $300,000 cap on the potential reimbursement.
The city, though, won't lose any amusement tax revenue, administration officials insisted.
Instead, the city plans to reimburse AMC by way of Urban Retail Properties. As part of its tentative deal with the city, the Chicago firm agreed to pay the city a fee of $3.50 per square foot of new retail space. After the project is finished, that fee could reach as much as $2 million a year.
As a result of reimbursing AMC, though, the city will have less money available to pay off $37 million in Market Place development loans from the Pittsburgh Development Fund, the Strategic Investment Fund and Urban Retail Properties. The original plan was to pay back that money in 20 years. Because some of the money would be used to reimburse AMC, the repayment schedule would stretch out for several additional years.
Urban Redevelopment Authority Executive Director Mulugetta Birru said the ceiling on reimbursement costs would be about $300,000 a year.
Birru said the city is trying to help the theater company. If AMC has to add the cost of the amusement tax to its ticket prices, the price for seeing a movie at the AMC theaters Downtown would be too high to be competitive, Birru said.
AMC customers already "will have to pay $1 for parking Downtown," compared to free parking at suburban theaters, Birru said. The $1 will cover four hours of Downtown parking, enough time for a movie and a meal, city officials said.
"We can't ask [AMC customers] to pay for parking and higher ticket prices" resulting from the amusement tax, Birru said. "[AMC] will be uncompetitive with all the megaplexes throughout the region."
Murphy has been working with Urban Retail Properties on the Fifth and Forbes project since mid-1997. He wants to have the cinema complex with 18 to 20 screens on Fifth and Forbes avenues because he sees it as the spark plug of the project.
The amusement tax exists only in the city of Pittsburgh. It is seen by city officials as a way of taxing suburbanites who make up much of the audience for plays, operas, musicals, movies and sports events in the city.
However, the amusement tax has been a sore subject for years with some arts and cultural groups, many of which are not-for-profit, unlike the for-profit AMC.
The tax was set at 10 percent until 1994, when the Allegheny Regional Asset District was created. It levies a 1 percent county sales tax and some of that money is given to municipalities so they can reduce other taxes. In 1994, as part of the RAD creation, the amusement tax was reduced to its present 5 percent.
Yesterday, City Council President Bob O'Connor and Councilman Gene Ricciardi, along with some arts groups, were upset to learn about the new plan to reimburse AMC for its amusement taxes.
"All these businesses are trying to feed off the public trough," Ricciardi said.
He said similar deals should be given to help movie theaters in Squirrel Hill, Regent Square and the defunct Rex theater on the South Side, which is trying to reopen.
"Right now the mayor's Fifth and Forbes plan is hanging in the balance [with council]," Ricciardi said. "If this [tax reimbursement] is thrown into the mix, I think it will put the whole project in jeopardy."
Council plans to vote, perhaps in May or June, on the mayor's Fifth and Forbes plan. No redevelopment can happen without council's approval.
"Murphy's people somehow can't do anything without tax breaks," O'Connor said. "I don't know if we can afford more tax breaks. The city has bills to pay."
Steven Libman, managing director of Pittsburgh Ballet Theatre, criticized Murphy for favoring a for-profit company.
PBT, which has an annual budget of about $7 million, paid $122,000 in amusement taxes in the 1998-99 season. "To grant some unique opportunity to a single venue, a for-profit venue, isn't fair," Libman said.
Many arts groups remain opposed to the amusement tax, even at the 5 percent level, since they must raise ticket prices or take from donations to pay it.
"What bothers me is that you have these arts organizations toiling in the market they've committed to and they can't shake the tax, but someone comes in from outside and they get a break," said Charlie Humphrey, executive director of Pittsburgh Filmmakers,
Humphrey noted that the city has offered AMC movie patrons a deal for $1 parking, but patrons of Pittsburgh Filmmakers' Harris Theater on Liberty Avenue must pay $3 for parking.
"If there's a break on the amusement tax and the parking, too, that's one more reason to feel frustrated," Humphrey said.
Staff writer Caroline Abels contributed to this report.
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