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DeKalb to consider $1 million in business incentives

Rob Winner —
Steve Almburg (center) of Almburg Auctioneering tries to draw up bids as his son, Andrew (right), looks for bidders during the auctioning of the two previous DeKalb Clinic buildings in DeKalb, Ill., on Thursday, March 21, 2013.
Rob Winner — Steve Almburg (center) of Almburg Auctioneering tries to draw up bids as his son, Andrew (right), looks for bidders during the auctioning of the two previous DeKalb Clinic buildings in DeKalb, Ill., on Thursday, March 21, 2013.

DeKALB – It will not be possible to redevelop the former DeKalb Clinic Annex location and the former Small’s Furniture site without support from the city, two business owners said Thursday.

John Pappas, the owner of Pappas Development, along with Bill and Joy McMahon, the owners of Lincoln Inn Restaurant, hope DeKalb city leaders approve a total of $1 million in redevelopment incentives from the city’s tax increment financing funds.

“Without the TIF, there’s no way possible to do this,” Pappas said.

DeKalb City Council members will discuss the incentive requests Monday, which will be the last meeting before three new officials are seated. Any votes on the proposals would come in May, after newly elected aldermen Bill Finucane and Robert Snow, and Mayor John Rey are sworn in.

The McMahons are requesting a $330,000 forgivable TIF loan and a $25,000 architectural improvement program loan, so they can redevelop the old DeKalb Clinic Annex at 302 Grove St. into a banquet hall.

They purchased the building at auction March 21.

Pappas is requesting a $628,000 forgivable loan to redevelop the Small’s Furniture property at 2211 Sycamore Road into either a restaurant or a retail center. It is the same location Darden Restaurants planned to open as an Olive Garden before the chain backed out.

The incentive money would come from TIF funds, a special tax mechanism that local governments use to redevelop blighted properties.

In these districts, the amount of property tax that local taxing bodies receive is frozen at a base level for 23 years.

As the property grows in value over time, the increase in property tax payments over the base level is captured in a special fund that can be used for economic development and public improvements.

The McMahons are hoping to open a banquet hall called Faranda’s, by September. Bill McMahon said there is a need for such a business in the city, as people who want to host parties of 200 or more are leaving the city to do so.

“It’s happening over in Sycamore because there’s an unmet need in DeKalb,” Bill McMahon said.
The McMahons would repay the $330,000 loan over six years through sales and property tax generation. City officials estimate the new business could bring in $49,000 to $62,615 in general fund revenues a year.

The $330,000 loan would be 20 percent of the projected cost of $1.7 million. The McMahons will close on the property before the council makes a final decision on the economic incentives, but Bill McMahon said not getting assistance from the city would be a dealbreaker in terms of bringing a banquet hall to DeKalb.

“We do need some city support, or this project wouldn’t be possible,” McMahon said.
Pappas said he will be working with the city to bring either a restaurant or a retail center to the Small’s Furniture site.

“We’re going to try to attract businesses that are not currently in the city,” Pappas said.

City officials have previously described the Small’s site as being challenging. Redeveloping the site would involve demolishing the building, rebuilding the parking lot and other infrastructure improvements.

If Pappas brings in a restaurant, city officials are hoping to collect $120,000 to $166,000 a year in revenue. If Pappas brings in a retail center, that expected general fund revenue drops to $100,000 to $110,000 a year. Either way, Pappas would have seven years to repay the loan.

City Manager Mark Biernacki said the establishment of certain businesses would allow Pappas to pay off the loan. A Texas Roadhouse would work, but another McDonald’s would not.

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