The letter leaves the door open for future negotiations at Hale's request but says the lease of the current building, the expansion of the theater and any redevelopment plans for the area "must be tied inextricably together."
"We want you to know that we are parting as friends and wish you well on the next stage of progress for your organization," Winder wrote on behalf of himself and other members of the West Valley City Council.
Rob Brough, chairman of Hale's board of trustees, said Thursday that no decision has been made on a location for an expanded theater.
"This is obviously one of the biggest decisions we will have to make as a board," Brough said. "This isn't a quick or easy process."
Representatives of the nonprofit theater company told the city in September that all of their productions are selling out and they want to triple the number of seats to about 1,900 in a new facility.
Negotiations then began with West Valley City, which had bonded for funds in 1997 to help build the current venue at 3500 South and Interstate 215. Hale leases the building from the city, which uses the rent payments to pay for the bonds.
The talks focused on two issues: Renewing the current facility's lease, which expires at the end of 2016, and working out a deal for building a bigger venue.
The City Council in December approved a new lease amendment that would keep the theater in the community through 2038 and give Hale the option of taking ownership of the building in 2028.
And in January, council members, sitting as the West Valley City Redevelopment Agency board, voted to buy 15 acres next to the theater for an expanded venue. The purchase agreement required the agency to pay a $100,000 nonrefundable deposit and set a 90-day escrow period.
Despite those steps, the two sides were unable to reach an agreement on lease renewal or expansion. City Manager Wayne Pyle has said that even if Hale decides to expand somewhere else, West Valley would have other options for the property, including a commercial or mixed-use project.
Sandy officials also have been trying to snag the new facility and want the theater to go on 11½ acres at 9950 Monroe St., a site that would provide prime visibility along Interstate 15. Under that scenario, the theater would be able to expand over 5½ acres, with the remaining land set aside for other development.
Sandy Mayor Tom Dolan said Hale recently rejected a proposal from the city but that the two sides are meeting Friday for further discussions. Sandy has been "totally open" with West Valley City about its dealings with the theater, he said.
"It's not a bidding war," Dolan said.