After awarding $200,000 to Alamo Drafthouse, Richardson leaders say they were blindsided

At first, the sweetheart deal between the city of Richardson and the owner of Alamo Drafthouse movie theaters in North Texas was noble in its goals.

City officials partnered with the owner to use the theater’s draw to revitalize the Heights section of the city, the site of the first strip retail center built in the 1950s.

Situated alongside S. Central Expressway, Alamo Drafthouse, with its no-phone rules and fun craft drinks, was a big hit in Richardson. But thanks to COVID-19, the movie industry suffered. Theaters shut down to wait out the storm.

Owner Bill DiGaetano had an idea. What if he could convince Richardson city officials to give him $1 million from the city’s economic development fund to renovate the theater, including adding those comfy reclining seats in all seven auditoriums.

DiGaetano is a talented salesman. As he told city leaders in one 2023 email, “Alamo is far away the best cinema eatery in DFW given our unique programming and scratch-made kitchen. When we have seats that rival our competitors coupled with an advertising campaign promoting this facelift we are confident our guests will return.”

City leaders proved able enough in their negotiations. They knocked the numbers down from $1 million to $400,000. They told DiGaetano he could have $200,000 when building permits are issued and the work begins.

The other half would come when the project was finished.

Plus, DiGaetano promised to keep the theater in Richardson until at least 2034, and he promised that he’d use theater money to pay for another $1 million in additional improvements.

Both sides agreed. In January, they signed the contract.

Alamo Drafthouse DFW bankruptcy

Fast forward to June, six months after the signing. City leaders learned the bad news from a resident who found it on Reddit: DiGaetano’s company had imploded.

His company filed for corporate bankruptcy and shut its doors.

Fortunately, the city didn’t make the final payment. The city, a listed creditor in bankruptcy records, hired a lawyer to recover as much as possible.

In a brief phone conversation, DiGaetano declined to talk to me about his situation.

In a follow-up email, former company spokesperson Kelly Kitchens said that the $200,000 went to new seats and tables. “Richardson residents have been the benefactors of those new seats and tables,” she said.

The theater chain was not only hurt by COVID-19 but also by the actors’ and writers’ strike.

She said theater owners invested a total of $3.5 million in their six theaters. But in 2023, the theaters lost more than $1 million.

The Richardson theater, she said, was a strong supporter of the local police department. Revitalization efforts paid off, she said. When the theater opened, the shopping center was “unkempt” and on the verge of bankruptcy, she said. The theater helped boost the neighborhood, as intended.

“They became an integral part” of the community with events, carnivals, film festivals and city art events. After hearing from Kitchens, I tried unsuccessfully to reach DiGaetano again.

Business funding is a gamble

This failure illustrates the gamble in doling out economic development money to private companies. Aside from playing favorites, it’s a risk to give away taxpayer money. The goal is that a project will benefit a city as a whole, whether it be increased future revenue or new jobs. In this case, both were goals.

Still, Richardson got burned.

The Watchdog can tell this story, because I’ve studied several hundred pages of open records I requested.

What I learned is it could have been a lot worse. In a world of multi-million dollar tax exemptions, $200,000 is a pittance.

I asked city spokesman Greg Sowell, “Is it fair to say the city was blindsided by this announcement?”

Yes, he answered, explaining about getting the information from the Reddit posting. “During the grant funding negotiations, there were no signs of financial distress,” he said.

Theater chain spokesperson Kitchens said City Manager Don Magner was notified on the day of the bankruptcy filing.

Sony is new owner

In a way, it has worked out better than expected.

DiGaetano was a franchise owner of the parent company based in Austin. DiGaetano’s company opened its first theater in Richardson 10 years ago. More theaters came after that.

In light of this year’s bankruptcy, they all closed.

A new company jumped in. Sony Pictures Entertainment bought the parent company in Austin. Once that happened, Sony took over the North Texas local franchise theaters in Las Colinas, Lake Highlands, Dallas and Denton.

Sony reopened all of DiGaetano‘s theaters (except the one in North Richland Hills).

The Richardson theater has reopened, and the goal of restoring the city’s Heights section is back on track.

News researcher Erin Sood contributed to this report.

Timeline:

2010: Bill DiGaetano signs contract with parent company Alamo Drafthouse to be a franchise owner.

2013: He opens the first theater in Richardson in what’s called the Richardson Heights Shopping Village.

2022-2021: COVID-19 decimates the movie industry.

January 19, 2024: DiGaetano signs agreement with the city. The company is given $200,000 in what DiGaetano calls “city money.”

June 6, 2024: DiGaetano announces that his franchise filed bankruptcy. Afterward, Richardson terminates the agreement to pay the remaining $200,000. The city hires a lawyer to try to get its money back.

June 12, 2024: News is released that parent company Alamo Drafthouse Cinema was bought by Sony Pictures Entertainment

July 23, 2024: Richardson’s lawyer asks DiGaetano in a letter to repay the city $200,000 plus interest, which at that date was $7,800.

August 9, 2024: The closed Alamo Drafthouse theaters in North Texas reopen under Sony management.