Unable to wait for the official launch, we took the opportunity to scope out the place at closing time Saturday night. And we liked what we saw (and what we purchased).

The store reminds me of a big-city specialty grocer: compact, visually pleasing and with lots of goodies artfully arranged in a compact space. There’s a fresh meat and fish counter, a very nice and competitively priced produce section, really good wine (including chilled whites) and liquor choices (Limoncello!), a nice cheese selection, plus a coffee bar.

The prepared foods department was closed by the time we got there, but I managed to snag some grilled asparagus and roasted vegetables — very nice. I noticed a lobster roll on the menu, which I would have liked to enjoy with a glass of wine at one of the outdoor tables. Maybe next time.

The store’s staffers (full disclosure: my kid is a part-timer there) are welcoming and knowledgeable. On the recommendation of Dennis, we bought a couple of bottles of wine, as well as a block of cheddar cheese, plus some whole wheat croccantini crackers and grapes to accompany it. Not a bad (late) evening repast.

(We weren’t alone in our positive response to the Lemon Tree. Wine from the store figured prominently in the offerings at a cocktail party I attended Friday evening.)

Looking forward to a return visit soon.

The Park Board heard a proposal for a $10.2 million addition to the Lincoln Center at its May 6 meeting.  The 20,000-square-foot addition, which would accommodate an anticipated increase in programming, would be accomplished in three phases, according to the presentation by architects Elke Lonigro.

This project  was first mentioned in the August 8, 2009, Park Board meeting minutes. The architects were hired last September to produce a Renovation Master Plan in consultation with the Park staff at a cost of $11,000.

The major portion of the addition is to the south end of the building, preserving the present multifloor structure, which the architects describes as having “good bones.” The presentation provided a floor-by-floor comparison of the existing space versus the new proposed floor plans.

The entrance to the building will be in the new southwest corner of the ground floor, which will also include a new gym. Above it, in what is now the third floor, will be a new 250-seat auditorium. Small additions will be made to the north end, and all floors will be modified to some extent.

The first phase of the project is estimated to cost $6.6 million. The second phase would include an addition at what is now the main entrance, plus extensive renovation to the interior at an estimated cost of $1.8 million.  The third phase is concentrated at the north end of the existing building, includes a small addition plus extensive renovation, at an estimated cost of $1.8 million.

Growth in the district’s programs will bring more people into the building which, in turn, creates the need for more parking, while the building expansion actually uses some of the existing parking spaces. Adding more spaces means the elimination of the grass and play areas on the south end of the property, or the costly aquisition of additonal property.

A key consideration is that the proposed modifications will render virtually unrecognizable a building of considerable historic significance. A two-room school was erected on the present Lincoln Center site in 1867, with an additional two rooms in1877. The first high school class was graduated in 1879.

The north section of the building was added in 1900 in front of the two original rooms, which were razed in 1913 and a high school was added to the South end of the building. It was used until 1928 when the original part of what is now Downers North High School was built.

Lincoln continued as an elementary school, with the administration office for both Distric 58 and District 99 in the top floor, until it was closed in 1973 due to decreasing enrollment and costly repairs required to bring it up to school code. The building was purchased by the Park District in 1974 and the interior was remodeled.

Owners Tim Canning and Shaun Black have launched the Roots Project to encourage supporters of the downtown market and eatery to contribute $50 or more. In return, their names will be inscribed in an art installation in the store’s bar area.

“These literal roots will become symbols of our dedication to our community of Downers Grove while at the same time building up the Lemon Tree,” the store’s website states.

A contribution of $50 or more adds the contributor’s name to the Roots Wall and snags a $10 gift card to the store. For $250 or more, contributors will see their name included in the lemon tree artwork, receive three $20 gift cards and gain an invitation to the store’s Grand Opening Gala. The deadline for donating is April 30.

Canning borrowed the “roots” concept from a friend who opened his Cambridge, Mass., restaurant The Hungry Mother on a shoestring.

“The Roots Project is very similar and is a creative way to bring family, friends and supporters together to embed them into the Lemon Tree’s future,” he said. So far, the store has reached about 25 percent of its fundraising goal, although donors have been “very generous,” Canning said.

