A small Philadelphia theater company called Hotel Obligado folded in December - which ended up, oddly, being good news.

After producing offbeat and new work for eight years, Hotel Obligado closed with a surplus of about $5,000 - which has become its legacy, funding the city's newest theater prize, the Hotel Obligado Audience Choice Award for New Work. A $1,000 chunk of it will be given to one of five small local companies tomorrow night, after all five present snippets of new work they're considering for full productions.

Those presentations make up the Spark Showcase, an evening that will offer glimpses of the new works at Plays and Players Theatre on Delancey Place. After the five have been presented, the audience will vote on which company receives the award.

A thousand dollars doesn't sound like much when you consider the overall costs of a full production, which at the region's major companies can easily run to tens of thousands and more, but "some of these theaters are putting up a play with about $2,000," says Margie Salvante, executive director of the Theatre Alliance of Greater Philadelphia, the service group to the local theater industry and sponsor of the Spark Showcase.

"Under normal circumstances, they might have $500 for all their sets and materials," she explains. "To suddenly be given a grant of $1,000 makes a significant difference for them and will give them the push they need to get that extra prop, get a better space, get a longer time in a rehearsal studio, hire another actor - to increase the value of their production."

The five competing companies are Black Starr Collaborative, Madhouse Theater Company, Philadelphia Dramatists Center, Plays and Players, and Represented Theatre Company.

This fifth annual Spark Showcase - the first done in one evening rather than devoting a separate night to each company, and the first with a prize - comes out of a Theatre Alliance group called Spark. It consists of the region's smaller, start-up companies, whose needs are different from those of larger presenters.

More than 70 companies - the majority of the alliance's 110 members - are part of Spark; they are invited to a fair where they network with theater artists, and to professional-development programs that deal with such subjects as marketing and ticketing.

To be among the alliance's Spark theaters, "your budget has to be under $200,000, and you cannot have a standard contract with Actors' Equity," the national union of actors and stage directors that negotiates with 34 of the region's larger theaters, says Karen DiLossi, the alliance's director of programs and services, who oversees Spark projects. Several Spark theaters, though, do have special contracts allowing Equity actors in their productions on a case-by-case basis.

Hotel Obligado was among the Spark theaters. Co-founders Robin Marcotte and Dawn Falato agreed last year that Hotel Obligado was no longer the way to express their artistic visions.

"When a labor of love becomes more labor than love, it is time to reevaluate how we approach our art," they wrote on the theater's Web site, saying the company was disbanding "after several months of weighing the pros and cons of maintaining our quickly growing organization while struggling with a lack of financial and administrative resources."

Under the rules of nonprofits, Hotel Obligado, upon closing, had to distribute its surplus to another nonprofit agency. The directors arranged to turn the money over to the Theatre Alliance, which decided to establish the "people's choice" award voted by the Spark Showcase audience. The alliance plans to give the $1,000 award over the next few years, as long as the money lasts.

Hotel Obligado was dedicated to developing new work - as are many small theaters in Spark and, to a degree, all the region's more established, larger professional theaters. Research from the Pennsylvania Cultural Data Project found that in the 2005-06 theater season, 81 world premieres were presented in Philadelphia, 26 percent of all professional productions. Comparable markets produced new work as 12 percent of their seasons.

Also that season, Philadelphia theaters held 63 workshops or readings of new work and commissioned 17 new plays.

"The significant number of new plays being produced is really being fueled by the small theater companies," says the alliance's Salvante, who cites the Spark Showcase as a prime example. "Where is the next Tennessee Williams going to come from? The next Arthur Miller? A lot of new work is being nurtured by the small companies, in the trenches.

"The next generation of playwrights is linking with these small theater companies, cultivating together, honing their craft, shaping the stories, and the small companies are incubating them."

This, she says, speaks directly to theater's role, "to show us who we are and to ask us how we should live. Certainly, the great plays of the theater canon endure because they tell the story of universal human experience. In a society such as ours, that is evolving at a rapid pace and confronted with many new issues, we need to be constantly renewing the story."

Contact staff writer Howard Shapiro at 215-854-5727 or hshapiro@phillynews.com. Read his recent work at http://go.philly.com/howardshapiro.