SOUTH PORTLAND — A deal to create a film production sound stage at the former National Guard Armory on Broadway may be in jeopardy.

The reversal comes two months after city officials and project investors indicated they were close to an agreement and were only fine-tuning a contract.

City Manager Jim Gailey said the city has not yet received a formal response to a lease offer that was hammered out during a private meeting attended in June by city councilors and representatives of the group of sound stage investors.

After that meeting, some councilors said they believed the agreement would be signed by July 1.

But this week, Eric Matheson, a Cape Elizabeth resident and film industry technician representing the investors, indicated the lease is not acceptable to the group.

“We will try and compose a document that is less convoluted, more clear and friendly to the proposed business,” Matheson said. “(The city) want(s) to control and profit from everything we do in the building at our expense. It cannot work that way.”

In addition to requiring the group to maintain the property, Councilor Jim Hughes said the proposed agreement includes a provision for the city to be partners in the business and share a percentage of the profits from production of films and commercials.

“The city wanted to be a partner in the sense we didn’t want to give (the armory) away, but we didn’t want to ask for too much up front,” Hughes said. “I don’t think we asked for too much.”

“I thought the agreement was incredibly fair,” he added.

Another stumbling block appears to be giving the investors the first option to purchase the property, but Gailey was confident that obstacle could be overcome.

“I don’t think the council will have problem putting that in there,” Gailey said.

The armory has largely been dormant, used only for cold storage, since the city bought it in U.S. Bankruptcy Court for $650,000 in 2006.

Since then, residents have periodically criticized councilors for buying the nearly three-acre property without public input and without an intended use. The city has invested little money in the building, which is crumbling from years of neglect.

Councilors have already met behind closed doors four times to discuss specific proposals for converting the armory into a film studio and established a conditional zone to allow that use.

Matheson has said the armory is ideal for a sound stage because the exposed iron beams in the drill hall could support automated light trusses and its wooden floor would allow workers to move stage props easily and quietly. A kitchen area would be ideal for production of cooking shows, he said.

In addition to building a sound stage in the 10,000-square-foot drill hall, Matheson has said he would like to renovate 12,000 square feet of office space and offer it to film-related professions.

While the city and Matheson have been working on bringing a sound stage to the armory for more than a year, there are signs that time may be running out for the two sides to come to terms.

“We have been serious about this project from the beginning and will make one more attempt to have it work,” Matheson said.

Hughes, who voted against purchasing the building in 2006, said he was not encouraged by the delay in the group’s response.

“We may end up doing nothing with (the armory) for while,” he said.

Randy Billings can be reached at 781-3661 ext. 100 or rbillings@theforecaster.net

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