The store has incurred some unexpectedly large expenses in its quest to become Downers Grove’s long-awaited downtown grocery. Building permits and variance costs for signage have added up, said Canning, a chef whose previous experience has been in the restaurant business.

“With new additions and little changes here and there costs have crept up along the way,” Canning said. “But we are set in offering the best ideas to the folks of Downers Grove and are willing to accept the costs because we believe the end result will be worth the dollars.”

In preparation for the opening, Canning and Black have traveled the nation to learn from the best gourmet grocery stores.

“Shaun and I were doing research for over a month in Colorado, California, Arizona, Dallas and New York City to fine-tune the Lemon Tree project,” Canning said. The goal is to develop a menu of delicious prepared foods, which will be the centerpiece of the store’s offerings.

Among those dishes will be the creations of the store’s recent recipe contest winners, including the  “Crispy Pancetta, Pear & Goat Cheese Sandwich” by grand prize winner Becky Rheintgen,  soup category winner Chandra Venkat’s  “Lemon Soup,” sandwich winner Elizabeth Walp’s “Salmon Sandwich,” salad winner Margie Cleveland’s “Gorgonzola, Roasted Pecan and Mixed Green Salad” and dessert winner Anne Reilly’s “Lemon Cake with Lemon Frosting.”

Meanwhile, work is continuing on the store’s interior.  “Getting the correct lighting has been the biggest challenge,” Canning said. “To showcase our vibrant produce, we outlined this entire area with special tracks that will ‘pop’ the natural colors of our fresh-picked bounty.”

The store will feature dark wood and stainless steel to showcase the food. “The bar area has a cool feel with Oceanside tile and high bar stools which are perfect to hang out after work and have a glass of wine or cold local draft beer,” Canning said.

“Outside, we are creating a European-feeling patio with an abundance of flower boxes and lots of natural tones,” he said.

It literally has taken a village to bring a gourmet grocery store to the pricier environs of downtown Downers Grove.  As part of an agreement with Michael’s Fresh Market, which recently opened at 7241 Lemont Road.,  the village offered to rebate 37.5 percent of that store’s sales tax for 10 years to operate the Lemon Tree.

Click here to visit the Lemon Tree Grocer fan site on Facebook.

One thing contributing to the budget squeeze is something government taxing bodies do that we all do: borrow money.  They do it via bonds, which are debt securities with longer than 10 year maturities.The basic idea behind municipal borrowing is to spread the cost of a project time-wise to capture a larger percentage of resident users who benefit from the product of the borrowing.  By borrowing money for a fire station, that 20 year debt is repaid by a wider range of taxpayers than if it was paid for cash on the barrel head by who live here right now.  At least, that’s how it’s been explained to me by various village managers over the years (note: current VM Fieldman was not one of them).

You can click on any graph for larger images. The first graph on the right shows deficit borrowing since 1998.  With the exceptions of two years, DG has borrowed money each year to do something right away, and planned to pay it back over time.  At the front end most of this was TIF borrowing to buy and assemble properties for the Acadia on the Green development and the Parking Garage.  1998 represents $3 million borrowed for Fairview Avenue reconstruction, and a dedicated 1.5 cent/gallon gasoline tax was enacted to pay for the bond.  There was also a 2001 $4 million bond issue to install automated water meter readers throughout the village, and water fund revenues were dedicated to pay for it.  Both of these bonds have dedicated single sources to pay for them, so in some ways can be considered Revenue Bonds, but they both have a backstop of the taxpayer should anything go awry, so they are counted by the village as general obligation bonds.

The rest of the bonds issued before 2007 are for the Central Business District Tax Increment Finance District- The CBD TIF that we’ve reported on in the past.  While there are specific TIF Bonds, here in DG our TIF bands are still general obligation bonds.  When the village started issuing them, there was no Tax Increment to pay for them.  All the way up through today, DG still relies on general fund tax receipts and parking fund money transfers to make TIF bond payments, although it has been said those general funds have been repaid out of the TIF fund and accounts are now in balance.

