Federal court throws out lawsuit against DeKalb City Manager Bill Nicklas, City after $2.5M TIF money pulled

A federal lawsuit against DeKalb City Manager Bill Nicklas filed by a local real estate developer seeking to turn an old Fisk Avenue building into a boutique hotel was dismissed this week after nearly two years.

That’s not necessarily the end of the road for the litigation, however, said developer Nicholas Cronauer, who also operated a lawfirm out of Sycamore. He said he plans to take the case instead to state court.

“The case was filed in state court and is proceeding there,” Cronauer said Thursday. “The constitutional claims were dismissed by the Federal Court in Rockford in April without any leave to re-plead those claims but allowed the State claims to be refiled in State Court. The narrow issue about whether the complaint created a Constitutional claim or not was heard by the Appellate Court with their final opinion two days ago.”

That’s not necessarily the end of the road for the litigation, however, said developer Nicholas Cronauer, who also operated a law firm out of Sycamore. He said he plans to take the case instead to state court instead, he said. Cronauer said he’s not sure additional action in federal court is worth it but will await state proceedings.

He had a state deposition on the matter last week and anticipates several more over the coming months, he said.

From fall of 2018 through early spring of 2019, Cronauer courted the DeKalb City Council, vying for a $2.5 million TIF grant to revamp 145 Fisk Avenue, the former St. Mary’s Hospital long vacant, into a boutique hotel. The proposal was denied at Nicklas’ recommendation in 2019 by a unanimous city council vote after city officials said Cronauer wasn’t able to provide proof of commercial viability and the developer’s ability to finance the project.

According to documents obtained by the Daily Chronicle, the federal lawsuit which was filed in April of 2019 in the United States Court of Appeals for the Seventh Circuit Court in Rockford, was dismissed by Judge Philip Reinhard Tuesday.

“We were pleased with the action of the 7th Circuit Court,” Nicklas said this week.

The lawsuit alleges that Cronauer “is convinces the City would have proceeded with the funding as planned but for the meddling” of Nicklas, and that Nicklas “sought to retaliate against it and favor” other local developers, and defamed Cronauer in the process. The lawsuit seeks damages of more than $2.5 million.

City officials at the time, including former City Attorney Dean Frieders, said they believed the lawsuit was “without merit,” and though the lawsuit did not name the City specifically, city attorneys took up defending it because it named Nicklas individually and he was acting in capacity of his city manager position at the time of the alleged actions.

Long, contentious history

DeKalb aldermen in December of 2018 gave preliminary approval to award $2.5 million in TIF funds to Cronauer and Bulson’s company, 145 Fisk LLC, to turn the long-vacant building into a 40-room boutique hotel and banquet center.

Nicklas took over as city manager in January of 2019 and not long after, began asking questions about the viability of the project, according to records obtained by the Daily Chronicle through the Freedom of Information Act.

In February of 2019, emails show city officials began requesting more financial and market information about the hotel plan. Nicklas did not like what he saw in the information provided, records show.

In an email to Cronauer on April 1 of 2019, he outlined six reasons he said the plan was not feasible, including that 145 Fisk had no collateral, no private sources of funding beyond TIF money and an expected bank loan, no means of income to cover expenses or consulting fees, and no provision for paying federal income tax on the $2.5 million TIF grant.

He also noted that the developers had never built a hotel and had not said what comparable hotel their projected three-year profit-and-loss plan was based upon.