Hope flickers out for Oak Street Cinema

After two years of speculation and a public battle over its future, cherished art-film theater Oak Street Cinema is expected to be sold after the Minneapolis-St. Paul International Film Festival ends May 3. Its most likely fate: Demolition to make way for a housing and retail development.

Minnesota Film Arts (MFA), which owns the Oak, is "in serious negotiations" with a group of developers and investors who own property around the theater, at 309 SE. Oak St. in Minneapolis near the University of Minnesota's East Bank campus, said board member Dr. Stephen Zuckerman.

The group, which has given MFA earnest money to demonstrate its seriousness, has been interested in the property for some time but backed off from negotiations about six months ago because of worries about the economy, Zuckerman said.

"It's questionable whether [Oak Street] will remain a theater," he said. More likely, it will make way for a mix of high-density student housing and retail space. Theater staff recently spotted a surveying crew outside the theater.

Oak Street Cinema was founded in 1995 by a group led by Bob Cowgill, now a professor at Augsburg College. Renovating a 92-year-old building that originally housed the Campus Theater, they turned it into a destination for film lovers, with a mix of American and foreign classics, and appearances by such luminaries as director Terry Gilliam.

But MFA's finances have been in jeopardy since Cowgill left the executive directorship in the fall of 2004. The organization quickly ran up a debt of more than $145,000, according to its 2005 tax form, the most recent on file. The new executive director, Jamie Hook, was fired in September 2005 for mismanagement that included missing deadlines for grants worth more than $50,000. Other staff members resigned or were laid off as the red ink mounted.

In January 2006, MFA's board said the theater might need to be sold, triggering a public protest by Cowgill and others who formed a group called Save the Oak.

"This is an outrage," Cowgill said Wednesday. "I offered my help to this board and they shut me out. They have wanted to sell the Oak since the beginning."

Zuckerman said selling the theater would clear the debt and pave the way for a reorganization of MFA, which also runs the film festival. It also would take the financial burden off MFA board member Tim Grady and co-founder Al Milgrom, who have helped the group stay afloat with their own money.

"Al Milgrom and Tim Grady gave a lot of blood, sweat and money to this organization," Zuckerman said.

According to Grady, he's put at least $75,000 into the organization -- a personal loan made against the theater building and property, which he has valued at upwards of $600,000. He would not discuss the MFA's plans Wednesday, saying only that he would talk after the festival.

"These people need to be watched very closely now," Cowgill said. "Where is the money going? Is [Grady] getting interest on his loan?"

Bell out of the picture, too

The MFA also has lost its longtime lease at the university's nearby Bell Auditorium, where Milgrom has been screening films since 1962.

Sue Weinberg, director of real estate for the University of Minnesota, said the university dropped the long-standing agreement because of outstanding debt and the difficulty of maintaining required insurance information on MFA's ever-changing staff.

The lease was replaced with a use-by-use agreement, she said.

The Bell is not included in MFA's plans for the festival, scheduled to open April 17. Instead, films will be shown at the Oak and the St. Anthony Main theater, which has five screens across the river from downtown Minneapolis.

Regardless of what happens with the theaters, the festival will continue, Zuckerman said.

"The festival carries the long tradition of film in Minnesota forward," he said. "We want to continue to focus on that tradition."

Megan Kadrmas is a University of Minnesota student reporter on assignment for the Star Tribune.