The neon blue represents bond re-fundings.  These are typically done to take advantage of lower interest rates, lower the Total Interest Costs (TIC) of the borrowing.  Usually, as is the case here, the cost of issuing the bonds are more than made up for by the interest savings.  This does not reduce the outstanding principle, it replaces it.  In the case of the almost $10 million borrowed in 2005, it replaced the remaining balance of $12.7 million in 1999 and 200 borrowings.  On the down side, like when you refinance a home, the time span extends back out again, so the village, although paying less, is paying longer.

Some refi bonds. like the 2008A bond issue that refunds 1999, 2000, and 2003 bonds, have odd payment schedules.  This looks almost like a balloon payment loan, with the last two payments being whoppers.  Look for those to be dinked around with before the balloon pops in 2020.

The Series 2009 bonds refunded $12 million in bond debt from 2003.  After paying about $1.125 million a year for the first 6 years, the payments dropped to around $1.04 million a year.  Over the next ten years that saves the village over $600,000 in interest costs-just like you refinance a home when it makes sense.  Anyone who bought a house in the 12% mortgage early ’80′s is probably a refi expert.

There are basically three types of debt in the village: TIF debt, stormwater debt, and other debt like Fairview and the AMR’s).  The graph at right shows the total debt payments for all three types of debt has sort of piled up on us.  Keep in mind the TIF increment is supposed to pay for the TIF debt, but that’s money that may not be available to spend elsewhere for things like streets and infrastructure repairs.  TIF revenues have limited uses, and generally have to be used within the TIF district itself.  Although Village Hall and the Police Station are within the CBD TIF, no TIF generated funds can be spent on public facilities.  Blame that on past abuse where cities and villages used the TIF for new Taj Mahal Civic Centers.  Can’t be done anymore.

If you think $8 million a year for the next three years for debt payments is steep, it is.  At least $2.5 million of that is pure interest payments.  Coulda woulda shoulda ten years ago set $2 million a year aside for stormwater projects?  Would have saved us almost $16 million in interest payments over the next 30 years.  All we need is a time machine to go back and we’re all set.   In 2013 the village is scheduled to at least consider another round of stormwater financing, and right now a stormwater utility is far away.

As it is, the last two years of CBD TIF analysis shows that this district won’t come close to paying off the $45.2 million it still owes before the TIF expires in 2021.  In this case the annual payments ramp up every year from a bit under $3 million a year to just over $5 million a year.  It appears this was a clear skies and sunny days repayment schedule.  That may change if it stays dark clouds and rainy days.  Another refi.  This is the blue component of the total payment chart above.

An artifact of the recession is that consumers have reduced revolving (credit card) and installment debt, and increased their rate of saving.  the net result is the average citizen is paying less in interest costs.  Interest doesn’t buy you anything.  Even on your home loan interest costs you only recover a percentage of the interest costs as a tax deduction.

The same is true of muni loans.  Over the next 30 years the village is scheduled to pay $102,044,433 on $71,235,000 of bond debt.  Do the math.  That averages  $1 million a year just for interest.  Doesn’t buy us anything, just pays for the money we already spent.

Ogden Avenues TIF district offers a different model, and in a time when the ground rules for doing things have changed, may offer a guide towards some future spending.  In the case of Ogden avenue, money is saved up first, then spent.  The sidewalks going in along Ogden?  The sewer work being done?  No interest costs.  Zip nada.  Instead of every $1 spent needing $1.40 in repayment, and .40 of non productive expense, it all goes to goods and services, dollar for dollar.

We even have a sorta/kind example of it.  Back in the 80′s the village purchased the homes immediately south of old Fire Station #2.  By buying them when we had the cash, it cut the land acquisition costs by a couple hundred thousand dollars.  By saving, we wouldn’t make much in interest payments right now (check CD rates), but we would avoid further borrowing down the road.

It’s not something that can be done right at the moment, but if-when the economy picks back up, and when the village trims expenses back to the bone, and when there are surpluses, perhaps the idea of saving for future projects will have some attraction.

The current Debt Service Summary from the 2010 budget is here.

The plan, details of which are located here, include:

• Replacing aged windows with new energy efficient units,
• Removing the wooden front and replacing and restoring the brick façade,
• Installing a new 6′wide canopy along the entire length of the building.

