The city has agreed to purchase the historic Senator Theatre's outstanding debt of $950,000, according to a press release from Mayor Sheila Dixon's office.

The deal, which theater owner Tom Kiefaber has also agreed to, is dependent upon the theater's morgatge holder, 1st Mariner Bank, cancelling the auction of the theater that is scheduled for April 20.

The city will issue a request for proposal, or RFP, seeking a new owner or operator for the theater.

The deal, if approved by the bank, would save the 1939 theater from foreclosure after years of stuggling as a single-screen cinema house in a wold of multiplexes.

Supporters of the theater had hoped to run it as a nonprofit, but that’s not feasible, the . Senator Theatre Working Group, a study group, said earlier this month.

“We did not feel we could assure the city a nonprofit could run the theater,”  Baltimore City Councilman Bill Henry, who served on the working group, said at a meeting of the York Road Partnership.

The working group consisted of leaders from city nonprofits, politicians, bankers and real estate agents.

The group said it would be more realistic for the city, which has guaranteed $600,000 of the theater’s mortgage with 1st Mariner Bank, to foreclose on the theater. Currently, Tom Kiefaber, the theater’s owner, owes the bank $950,000 on the mortgage.

After foreclosing on the property, the city would pay off the note owed 1st Mariner and other debts. This move would also “preempt future claims on the property” by other creditors, according to a letter the working group sent to Deuty Mayor Andrew Frank.

The city would then release Kiefaber’s home in Sparks as collateral. In return, Kiefaber would agree that the theater’s sound system, projection equipment and screen would transfer with the theater.

Once the city held title to the theater, the city would then put out a request for proposals and try to sell or lease the property.

Leasing the building would afford the new operator “considerable savings on taxes and transfer costs,” according to the group’s letter. The letter also recognizes that a new operator may want to purchase the property and recommends the city consider either option.

“It should be noted, however, that there is no guarantee that the city will own the property even under the scenario we propose if another bidder satisfies the liens on the property,” the working group’s letter said.

The second option is to allow 1st Mariner to foreclose. That option wasn’t favored by the working group because foreclosure would limit the amount of control the city has over how the 70-year-old, art deco building is used.

“The city should be an active participant, however, prepared to bid on the property or cooperating with another whose purchase will yield the benefits enumerated above,” the group’s letter said.

The bank has already started foreclosure proceedings on the theater and has scheduled an April 20 auction of the theater.

Henry said he, Frank and Kiefaber met April 2 with Kiefaber to discuss the options presented by the working group.

In February, after the theater’s financial problems became public, the city offered Kiefaber a loan of $320,000 in exchange for his signing over the theater to a nonprofit. That offer depended on the feasibility of the theater operating as a nonprofit and without further city subsidies.

A nonprofit group, the Senator Theatre Trust, which consists of local businesses and community members, has been trying to raise enough money to stave off the auction of the theater. The group has sent e-mails soliciting donations, but has been unable to raise enough money to stop the auction.

The theater ceased showing movies last month, but it did open its doors to host a wedding April 2.

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