Our recent post on the disappointing state of Paramount Hudson Valley in Peekskill seems to have hit a nerve with those who thought they pulled one over on the citizens of Peekskill. Funny how when the facts and background that was never made public before are suddenly brought forth, those involved get offended and begin lashing out. Then the cover up kicks in. It’s always the cover up that gets ’em.

Thanks to the Peekskill Post news site, we have learned a key clause to the sweetheart lease deal that Morey & Claxton gave Red House Entertainment. We thank Mr. Fumagalli for providing it but he has the wrong understanding of what it means, otherwise he would have pressed Claxton for the truth. He mistakenly took her comments (about the lease and the ‘negotiations’ that created it) as truth.

First, let’s discuss the clause that was referred to in the Peekskill Post article:

“The rent for the premises (the “Rent”) shall be equal to five percent (5%) of (i) the adjusted gross box office receipts (i.e. gross receipts less sales tax, fees paid off-the-top to distributors of digital content (distributor fees), booking agents, ticketing agents, credit card companies and related service providers and the like) of Tenant from actual performances (live or filmed) produced and sold by Tenant and (ii) gross margin (i.e. net sales less actual cost of goods sold) of Paramount Hudson Valley, Playing at the Paramount or Peekskill branded merchandise sales. Rent shall specifically not include any portion of (x) box office receipts from performances produced by any other third party to whom the premises may be rented (including but not limited to any tax-exempt entity which may so utilize the premises), (y) any other merchandise sales or (z) any revenues received from food or beverage (including alcohol) concessions.”

The title and premise of the article reads: “Paramount pays rent based on percentage of gross ticket sales for ‘original productions’” This is not accurate– it is based on “the ADJUSTED gross box office receipts (i.e. gross receipts less sales tax, fees paid off-the-top to distributors of digital content distributor fees…).” This means that AFTER all the fees and related costs are made, which includes full payment to Red House, if there is anything left over THEN the City will get 5% of it. The problem is most shows are not “ORIGINAL PRODUCTIONS” and those few that are don’t make any money so there is nothing to receive 5% of (see example at the end of this post). As we stated in our previous post, this lease is a total sham.

InsidePEEK has learned that Claxton has been “out of control,” (as one of our readers informed us), about the selection committee and truth behind the process being exposed. Her desperate lies in the Post article seem to confirm that. She falsely claimed that the City, under the previous operators, was paying $70,000 a year in utilities. This is not true. While the City did give an annual stipend to the Paramount of roughly $40,000 at one time, it had been slowly reduced to zero, which was agreed to in the previous lease. To state that the previous operators were receiving $120,000 a year from the City (as Claxton did in the Post article) is laughable and totally false. InsidePEEK has been provided information that Claxton and Morey are now stating it was $160,000. If we wait a few more days maybe they’ll even jump it up to more, they can’t help themselves. The lies keep compounding.

The fact of the matter is that we may never know how much Red House has cost the City. Mayor Catalina keeps asking for a full accounting beginning with the lease that was granted to Red House, but the Democratic majority’s appointed City Comptroller has been directed not to provide it. It has been suspected that the full Democratic Council under Mayor Foster misrepresented the Paramount financials all along and that it would take a professional forensic audit to get the true picture.

Here is the ‘money’ line from the article: “Claxton said she does not know how much money the city gets on an annual basis from Red House…” What a joke. She doesn’t know? Claxton likes to say, especially at budget time, she is a finance person who works with numbers all day – and she doesn’t know? In fact, that $40,000 phantom revenue stated by Claxton has been listed in the PROPOSED budget every year since 2013 but when the ACTUAL budget numbers are obtained, there was NO payment made to the City.

Thanks to another reader we were provided Morey’s attempt at damage control through a statement on social media. It seems that Morey and Claxton are working from the same talking points they created. Among other falsehoods, he is totally misrepresenting the Tarrytown Music Hall proposal. He claims Red House asked for no subsidies – this is totally false. In fact, Red House had at least a full year of paying no utility bills. The city picked up the tab. Tarrytown Music Hall only requested a short grace period to get up to speed with the conditions of the debt being assumed and the condition of the physical plant. Red House didn’t have to worry about that since they were promised no utility bill and that the City would make good on the debt.

