DeKALB – Despite some initial hesitation from new aldermen, a third mixed-use, residential and retail space by Pappas Development LLC could soon come to downtown DeKalb.
Though no vote was taken Monday night, the city council gave their positive consensus to move forward with seeking a preliminary incentive agreement which could see Pappas get $3 million in tax increment finance money to bring 38 luxury apartments and 20,000 total square feet of retail space to the city's Central Business District. Pappas has proposed a $13.8 million project to demolish two parcels of land, commonly referred to as the Mooney building, 204 N. Fourth St. and 423/420 Oak St.
Ward 1 Alderman Carolyn Morris and Ward 5 Alderman Scott McAdams, sworn in Monday, said they heard from members of the public that Pappas's other mixed-use spot, Cornerstone DeKalb, was not at full capacity, despite City Manager Bill Nicklas' insistence that he saw the rent rolls which indicated 100% capacity.
"I don't want to suggest that your word is insufficient evidence, but I have heard repeatedly from community members that are questioning the validity of that," Morris said, adding that she did not personally question Pappas' capacity.
"This is a private development with private funds," John Pappas, principal owner, responded. "Our bankers are happy. I'm not the smartest guy on the planet, but I would be pretty stupid if it wasn't 100% full and I'm turning down six to seven residents a day to proceed with a third project. So whoever doesn't believe us, that's their problem. We have zero responsibility to do any explaining."
Nicklas said current Equalized Assessed Value (EAV) on the Mooney property show its property taxes could generate 11 times more than the $35,000 it generated in property taxes in 2018, because of the investment Pappas is planning. A conservative EAV projects the property to generate $400,000 in taxes after the project is complete, Nicklas said.
"I appreciate some people will never trust an appointed city manager," Nicklas said. "But if we walk away from this because there's some speculation that's not founded, then I don't know where the TIF program is really going to end up going for us. Here's a chance to invest in a project that has somebody willing to take the risk and investors in tow that are willing to take the risk with him."
McAdams said the public has a right to know details about the project since TIF funding comes through residents who pay property taxes.
"While I appreciate that it's a private project, it's in the public process," McAdams said. "I was told, 'Spend it like you earned it,' not 'Spend it like we gave it to you.'"
The existing buildings would be demolished, and two 56,000-square-foot buildings would go up, the agenda shows. The building has been mostly vacant since it ceased to be used as an auto dealership, and an attempt to sell it at auction earlier this year attracted no bids.
Mayor Jerry Smith supported Nicklas' proposal, and offered a clear approval of the city manager's word.
"When we hired Bill Nicklas, we didn't hire him to blow smoke," Smith said. "I just want you to know that I take your word. I believe you."
The money became available for use after the council backtracked on plans to award $2.5 million to developers seeking to renovate the former St. Mary's hospital at 145 Fisk Ave. into a boutique hotel. The developers who proposed that project, Nicholas Cronauer and Chip Bulson, have filed a federal lawsuit against Nicklas.
Ward 6 Alderman Mike Verbic said the city should hold any TIF decisions until after the planned forensic audit of the past 10 years of TIF activity is complete.
"I'm not one that's concerned about your capacity," Verbic said to Pappas. "I'm concerned about our capacity to follow through on our obligation."
During council's consideration and ultimate positive consensus to move forward with ending TIF 1 in 2021 rather than 2022, Verbic worried the audit could result in the city being liable for misspent funds.
"Will the results come back and say we're obligated to pay back millions of dollars?" Verbic said. "And then where do we get it?"
Nicklas said he could only speculate.
"I think it will show our record keeping was not as sharp as it needed to be," Nicklas said.
Nicklas said the city's Joint Review Board was presented with the first quarter financials of TIF spending money in 2019 at their April meeting, and it was to their satisfaction.
All aldermen came to a final consensus to move forward, and council will vote on the preliminary incentive agreement at a meeting in the near future.