DeKALB – Developers looking to rehab the old St. Mary’s Hospital at 145 Fisk Ave. and turn it into a boutique hotel could lose their $2.5 million tax increment financing incentive on City Manager Bill Nicklas’ recommendation.
Developer Nicholas Cronauer responded to the news Thursday night in an email to the Daily Chronicle.
“A federal lawsuit will be filed tomorrow against Bill Nicklas for his misconduct,” Cronauer said.
According to the agenda for Monday’s City Council meeting, Nicklas is recommending that the council approve the termination of a preliminary incentive agreement because of developers Chip Bulson and Cronauer’s continued inability to provide sufficient project plans. Approved in December, the agreement earmarked TIF funds for the project, provided that the developers submit more concept plans, which Nicklas said they have not done.
According to the agenda, on April 1, Nicklas told the developers that based on the status of their application, he didn’t believe they have the capacity to complete the project. Nicklas invited them to have a private conversation, since he was “reluctant to embarrass them publicly.”
“The response of the petitioners was harsh, personal and unprofessional,” Nicklas states in his agenda documents. “Several additional attempts to set up a meeting with the petitioners and the city attorney were unsuccessful. No additional contact has been received since April 3.”
Nicklas said Thursday that Cronauer was the one who sent the response on behalf of the pair.
Bulson could not be reached for comment.
“In the conversations we had, I kept asking for the financials, and finally not seeing anything, I said, ‘Here is a very simple form that is used by lenders,’ ” Nicklas said Thursday. “I made it very basic so they could fill in the general information, simple balance sheets which show assets and liabilities, working capital which is what a firm needs to get started. And there’s nothing.”
The agenda also states that the developers failed to provide enough evidence that they could come up with the rest of the funding after receiving the $2.5 million in TIF funds.
Nicklas’ agenda notes emphasize that TIF assistance comes with a federal income tax liability, and the submitted financials show no indication that the project will support that liability.
“Clearly they were counting on the $2.5 million as like a down payment,” Nicklas said. “And from what I can tell on the sheet, it isn’t like they just got this and hadn’t talked about it. They knew I was looking for financials. They suggested they were going to get bank financing for the balance, and that means they have no collateral.”
The agenda shows Cronauer and Bulson did not submit a balance sheet, and they do not own the property, since their purchase of 145 Fisk Ave. is contingent on it being rezoned and awarded the proposed TIF incentive, according to the agenda.
Cronauer has said the project would cost about $7.1 million in total, and he would work to find additional funding beyond the TIF money to cover project costs. Developers planned to turn the Fisk property into a 35- to 40-room boutique hotel, with a banquet space, distillery room and restaurant and bar on the 5,000-square-foot lower level.
“Despite appeals from the Community Development department staff and the City Manager from early February, the principals of 145 Fisk Ave LLC failed to produce any financials until March 28,” Nicklas states in his background information on the agenda. “These documents were barren of any assurance that the LLC could afford ongoing preliminary planning and engineering fees, let alone the substantial undertaking they had portrayed to the Planning and Zoning Commission on Feb. 6.”
During that Feb. 6 commission meeting, support for the project fizzled, with residents citing concerns over potential noise, traffic and disruption.