A sticking point in several previous applicants and grants, no EIFS materials are planned for this project.

The grant applicants asked for more than the max $15K based on Dali’s occupying two buildings, but staff is treating this as one restaurant, one project, and has capped their recommendation at $15k.  Look for council to react favorably this week at workshop, and approve this project at next week’s meeting.

There have been eight previous projects approved  under the Façade Improvement Grant Program, and if Dali’s ais approved, a little under $12,000 would remain in the fund.  The project funds are derived from the CBD TIF District funds.

Everybody missed it?

Pick a local business; any one — about 80 folks involved with them protested the approval of ATI taking 10,000 square feet of prime retail space at reduced rental rates any one of them would gladly pay.  Many of those local businesses are owned by people who live here.  They bank here, sometimes locally.  They buy groceries, and dine out, and have a beer or glass of wine here.  They attend local events.  They belong to local business groups that promote local business.  The rent they pay sometimes goes to landlords who live here, who in turn do the same things the other business owners do.

National and regional businesses expanding into local markets diverts the local money stream away from the community, where it is spent on large capital expenditures, overseas goods and all too frequently inflated executive salaries. As the money leaves town, an important economic source of funds leaves with it: recirculated income.

John Maynard Keynes first coined the term “Local Multiplier Effect” in his 1936 book The General Theory of Employment, Interest and Money, to describe this phenomenon that creates local money movement that passes from local hand to local hand over and over, on average at least three times before leaving the community.

Pick Anderson’s Book Store and compare that to Barnes & Noble Booksellers.  Both fine book stores, both staffed by able and willing employees.  Spend $100 dollars at Anderson’s, and about $45 dollars gets spent on things-and I have no idea if these are all applicable to Anderson’s-like accountants/bookkeepers, advertising, legal services, possibly office supplies and a plethora of other expenses.  That same $100 at Barnes and Noble-again a fine shop-and about $15 dollars gets spent locally.  The remainder leaves town for the corporate offices.

It adds up.  Some communities actively advocate a Business To Business (B2B) Import Replacement program to link businesses with local suppliers and services.

Back to ATI.

Council took the short view that $50,000 in property tax income a year was better then waiting for the same property tax income plus an estimated $26,000 a year in sales tax at some later date.  To boot, finishing up the Acadia on the Green Redevelopment Agreement hinged upon approving the ATI deal.  So in they go, and local residents will be referred there, possibly instead of to the Good Sam Wellness facility, or to any of several existing local physical therapy businesses.

In the former, ATI revenue leaves town immediately for the regional offices. One hopes some jobs for locals come with the business.  Patients and workout buffs probably will not even make payments there, instead being billed; few local services being used to keep money in the community.  Council harped on the fact ATI users would be eating downtown, and shopping downtown.  Given ATI expects their prime time to be before 5am and 8am, and after 6pm when bars and restaurants are open, it appears the opposite would be true, people will be going to ATI instead of to local shops and dining.  That $70 therapy visit or that $25 a month membership money never gets a chance to do much inside Downers Grove.  Mostly it just leaves.  Add on to the local money departing, outside insurance funds never returning into town.

In the latter, at the other smaller physical therapy businesses, or at God Sam’s Wellness Center, all of the benefits of the Local Multiplier Effect (LME) come into play.  That insurance payment that left the community comes back to a local business, who passes it on to another local business.  That dimes the users drop at the Park District or the YMCA to feel the burn circulates around so others can share the wealth by receiving and in turn using the money.  Both of those groups use the money for other programs and activities.  The money sticks around and does some more good for the community.

The village needed to determine whether ATI would add value to the downtown, or whether they should wait longer and see if they might get retail to fill the spot.  It’s a tough choice.  The EDC is tasked with finding warm bodies to fill cold space.  When EDC President Greg Bedalov entered into talks with ATI, they took a look around and locked their sights on the middle of AOTG building #1, which is the choicest of the AOTG prime street level space.  Thousands of commuters pass by there every weekday; hundreds of Egg Harbor customers see it, and thousands of cars drive by every day.  TCF Bank?  Charles Place?  No thanks, ATI knew where it wanted to be, and that was at DG’s “Grand Central Station”.  It meets all three real estate requirements: location, location, location.

