Sunday, July 20, 2008
City's Deal With Studio in Limbo
By Rosalie Rayburn
Copyright © 2008 Albuquerque Journal Journal Staff Writer
Rio Rancho has re-emerged as an attractive target for New Mexico's burgeoning film industry, but the biggest player to show interest in the city has yet to break ground on a proposed studio.
It's nearly two years since city officials closed a deal with the Lions Gate Entertainment Corp. that provided incentives for the billion-dollar corporation to build a film production studio and soundstage complex in Rio Rancho's new downtown area.
The agreement obligated the city to give the company land appraised at $1 million and front the company for another $1 million worth of land. In return, Lions Gate – aka Lionsgate – was to break ground on a $15 million facility by November and provide 800,000 work hours within five years.
With less than four months to go, construction has yet to begin. City officials have repeatedly said Lionsgate is still interested in Rio Rancho and plans to honor its commitment. The company has not responded to Journal requests for comment.
On Friday, Mayor Thomas Swisstack said he expects to meet with Lionsgate representatives in the next week. He hopes to see "at least a shovel in the dirt" by the November deadline.
"I'm still very, very positive that this is going to happen," Swisstack said in a phone interview.
Swisstack said recent announcements by Hewlett Packard that it plans to build a customer support center in downtown Rio Rancho, interest by two other media groups, and commitments by Central New Mexico Community College and the University of New Mexico to build a Rio Rancho campus, have helped bring a positive energy back to economic development efforts in the city.
"It's all beginning to fall in place," Swisstack said.
Lionsgate is an independent film studio, as well as producer and distributor of movies and TV programs with headquarters in Santa Monica, Calif. It reported annual revenues of $1.36 billion for the fiscal year ending March 31. Its film and TV activities in New Mexico have included the Western "3:10 to Yuma" and the ABC Family TV series "Wildfire."
Mark Manuel, the company's executive vice president of structured finance has not answered several e-mails seeking comment, including an e-mail sent Friday.
City officials approved the Lionsgate deal as an economic development project that was supposed to bring jobs and additional gross receipts revenue to the city.
So far, the land transfer part of the 2006 deal has proceeded. Lionsgate now has about 53 acres northwest of City Hall. The deal involved three contiguous parcels — part was city land; part was land purchased from the State Land Office and transferred to Lionsgate.
But items mentioned in the deal, such as investment by the state and a reporting system Lionsgate was supposed to establish to track work hours it generated, have never materialized.
The "Project Participation and Land Transfer Agreement" was signed by former City Manager Jim Palenick and a Lionsgate attorney on Aug. 3, 2006, and closed on Nov. 3 that year.
In the agreement document, it said Lionsgate and the State Investment Council intended to contribute $15 million to a newly formed company, "Newco," to develop and equip the studio. Newco and Lionsgate were to provide the city with their articles of incorporation and a copy of the financial agreement between the SIC and Lionsgate.
The State Investment Council, which manages the state's Permanent Fund, also makes real estate investments and has invested in more than two dozen movies and TV projects in the state.
In fact, there never was any signed agreement between the SIC and Lionsgate.
"We negotiated but never closed the deal," SIC spokesman Charles Wollman said in a phone interview Friday.
The 2006 agreement document said Lionsgate would establish a reporting mechanism to verify the work hours it pledged to create, and report the numbers to the city. Filming work for "Wildfire" and labor for studio construction were supposed to count toward satisfying the requirement.
Lionsgate filmed four seasons of "Wildfire" at locations in Rio Rancho, Algodones and Albuquerque. The ABC Family network canceled "Wildfire" in February.
City spokesman Peter Wells said in an e-mail that Lionsgate didn't set up a reporting mechanism and didn't provide work hour reports.
The agreement does provide safeguards for the city and the State Land Office.
If Lionsgate doesn't build the studio and fulfill the employment requirement within the two and five year timelines, the city may terminate the agreement.
Lionsgate would have to pay the city $75,000 an acre for the 12.8-acre parcel of city land. The State Land Office would get a similar amount, plus 5 percent interest per year, for 7.2 acres of its land that is governed by the city's economic development ordinance.
The transfer documents do not say how the remaining 33 acres the city acquired from the SLO and transferred to Lionsgate, will be treated. Whatever happens with Lionsgate, city officials are still interested in luring a movie company to Rio Rancho. In June, city councilors authorized city staff to work with City of Vision Studios, a group that wants to build a digital media center Downtown. The group wants the city to set aside 14 acres of city land for the center.
More recently, the council approved issuing industrial revenue bonds to help a Los Angeles-based film company, Masque Entertainment, build a production studio and soundstages in far north Rio Rancho, near U.S. 550.