It soon became clear who was paying the bills and it wasn’t Red House. Some complained of the wasted energy at the Paramount. One of our readers informed us of an incident they witnessed first-hand; “it was only a few weeks after the Paramount reopened under Red House and on very hot day when I was in the vicinity of the Paramount and saw the front doors propped open. I was curious so I went to look inside and see what shows may be coming. I felt a rush of cold air as I approached and thought it odd the doors would be open with the air conditioning on. As I went a little further inside I overheard a conversation between two people near the ticket booth. One person asked the other (who must have been a representative of Red House) why the doors were open while the air conditioning was running. The response was – “we don’t care, the city’s paying for it. Then he smiled and walked away.”

We received an interesting comment from one of our readers who is not connected to the Paramount situation but has experience in theater and entertainment operations: “after what background I already know and reading the latest information regarding the City of Peekskill’s relationship with Red House Entertainment I think the approach may be wrong. It is safe to state that it is nearly impossible for such an operation to survive from ticket sales, there must be other revenue. Red House being a ‘for profit’ operation makes it even more difficult. Usually not-for-profits have access to grant opportunities and it is not unusual to have municipalities contribute to such venues. It happens more than you may realize. In the case of Peekskill and the obvious failing situation there it may be beneficial for the city to run the operation. It seems to me that Red House is nothing more than a glorified booking agent. They probably hired one themselves. Since the city pays for most of the cost of operation of the building they might as well hire their own booking agent and reap the rewards of any profits. Owning the building is a huge advantage. They would have no rent or taxes, just the cost of maintain the building and the booking of shows.”

InsidePEEK felt that this was an interesting take and worth sharing. We do not know if this would be possible but probably worth a look. It can’t be any worse than what is going on now.

One thing we do know is that Red House has, in fact, reached out to Tarrytown Music Hall for help. It is not clear if Tarrytown would be interested since Red House is offering a partnership, not a transfer of operations. From what we have been told Tarrytown Music Hall runs a tight ship and a partnership of any kind seems unlikely and especially not with those at Red House. We can only hope something is done. Peekskill cannot afford to have the Paramount go dark again.

InsidePEEK realizes that the Paramount issue may be difficult to follow. A recent email sent out by Red House after the Michael McDonald concert may help explain why Claxton and Morey’s economics simply don’t add up:

Dear Valued Patrons,

First off, we would like to begin by thanking you for helping make our 86th anniversary such an overwhelming success. It really was a fantastic evening and that is thanks to all of you. With your contributions and support, we were able to raise close to $6,000 for Paramount Hudson Valley Arts!
 
Kurt Heitmann
CEO Red House Entertainment LLC

They are bragging about raising CLOSE to $6000. That means on a best day, high ticket price, and sold out house, they cleared only $6000. That may sound like a lot of money to some but for an operation that costs somewhere between $300-400,000 a year that is not very much. That means the Paramount would need 50-60 shows like the one they had with McDonald. As we know, most shows are not even close to sellouts, or have high ticket costs. This analysis supports the statement above by one of our readers.

Let’s assume the McDonald concert was an “original show.” According to the lease, that means the city should receive $300 (5% of the adjusted gross). That means that for the City to receive the $40,000 that Claxton claims they received last year, they would have had to have 133 such shows!

In our last post InsidePEEK included a link for the article announcing the selection of Red House by Morey’s committee where they stated the following:

“Red House plans to hold about 80 events the first year if chosen by the Peekskill City Council to run the venue, increasing to around 200 events the following year. The group plans to run as a for-profit and non-profit hybrid, using profitable shows to help fund arts shows. The group estimates about $1.8 million in revenue, with losses of about $370,000 in its first year of operation.”

They have not even come close to the shows or revenues they promised. In fact, its cost to the City has been considerably more than the previous operators. The City Council should have allowed Tarrytown Music Hall take over then, and they should make sure it happens now.