Some might say council went with “git ‘er dun”, but it looks like staff and council made their decision based on a cost/benefit analysis, which is usually informal.  Letting a property lie unused for three years is about the maximum if you are looking at the short term of ten years, and a difference of $50,000 or $76,000/year in revenues to the village.  If you are considering the full 20 years of the potential lease, the break-even point is six years.  If you are looking at the life of the building for how it can contribute to village revenues, it never makes fiscal sense to allow a non-sales tax revenue generator into a street level building in the CBD.  Everyone knew that three years ago, but as they say, times change.

Net Present Value

“It is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.”

In another post I mentioned Net Present Value, or NPV.  Sometimes it’s called Net Present Worth.  It’s a concept most people on council with one exception, might have no experience with.

Here’s some full disclosure; one of my jobs due diligence requires me to do the NPV math on a sale or purchase.  I cheat nowadays: I use a couple different computer calculators that do the math for me so I can just plug in different variables and see what the results yield.  This is not an exact methodology, but it usually works, especially for long-term investments.  Long-term planning if you will.

In this case, the village needed to determine whether ATI would add value to the downtown, or whether they should wait longer and see if they might get retail to fill the spot.  Using NPV calculations isn’t quite germane for the village, unfortunately.  Long story short, given the expectation of revenues and the revenues already lost, given a 20 year time frame the village could wait four more years if they could know for certain the space would be filled with retail, which they can’t know.

The guy on council most intimate in knowing how to value real estate deals is Waldack.  Deal with it; he knows his numbers.  He knows how to value real estate, transactions, and account for variables related to whether or not a given deal makes sense from a hard math POV.

Past that, whether to keep fishing or cut bait is anyone’s guess.  I called my buddy, a pseudo-retired economist who taught at U of I, and got his response: “Ask ten expert economists what will happen and you should get at least 30 answers all based on what has happened in the past.  Makes for great conferences, by the way, always someone to discourse with.  Economists are best analyzing what happened, not specifically seeing the future; that involves bones, blood, entrails, and cauldrons.  Candles help set the mood…  Listen to what Warren Buffet thinks will happen.  He’s been more right than any economist in predicting future markets, and the economy is tied to the market.   Buffet says in 2012 or 2013, everything will be fine.”

It’s a tough choice.  The village sank about $7.2 million into the AOTG deal with New England Builders, another outside company.  In return the village determined that street level retail was something to be desired, and wrote a 90% minimum into the RDA with New England Builders.  That deal is now done and gone, as is the $7.2 million-NEB is an outside company, and most if not all of the bond money left town just a surely as if it were spent at Barnes & Noble instead of Anderson’s.

So much for long-term planning in the CBD?  Maybe, maybe not.  Times changed for the worse, and they can change again for the better.  It’s ironic that for all the support council has shown for the concept of shopping local-and they are absolutely correct on the importance, even the need right now-that they lost sight of not just solid long term comprehensive planning, but that what the village also lost in the ATI deal was the Local Multiplier Effect.  It wasn’t just settling for the short-term gain of $50,000/year in property taxes instead of the “maybe” of an extra $26,000 in sales tax.  It also includes the certainty that 85% of the money that goes into ATI never comes back out into the community; it leaves town.

The idea was intriguing, particularly in light of Downers Grove’s recent discussion on the value of retail to the overall health of the downtown.

Curious about the impact of the Elmhurst grant program, I followed up with John D. Said, director of planning, zoning and economic development for the City of Elmhurst.

The retail grant program was created in 2002 to target specific retail activities for the downtown, he said.  Like Downers Grove’s $100,000 Facade Improvement Program, the grant program is financed out of TIF funds.

The district already had a healthy number of restaurants and salons, so the goal was to enhance the local shopping experience and to “help support the community with retail sales tax.”

“It’s done extremely well,” Said said. Forty retail businesses have used the program since its inception, and many of them are locally owned. One of them, My Favorite Toy Store, used the program as an opportunity to add a second location to the one already existing in Downers Grove.

That’s the pitch his office brings to neighboring retailers — that they can use the grant money to expand into Elmhurst, Said said. “We don’t want to raid other communities.”

