DeKalb City Council pulls TIF funding from plan to create hotel

DeKALB – Developer Nick Cronauer told the City Council on Monday that they were making a “big mistake,” just before they voted unanimously to terminate a $2.5 million tax increment financing agreement for a boutique hotel project at 145 Fisk Ave.

The Council voted 8-0 Monday, denying 145 Fisk LLC the previously earmarked funds from the tax increment finance district known as TIF 2.

In December, the Council passed a preliminary agreement to approve the money to convert the old St. Mary’s Hospital into a 40-room boutique hotel. City Manager Bill Nicklas recommended the Council terminate the incentive agreement based on what he said was developers Cronauer and Chip Bulson’s continued inability to provide sufficient project plans and required financial paperwork.

“The full truth has not been disclosed to you,” Cronauer said, addressing the Council on Monday. “There is a conflict of interest in the background that I don’t think anyone’s been made aware of. I don’t want you to regret this mistake later on down the road when the truth comes out.”

When prompted by a Daily Chronicle reporter after his comments to elaborate on the alleged conflict of interest, Cronauer said, “It will be very apparent tonight.”

“It’s all going to be spelled out in 23 pages in a matter of time,” Cronauer said.

It was unclear whether Cronauer was referring to the federal lawsuit he said Thursday he plans to file against Nicklas. Cronauer on Monday said, “We’ll see what happens,” when asked if and when he plans to file the suit.

City Attorney Dean Frieders said Monday that there are a number of required documents and basic financial papers that the developers were repeatedly asked to provide to the city, and they did not.

Nicklas said Thursday that he invited the pair 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.

The Daily Chronicle acquired emails through a Freedom of Information Act request that show the email response to which Nicklas refers, along with a chain of correspondence from April 1 to April 4 between Cronauer, Frieders, Nicklas and other city officials such as Dan Olson, who is the staff liaison for the Planning & Zoning Commission.

In an April 1 email, Nicklas’ analysis said the petitioners have no experience developing hotels, no private equity investors and no comparable hotels upon which they based their business plan. Frieders also noted the developers refused to provide a “substantial pro forma” to justify the economic incentive, a standard financial document which would detail plans for the public dollars.

In multiple emails, Cronauer accused Nicklas of blocking his attempts to get a public hearing scheduled before the commission to apply for a hotel rezoning of the Fisk Avenue property. Frieders said the developers can still move forward with a zoning petition if they wish, but it will be independent of any financial funding by the city.

“Please stop tortiously[sic] interfering with this project,” Cronauer said in an email to Nicklas sent April 1. “This has been palpable since your first day dealing with us juxtaposed with your statements at various meetings about this project. Significant personal money has been spent on this project to get to this point by Chip and I. Chip and I are happy to appear at the council meeting and let them know what has been going on behind the scenes since you took over.”

On Monday, Cronauer declined to elaborate on his insistence that Nicklas has a conflict of interest in the project. Email documents show Cronauer blaming Nicklas’ former work as a banker, and said he recommends Nicklas recuse himself from the project.

“I am not aware of any legal reason that the City Manager would need to recuse himself from this matter,” Frieders responded in an April 3 email to Cronauer. “As I explained to you, the submittal received to date is substantially less than the analysis the city has undertaken on other similar hotel projects.”

Cronauer, Nicklas and Frieders planned to meet April 5, but the meeting did not take place after the developers stopped responding to city officials April 3, Frieders said.

Neither Cronauer nor Bulson own the building, and agenda documents indicate the pair’s plans to buy the building were contingent on receiving the $2.5 million.