Evanston would double the sales tax rebate offered owners of a proposed food store under a plan approved by the Economic Development Committee Wednesday.

The new plan to revive the long-vacant Osco Drug Store at Oakton Street and Asbury Avenue calls for adding roughly 5,000 square feet to the existing 14,664 square foot store. The old concept would have left the building at its current size.

The project also has a new ownership team and lender.

Last fall the EDC approved a plan under which the city would rebate half the sales tax revenue generated by the store up to a cap of $500,000 over the 11-year life of the store owners’ lease on the building.

But within weeks after that vote, before the deal could be approved by the City Council, the lead partner on the project, Nick Merikas, told city staffers that the nationwide economic downturn had led his two brothers, who were partners in the business, to withdraw from the project.

Wednesday night Merikas’ new partners, Jim Stivers and Dean Theo, described plans for the expansion of the building and said the store, previously named Farmers Best Market would also have new name, Fresh Foods Marketplace.

The two said they had received a financing commitment from a new lender, ACAPS Joint Venture LLC of Cheyenne, Wyo., but that the lender is insisting on a sales tax sharing agreement totaling $1 million to help secure its loan.

The committee approved a plan under which 75 percent of the city’s share of sales tax revenue from the project would be rebated until the $1 million cap was reached.

Start-up costs for the project are expected to total just over $3 million, including nearly $1 million to expand the building, $800,000 for refrigeration equipment and $850,000 to build out the interior.

Bob Rychlicki, the city’s long-time advisor on economic development projects from the consulting firm Kane/McKenna, said he had only been able to obtain limited information from the new lender, but that the loan has an 11-year term with a 25-year amortization schedule, resulting in a large balloon payment due at the end.

The borrowers, Rychlicki noted, would not be personally liable for the debt, and they don’t own the building or land on which the store sits, making the lender demand the financial assistance from the city to help secure its loan.

Alderman Ann Rainey, who’s 8th Ward includes the store site, said, “The only thing we’re risking is not having a store. We’re not going to give them one thin dime that they don’t generate in sales tax.”

Stivers said the store would offer “a unique concept, something that has not been seen in Chicago. It’s going to be the talk of the town.”

He said the concept is based on a Texas-based chain called Central Market that he said is “very service-oriented and customer friendly.”

He said the store would offer more competitive prices than Whole Foods but have a much greater selection of fresh foods than Trader Joe’s.

To meet the lender’s conditions, the agreement would have to be approved by the City Council at its next meeting, Feb. 9.

Stivers said that if the agreement is approved, the partners hope to move forward quickly with the expansion project and open the store by September.

He said the owners have a big incentive to move quickly, because the rent-free first year on their lease on the building runs out June 28.

Stivers said the expansion would involve building into what’s now a drive-through lane on the east side of the building and expanding the west side of the building as well.

He said the partners are in negotiations with the owner of the property just west of the store to acquire additional parking space on that parcel.

Tracing history of the Osco site

Panel backs tax break for market (9/25/08)

Tax rebate proposed for new market (8/7/08)

Neighbors cheer plans for new market (7/9/08)

Green grocer plan wilts (10/18/07)

Green grocer eyes Osco site (8/29/07)

Trader Joe’s rejects Osco site (10/7/06)

Osco closing; neighbors hope for Trader Joe’s (6/27/06)

Bill Smith is the editor and publisher of Evanston Now.