Among the businesses that have emerged are several boutiques. While they aren’t the national specialty retailers that some residents favored, the town has found that dealing with independents is more advantage than dealing with a corporate headquarters one or two states away.

And with Oak Brook Center less than five miles away, there are abundant reasons why downtown Elmhurst may never attract a major retail chain — a reality many in Downers Grove have also come to accept.

In another similarity with DG, Elmhurst has discussed an ordinance that would limit the downtown’s first-floor space to retail businesses, although none is currently on the books.

As for downtown vacancy rates, maybe the grant program has given Elmhurst a leg up. The city’s rate is  only three to four percent–about a third of that of downtown Downers Grove.

Council approved ORD 00-03890 by a vote of 6-1.  Among other things, the ordinance amends an agreement with New England Builders that allows ATI to open a 10,000 square foot facility in Acadia on the Green building one incorporating both a 3,000-square-foot physical therapy facility and a 7,000-square-foot fitness center.

Only Commissioner William Waldack voted against the amendment after failing to find backing for a suggestion that would have required the developer to make payment in lieu of the $25,000 in sales taxes the space could be expected to generate annually.

Commissioner Marilyn Schnell said a comment by EDC board chairman, Ph.D. economist and Big Four acccounting firm partner Don Jankowski had “swayed” her, prompting her affirmative vote.

Jankowski was among a number of business owners and residents who spoke to the issue, most of whom wanted to maintain the existing redevelopment agreement calling for at least 90% retail and discouraging as undesirable health club facilities in the Acadia complex.

George Swimmer, a CBD business owner, spoke about the Lakota Plan that had laid the original groundwork for downtown redevelopment.  Bill Nienburg, who said he was speaking as a resident and not a business owner, read a prepared statement that was interrupted by Mayor Sandack when it ran over the allotted time. Nienburg was allowed extra time to finish.

Willis Johnson, whose company owns the Tivoli building among other real estate around the village, cautioned commissioners that actions taken to solve short-term problems might have long term effects.  If rent levels make sense, it would rent, he said.

Other business owners seemed to underline that opinion in their comments; several had expressed interest in renting space in the AotG building one, but went elsewhere after receiving little interest from the renting agent.

Local attorney Kevin McQuillan, a Naperville resident, got into a bit  of back and forth with Mayor Sandack: lawyers-can’t help arguing I guess.

Last to the mike was Jankowski, who wore an ATI t-shirt he acquired as a physical therapy patient at the company’s Darien facility.

He outlined the economic factors arrayed against the retail sector:  bank financing is virtually non-existent, consumer spending has plunged while saving rates are up, shopping habits are changing in favor of  discounters and big-box stores, and a spate of retail bankruptcies have created vacancies in Downers Grove and throughout the country.

“The fact is retailers are struggling in this economy and that is not likely to change in 2010,” he said. “Based on my experience as a professional economist, I believe to return to where we were before the financial downturn we’re probably looking at 2015. ”

Citing the impact of the internet, Jankowski also predicted that brick-and-mortar retailers will have a difficult time ever returning to levels they enjoyed before the current recession.

While the retail aspect of the ordinance captured the most attention, it should be noted that it contained several other  items related to New England Builders and ATI:

• provide a credit from the purchase price for the Phase III property for improvements made by the developer above and beyond the requirements of the redevelopment agreement
• extend the schedule for the developer’s purchase of the final phase of the development
• accept certain public improvements and reduce the letter of credit posted by the developer
• accept a grant of easement for public alley purposes
• grant an easement to the developer for the maintenance of the village green space
• approve the lease of first floor tenant space to ATI physical therapy and fitness center

Not approving the last condition would have meant not approving any of the above, which would have created its own problems.  It looks likely the lease was a linchpin to NEB getting the necessary funds to buy the third and last part of the AOTG project, the building on Main Street, which will probably feature street-level retail.

Following the meeting, the DGreport checked in with Tammi Karam, one of the downtown retailers who had opposed changing the changing the 90-10 retail guidelines.

While there had been some talk about filing a lawsuit should the ATI lease win approval, Karam said her group intends “to learn from the experience and move on.”

