DeKALB – Chicago-based brewers were shut down once again by the City Council on Monday after their second attempt at presenting an appeal for tax increment finance money received little support.
While council members again expressed support of downtown development to bring Alulu Brewery & Pub to 263 E. Lincoln Highway, formerly the House Cafe, for a brewery and music venue, they echoed their July 8 remarks, when the council said it would prefer if the developers kept their TIF request below 30% of the total cost. According to city documents, the developers amended their plans by eliminating the rooftop dining and entertainment area they had proposed in the initial designs. That brought the overall project costs down from $1.8 million to $1.6 million but increased the percentage of TIF-eligible project costs from 42% to 45%.
Seventh Ward Alderman Tony Faivre expressed doubt that the “craft beer phase” would last 20 years, the duration of the forgiveable loan. He said the return on investment, estimated to be 5.1%, or $592,000 in sales tax revenue over 20 years, did not justify the spending.
“I know some companies, when they’re investing in research and development, they won’t accept a project [with] less than 17% [return on investment],” Faivre said. “There’s no guarantee that this is going to last 10 years. There’s a risk and a reward, and at five and a quarter percent, the reward is not there for me.”
Faivre said a vision of former city councils was to give more to the first few projects downtown since they would be taking more risk, and taper off TIF funding for subsequent projects as development grew.
Mayor Jerry Smith expressed support for the project, however, and invited Derek Bly, chief financial officer of Alulu, to return to the council for a third try.
“I think we’re going to give you another strike at this,” Smith said. “I hope it’s not a strike three based on those who feel that this is a great concept.”
Bly said the company would take what it has learned from its Chicago investment and put it to use in DeKalb to get the business profitable in less than three years.
“This is not our first location, so our intention is to profit [in] Year 1,” Bly said.
Bly also referenced neighboring downtown breweries: The Forge Brewhouse, at 216 N. Sixth St., and Byers Brewery, 230 E. Lincoln Highway, set to open in August.
“There’s a network effect when it comes to breweries. We assist each other. It’s not a competition; it’s a network effect where we help each other succeed.”
Sixth Ward Alderman Mike Verbic and 1st Ward Alderwoman Carolyn Morris expressed disappointment that developers nixed the rooftop idea. Verbic suggested if they put it back in the plans he would consider a TIF compromise.
“I really appreciate your due diligence,” Verbic told Bly. “My preference would be the rooftop feature be added back in. I would be willing to meet halfway; I believe in this. I would support a 37.5% cap if [the] council would consider that.”
“I would say I’m highly in support of that as well,” Morris said. “I think the rooftop element was key to making it unique and attractive and a new feature for town.”
Other recent projects have received funding from city TIF coffers. The Egyptian Theatre’s expansion and air conditioning project received $2.5 million, or 62.5% of its overall $4.5 million cost. Pappas Development was awarded $3 million in its preliminary TIF incentive agreement, 22% of the overall project costs for the Mooney Project redevelopment, expected to total $13.8 million.
Source: The Daily Chronicle