Beverly Hills Builds Up Offer for Bloomingdale’s : Retailing: Non-binding deal for West Coast flagship store includes developing adjacent parcels. O.C. plans unsettled.

In their effort to bring a Bloomingdale’s to Beverly Hills, city officials this week unveiled a plan under which Bloomingdale’s would build a 240,000-square-foot flagship store on Beverly Drive and the city would develop retail space on the north and south sides of the department store.

Before signing the non-binding agreement late Tuesday, Beverly Hills City Council members said the city could earn $3 million to $5 million a year in sales tax revenue and rent on the deal, a major infusion for a city whose annual operating budget is $75 million.

Several members of the arts community objected to the agreement because it would mean the demolition of the 382-seat Canon Theatre, one of the few mid-sized performing arts theaters in the Los Angeles area. The Canon Theatre land was sold recently to Bloomingdale’s parent company, Federated Department Stores. Under the agreement endorsed Tuesday, the property would be leased to the city for retail development.

City leaders promised to take the concerns about the theater into account. But they also appeared committed to seeing the Bloomingdale’s deal through, citing the economic boost a major department store would bring to the city.

Bloomingdale’s has indicated it would like to open a store in Orange County also, but so far no deal has been announced. The chain’s executives have indicated that South Coast Plaza is their first choice, but that they have not yet been able to reach agreement to open a store at the Costa Mesa mall. Locations at Newport Beach’s Fashion Island have also been considered.

Under the agreement, Bloomingdale’s would lease six parcels from the city--three facing Canon Drive and three fronting Beverly Drive--for $40,000 a year plus 0.25% of the department store’s annual gross sales above $150 million.

Recently, Federated purchased nine privately owned parcels on either side of the city property. It will use four of these parcels and the six city lots to build the proposed four-story Bloomingdale’s store, which will have underground parking.

In turn, Federated will lease its five remaining parcels to the city for $39,000 a year. City officials hope to build 75,000 square feet of retail space on the lots--three on the north side and two on the south side of the proposed Bloomingdale’s site. The two lots on the south side are now home to the Canon Theatre.

“The twist to this deal is that it works for the city and it works for Federated,” Beverly Hills City Councilman Allan Alexander said.

Beverly Hills City Councilman Allan Alexander said the city could earn more than $1 million in sales tax revenue from Bloomingdale’s, in addition to an estimated $3.8 million in leases and sales tax revenue from the city retail space.

He said the city could pay for the retail buildings in less than five years and place future years’ income in an endowment fund that in 15 years could grow to $100 million. A fund of that size, he said, could generate annual interest of $5 million to $6 million, making the city “financially bulletproof.”

“The city is on the threshold of a new era,” said Mayor Vicki Reynolds.

Objecting to the Bloomingdale’s deal in Tuesday night’s council meeting were Gordon Davidson, artistic director of the Mark Taper Forum, Canon Theatre executive director Joan Stein and theater producer John Clark.

Stein said that while she supported plans for Bloomingdale’s she hoped the city would build a new theater as part of the proposed development, “merging cultural life with retail space.” Clark read a letter from actor Charlton Heston, who offered his support in finding a new home for the theater.

Council members offered no concrete proposals for a new theater, but they said the issue will receive attention at the many public hearings and meetings expected on the retail development plans.

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Times staff writer Chris Woodyard in Costa Mesa contributed to this report.