CARY - The town of Cary will spend a total of $3.1 million to create a downtown theater and cinema, plus another $1.4 million on sewer, water and parking improvements, as authorized in a unanimous vote of the Cary Town Council Tuesday.

The town-owned theater, once Cary’s most popular cinema, will host audiences of up to 200 for live music, drama and dance. Movies will also be shown there. Cary purchased the 65-year-old building in July for $410,000 and will spend the extra $2.7 million to build an addition and upgrade the cinema, which had been a retail store in recent years.

The project “represents the next step in Cary’s downtown transformation,” a staff report stated. The addition, to sit just east of the original at 122 East Chatham St., will include expanded dressing rooms, restrooms, storage and lobby overflow, allowing for larger performances, according to the town.

Construction is to finish in the summer of 2013, and the town estimates operating costs will be about $321,000 annually.

The town predicts a significant deficit for the project. Once the arts programming is fully established, the theater’s annual budget will still run close to $200,000 in the red, according to a town report.

Council members on Tuesday also approved downtown infrastructure improvements, including facade upgrades, curb and gutter replacements along Chatham Street, and repairs to downtown water and sewer lines.

Much of the projects’ funding will come from the $8 million that the town set aside this past summer for downtown improvements. Ed Gawf, Cary’s downtown manager, has coordinated planning for the new theater and the purchase of several downtown lots since joining the town staff in April.

After the new spending, about 15 percent of the downtown fund will still be available just short of halfway through the budget year.

The project will join the recently completed Cary Arts Center, a Cary-owned downtown building with a 400-seat auditorium.