10:21 AM EST on Sunday, February 27, 2005

BY GREGORY SMITH
Journal Staff Writer

PROVIDENCE -- Whatever happened to the Downcity Cinema?

Any money still to be gotten for the cinema is gone, lost for all practical purposes when developer J. Daniel Lugosch III sold Providence Place mall.

Back in 1996, city leaders and Downcity advocates made a deal with Lugosch's partnership to develop a Downcity movie theater in cooperation with local corporations, including the Providence Journal Co. Lugosch was to contribute half the equity, up to $2.5 million.

It was the number one concession Lugosch's partnership made to the city in return for a property tax break worth an estimated $140 million. The Downcity Cinema was supposed to draw crowds into the old downtown, which was being eclipsed by the mall.

If Lugosch failed to follow through, his partnership would have to pay the city $2.5 million to be spent for other Downcity purposes. But the Downcity Cinema was not built and the penalty was not paid.

Eleven months ago the Lugosch partnership, Providence Place Group, sold the mall and Lugosch left Rhode Island.

Lugosch did not return recent telephone calls, but people involved in the cinema saga said that the developer contends that he spent a lot of money on plans for the Downcity Cinema and held up his end of the bargain.

The $4.8-million Downcity Cinema was supposed to be built on a Journal parking lot at Washington and Mathewson streets by the end of 1998. Its reluctant operator was to have been Hoyts, which would also operate a 16-screen complex in the mall.

However, developer Arnold B. "Buff" Chace lobbied then-Mayor Vincent A. Cianci Jr. and civic leaders in favor of a Sundance cinema complex elsewhere in Downcity.

Cianci and the leaders ultimately concluded that actor Robert Redford's Sundance enterprise had more pizzazz and prestige and would provide a bigger boost.

Lugosch was asked to contribute to a Sundance project, to be built on Union Street. He agreed and offered $1 million, Cianci said at the time. Not long after, Sundance's financing partner, General Cinema, went bankrupt and the alternative project collapsed.

Cianci did not enforce the mall tax agreement after the Sundance collapse, or negotiate the payment of a cash sum by the Lugosch partnership. Patricia A. McLaughlin, Cianci's top aide for downtown development, said recently that it would have been "a judgment call" whether there was a default.

"He didn't really walk away," McLaughlin said. "The community chose a different track."