She had planned to become more involved in the Downtown Management Corp. before the ATI issue came up and she will stay involved now that it has been resolved, Karam said.

Her next goal is to encourage downtown management board members to post their email addresses on the organization’s site.

She also wants to work toward better communications between downtown management, the Downers Grove Area Chamber of Commerce and business owners throughout Downers Grove, many of whom “don’t know where to turn to,” she said.

“This issue has been an eye-opener to me.”

The proponents

While downtown retailers who oppose the ATI plan continue to register their objections, proponents of the proposal have been working to convince the village council to approve the deal Tuesday night.

The boards of both the Downtown Management Corp. and the Economic Development Corp. already approved the plan by Acadia on the Green developer New England Builders to lease about 10,000 square feet of first-floor space to the ATI physical therapy and fitness center.

Unlike the village’s agreement with Charles Place, which mandates a 75-25 retail-to-service split, the Acadia on the Green agreement allows for the developer to deviate from the 90 percent retail guideline with prior written consent of the village council.

Both Downtown Management and the EDC  say business conditions have changed dramatically since the AotG was conceived and it would be unwise to pass over a long-term service tenant in the  hopes of attracting future retail to space that already  has stood empty for three years.

Downtown Manager Linda Kunze said her board, which consists of four downtown business owners and four property owners,  voted in favor of the proposal after discussing it at length. Kunze had exercised her prerogative to call the special meeting.

While downtown Downers Grove is holding its own compared to the foreclosures and vacancies plaguing neighboring villages, new retail tenants just aren’t in the market right now, she said.

“ATI wants the space” and some downtown retailers are excited about the prospect, Kunze said.

Acadia’s banker may also be enthusiastic. “I do think Bank of America, which has the construction loan, wants to get it closed up and done, too,” she said.

Kunze also responded to complaints from opposition retailers that she was no longer communicating with them, saying it had become impossible to get any work due to the constant interruptions. She also has heard the group is mulling a lawsuit if the ATI proposal is approved.

As for suggestions that a physical therapy and fitness center would be better suited to the Forest Avenue site of the old TCF bank, which includes a dedicated parking lot, Kunze said the owner of that site, Peter Burdi, hasn’t contacted her office to express his interest.

In an interview with the DGreport, Burdi said the condo-retail project planned for the site is on hold. “We haven’t been able to get financing for the units because we haven’t sold any,” he said. “There is no question that banks are putting pressure on everyone.”

Burdi said he had heard about ATI’s interest in the AotG space and had “reached out” to the physical therapy and fitness company, but hasn’t heard back. The present TCF bank building includes 7,200 square feet on the first floor and another 7,000 square feet on the lower level — space he would lease “without question” for the $21 per square foot Acadia is offering ATI.

“It sounds like ATI wants to stay in the (Acadia) building, he said. “It’s understandable as it’s a new building. If you’re going to pay the same rate, a business would rather have a new building where people live,” Burdi said.

Meanwhile, Chris Rintz, the owner of AotG developer New England Builders, told the DGreport that he is able to rent space to ATI at $21 a foot when a start-up retail venture by a sole proprieter would have to pay $26. Credit worthiness and the length of the lease impact the rate charged, he said.

Rintz attempted to market AotG to national retailers for three years only to find the trend in that sector is to pull out of town centers in favor of “lifestyle centers” such as Burr Ridge Town Center.  “I’ve spent the last five years aggressively marketing the space and I have been unsuccessful. ”

Until ATI came calling, he had declined to lease to service businesses, Rintz said.  “I turned away two Realtors and three banks. I refused to even quote them or the space could have been leased up a long time ago.”

Rintz believes ATI meets all the criteria for a vibrant downtown. The business will generate trips, particularly during off-peak morning, mid-day and evening hours, and will add to the diversity of downtown Downers Grove, he said. It will also answer demand from CBD condo dwellers who are “clamoring” for a fitness facility.

ATI also will generate sales tax revenue through the sale of workout equipment and clothing and  refreshments, Rintz said. “It really is two separate and distinct facilities, with 2,000 square feet of non-retail PT space and about 7,800 square feet in the health club.”

