City supports keeping out Wallace theaters |

City supports keeping out Wallace theaters

Wallace Theaters has been haunted by its past.

After hearing more than an hour of testimony from attorneys representing both sides, the South Tahoe Redevelopment Agency found Tuesday that the developer’s decision to deny the South Shore theater operator space in the Park Avenue Redevelopment Project was within the scope of redevelopment law.

Some community members supported the decision.

Dr. Brooks Martin, a resident for 19 years, presented the board with a petition signed by 335 community members who support the developer’s decision to award the theater operation to an outside source.

“We’ve put up with sticky floors, lousy seats and poor sound and picture quality,” he said Tuesday. “We don’t get the less mainstream movies, but probably the worst thing (Wallace) did was not putting an outdoor access to their theaters in Horizon – locals and children have to walk through the casino floor to get to the movies.”

Wallace Theaters was notified Feb. 16 by Trans-Sierra Investments, the commercial space developer of the Park Avenue Project, that their business proposal did not make the grade.

Wallace’s historical performance in the area also helped make the final decision, said Lewis Feldman, attorney for Trans-Sierra Investments.

“Wallace Theaters has operated in this town since 1991 and they have not significantly reinvested in their theaters during that time,” he said. “All things being equal, TSI would rent space to a displaced tenant but there are operational shortcomings that are well known to anyone who has attended a movie in the area.”

The Redevelopment Agency agreed that Trans-Sierra Investments, though it did not award space to Wallace Theaters, has acted within the boundaries of California redevelopment law, mandating that a reasonable preference be given to displaced tenants. Wallace Theaters, which operates one screen on Park Avenue, is considered a displaced tenant despite its eight-screen complex located inside Horizon Casino Resort.

The Agency’s decision, which passed by four votes with Agency member Bill Crawford abstaining, may launch a lawsuit between the Redevelopment Agency and Wallace Theater Corporation.

C. Nicole Murphy, Wallace’s attorney, said it’s a disagreement in the interpretation of the law that will likely bring this matter to the court.

“Most likely there will be litigation to resolve this issue,” Murphy said. “Wallace has not been given a reasonable preference opportunity.”

She also believes that guidelines for business proposals were vague and the decision for the commercial space should rest on the shoulders of the Agency, not the developers.

“It’s clear that the staff has not evaluated the competing proposals for the theater,” Murphy said. “The developer’s goal is primarily economic and the Agency has a greater public policy responsibility.

“Our position is that Wallace wasn’t aided in producing a proposal that could be considered adequately.”

According to Karen Teidemann, the city’s redevelopment attorney, Trans-Sierra Investments has been delegated authority in selecting which businesses will occupy the commercial space in Park Avenue because they bear the burden of financial risk in the investment.

Feldman said that Resort Theaters of America, a Los Angeles company which owns theaters in Aspen, Colo. and Monterey and Palm Springs, Calif., was awarded the opportunity to run the approximately 28,000-square-foot complex because they had a more detailed, superior proposal.

“It became evident that the Wallace Theaters proposal was short on an economical sense and short operationally,” he said. “Resort Theaters of America, though a relatively new company, opened theaters in Aspen, Colo., which we felt would be the best example of whether or not they were in a position to bring quality theaters to South Lake Tahoe – it’s as fine a theater as any urban complex and it’s the kind of product that we think needs to be in this project.”

Jeff Rahbeck, also an attorney for Wallace Theaters, said the space should be awarded to Wallace even with an inferior business proposal as long as the Agency’s redevelopment requirements are met.

Crawford, who said he was not acting as an advocate for Wallace Theaters, said the issue isn’t whether or not the corporation is a sound business partner – it’s a question of the developer’s obligation to offer reasonable preference to existing tenants.

“I’ve abstained because I am caught in the middle here,” he said. “I’m not going to vote for it and I’m not going to vote against it.”

Feldman said the developer’s record speaks for itself.

Of the 10 businesses that have expressed interest in relocating to the new development, three have been accepted, three have turned down the opportunity and two are still pending, he said.

“Wallace Theaters is the only tenant that has been denied space,” Feldman said.

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