BELLINGHAM - On a 5-2 vote, City Council has approved giving a local dance group a below-market rental rate for lease of retail space inside the city's Parkade on Commercial Street.
But the deal comes with one big catch: To get the lease on the 3,847-square-foot space, Kuntz Community Dance must raise the estimated $638,000 needed to construct a dance stage and 216-seat theater inside the space, which is being called the Commercial Street Theatre.
The deal the council approved Monday, May 20, requires the group to raise half the money by Aug. 1, 2013, and the full amount by Feb. 1, 2014. Kuntz Community Dance, the brainchild of Pam and Mark Kuntz, is also required to begin construction by March 1, 2014, and complete it by Sept. 1 that year.
If the group can manage that feat, the deal the council approved Monday would entitle them to a monthly rent of $500 per month for the space, or about 20 percent of the market rate rent of $2,565 per month. Rent money from the Parkade goes to the city's parking fund, which is supposed to help pay for public parking downtown.
Public Works Director Ted Carlson told the council that the lower rent for the dance group would mean potential lost income of about $24,000 per year to the parking fund.
Besides using the proposed theater for its own dance events, the new tenant agrees to make the theater available for free for other nonprofit events, while also allowing the city to use it up to 10 times per year when it is not needed for the tenant's own events.
Cathy Lehman and Jack Weiss cast the dissenting votes on the deal.
Lehman said she found it difficult to vote against a lease for a project she is enthusiastic about, but she wasn't convinced that the lease terms made financial sense for the city.
Lehman was hoping for lease terms that would give the theater improvements to the city, in exchange for the break on the rent and the resulting loss of hundreds of thousands of dollars in parking fund revenue over the potential life of the lease, which is for 10 years plus a tenant option for a 10-year extension.
Instead, the improvements remain the property of Kuntz Community Dance, and the tenants have the right to remove them when and if they vacate the premises.
"Would we have chosen to expend $300,000 in city money for a theater?" Lehman asked.
The space has been vacant since the Stamp & Coin Place moved to a new location in 2011. Asked if the city had any likely prospects for finding market-rate tenants, Lehman said she wasn't sure. But she noted that in April 2012, the city did have an offer to lease a portion of the space at market rates, for a coffee and tea shop.
If the council had accepted that offer, Lehman said it could have spurred other merchants to set up shop in the remaining space. Instead, the council decided to delay a decision to consider an offer from the Bellingham Railway Museum next door.
The railway museum wanted to expand into a portion of the empty space, if a reduced rent could be arranged. Then the Kuntz Community Dance Group stepped forward to express interest.
The council put the process on hold and directed city staff to form a group with representatives of downtown business owners, the Downtown Business Partnership, City Council and city staff to study the rival nonprofit proposals. In May 2012, that group recommended negotiating a lease with Kuntz.
The city could be back to square one in a few more weeks if Kuntz Community Dance can't meet its imposing fundraising deadlines.
At a Monday, May 20, council committee meeting, Mark Kuntz thanked the council and said he thought his group could meet its deadlines.
"We think it's a very generous lease," Kuntz said. "We're thrilled with it. ... We're kind of excited about the tight time frame. ... We're very optimistic that this is going to happen."
According to the Commercial Street Theatre website, the project has raised $12,875 as of Tuesday afternoon.