As for rumors that he is holding the village hostage by refusing to sign a lease with the Lemon Tree grocery unless ATI is approved, “the Lemon Tree lease is signed,” Rintz said.

The delay was due to the grocer’s operators, he said. “I would have loved to have the lease signed two months ago.”

In the end, the retail guidelines originally specified for Acadia on the Green aren’t being completely tossed aside, Kunze said. The ATI lease would be considered as a variance, with the rest of the open space still subject to the 90 percent, 10 percent split.

The proposal to lease 10,000 square feet of Acadia on the Green space to a physical therapy and fitness facility has elicited a mixed and sometimes emotional response on this blog and throughout the community. Tuesday, the village council will make its decision. Here are some of the viewpoints commissioners undoubtedly will take into consideration.

The opposition

Several downtown retailers and others oppose the plan, which they feel is a rejection of the original concept for the space, as set forth in the AotG prospectus:  “At the forefront of the plan, Acadia on the Green, a public/private partnership, has been established to develop a critical block of space in the heart of downtown for retail, residential and civic use.”

The retailers don’t feel their opinions were solicited by the Downtown Management Corp. board — comprised of four business owners, four property owners plus ex officio members — which voted in favor of the proposal.

They also object to the $21 per square foot rate being offered ATI, which is considerably lower than many interested local retailers had been quoted.

“At $21 a square foot that building would be filled with retail,” said Tammi Karam, who pays twice as much for the space her Humidor store occupies — a price she accepted based on the development’s potential as a local retail showplace.

(Meanwhile, at least one local retailer has been approached by a neighboring suburb that is looking to lure retailers to its downtown by offering space at $10 per square foot.)

Joining the retailers in opposition to ATI is Bill Nienburg, a member of the Economic Development Corp. board, and Dave Bormes, a local businessman who spent 32 years working in real estate lending.

Nienburg, who is opposing the plan in his role as a private citizen, said there is room for flexibility in the 90-10 guideline, but “this is a complete toss-out.”

ATI would be the “single largest Acadia tenant and maybe one of the largest in the downtown business district,” he said.

Bormes said he’d heard some discussion of changing the 90-10 guidelines. “My first reaction was that might not be a bad idea.” However, the potential lease was presented before that could be accomplished, he said.

Both men expressed concerns about the parking problems that could result from the facility and questioned the village’s willingness to present the proposal without performing a study, as was done before the AotG project was approved.

“I’m concerned a lot of tax dollars went into the deal and decisions were made on the basis of professional studies,” Bormes said. “Now we are making decisions not based on a study.”

“We should have a healthy discussion,” Bormes said. “My suggestion is: Let’s go get a study. We could get one done in two weeks.”

Bormes suggested that financial pressures may be driving the ATI proposal, noting “there’s hardly a deal done in 2005 that is working today. This would be an oddity if this deal were working.”

However, both men feel the ATI proposal offers a quick fix that might turn out to be negative once growth resumes, which some analysts predict will begin to happen in 2010. “You want a healthy vacancy rate, not an unhealthy vacancy rate,” said Bormes. “Zero is unhealthy.”

“I feel for the council and appreciate their fiduciary situation, but the right fiscal decision would be to leave the space empty and wait for good retail,” Nienburg said. To do so would provide the village not only with $50,000 a year in property tax revenue, but also sales tax revenue.

“Leaving the space open for an additional year versus jumping on this current proposal over the life of the initial lease is worth an incremental $138,511  to the village,” Nienburg said. “In fact, you don’t break even unless the space stays vacant for over three more years.”

Whatever decision is reached by the council tomorrow night, both Nienburg and Karam believe the current debate will impact the downtown community for some time to come.

Karam said the ATI debate has become political, with opposition retailers warned “not to be on the wrong side of the issue” and tensions and fear-mongering spreading through the CBD community.

“I thought we were going about this (protest) the right way,” she said. “When I promoted downtown Downers Grove, I didn’t hear any complaints.” She intends to be more active in the Downtown Management Corp. going forward.

Nienburg believes the controversy could have a positive impact, no matter how it ends up.

“It’s definitely heightened the awareness of  the downtown merchants,” he said. “There will be a renewed focus on what we are doing to steer our downtown.”