Join the Conversation

4 Comments

  1. City asked to chip in more for market
    It’s good to see in-depth reporting about this sales tax rebate approved at the latest EDC meeting. Thanks, Bill. I attended this meeting also and was stunned that the EDC approved $1 million in sales tax rebates to these developers over a period not to exceed 9 years, 75% to the developers, 25% to the COE. The developers have no personal money at risk and the lender giving the COE until Feb.10,2009 to approve the sales tax rebate or the deal was dead was akin to putting a gun to the City’s financial head. The lender was only incorporated in November 2008 and without much information known about this lender, the committee still voted to recommend the sales tax rebate due to the lender’s unreasonable time demand. Somehow, the EDC alderman still believe in “privatizing profit & socializing risk/loss”. Ald. Baptiste was right on target, when he said doing this may open the door for other businesses to ask for similar handouts. In what way is this fair for all the other business taxpayers in Evanston, who pay for their own additions and try to tough it out on their own, without COE assistance during these tough times? Ald. Rainey doesn’t get it when she says it costs the City not one thin dime except out of the sales tax revenue. This is “developer welfare” that does cost the COE 75% of the sales tax revenue up to $1 million, not to exceed 9 years. It allows these developers to get a loan (with no personal risk) due to the COE’s giveback and allows these developers a leg up on all businesses that do business without the City’s bailout. The alderman on the EDC can’t have it both ways: “we’re expanding the City’s taxbase”, “oh,by the way we’re only getting back 25% in sales tax revenue”. This is an inappropiate action to take, while all taxpayers in Evanston are tightening their belts, our City officials are playing Santa Claus to the fortunate few. It was also interesting, that Ald. Tisdahl opposed this motion, even though she has supported sales tax rebates in the past for “developer welfare”. Ald. Tisdahl asked no questions and showed no leadership with her fellow alderman, to convince them to follow her “no” vote. Perhaps, her “no” was for political cover during her mayoral run. We’ll never know, due to her silence.

    Kevin O’Connor

    Citizen/Candidate for 7th Ward Alderman

    1. I understand the arguments
      I understand the arguments on both sides. I am a hawk myself when it come to any issue of “city business-welfare”. The old Osco lease at Oakton & Asbury was inherited by CVS after the buy out. There are many reasons why CVS did not build a store there. It’s too small for a major retailer to be there. It’s too big for a mom and pop store. Add the credit crisis to the mix, with no lending and what do we have now? The answer is NOTHING: no sales tax, no traffic, no jobs, a vacant building in the middle of town.

      There are 2 options we have. 1)We could wait and see who comes forward with $4 mil to build- if know of someone, please let me know. 2)We could entertain the only serious entrepenuer in the last 3 years that has secured financing and is ready to build. In the first scenario, we do not know how long it would take for a viable business to be there. While we wait, no traffic, no jobs, no sales tax. In the second, the city makes a concession of FUTURE REVENUE, with a break even date that will be offset by what 50 or so jobs will create and a 25% share (new cash flow) of the sales tax for 7 years or so.

      If the store fails during this time, ,the city is only out the 75% share of the sales tax collected up to that point. This deal does not imply Evanston is giving away $1 mil, rather it is a future credit of up to $1mil. Meanwhile, the city does collect some tax which is 100% more than what its is collecting now.

      After all, this is the Economic Development Committee. Business is about concessions. This concession was required by Fresh Market’s lender. The lender wants to reduce the start-ups cash flow, naturally. A decision had to be made. Say no and perpetuate a vacant space, in my opinion which would be there dor another 3 years or so, or make a concession while scrutinizing the opportunity cost to DEVELOP something.

      The city is not giving away anyone’s money in this case, because there is no tax payer there now, nor is there anyone in line to jump in except Fresh Market. When the economy turns up and multiple developers or entrepenuers resurface, I then will not support sales tax credits.

  2. No more Chips!
    I tried to post this on Thursday, here it is again:

    I am shocked that the taxpayers are being asked to give a new business a $1 million subsidy. The first $500 K on the table was bad enough and now the new owners need more for the opportunity to sell Evanstonian’s fruits, vegetables, deli, liquor etc…

    Message to City Council & Community Dev. people: WE ARE OVERTAXED and we have been giving too much money away and that is why we are in a city-wide financial crisis! That is a million dollars less public money to pay off the pension funds, fix our schools, streets and a million dollars more that will be sought from taxpayers one way or another!

    We do not live in a blighted red-lined community. If the new owners offer value and service – The People will come and spend their money… just go visit the Marketplace on Oak (Oakton St just over the Swift tracks)… I am sure Skokie did not give them a huge tax holiday.

    There are other ways to finance a business without asking the community to roll over and put other faithful long time business owners at a disadvantage.

    Brian G. Becharas

  3. Grocery store is a pipe dream
    These guys tried to pulled the same stunt in Libertyville leaving behind a big mess to clean up. In my opinion their motive is not to open a store but just go through the motions. First of all even if they did open a store I doubt they would ever get close to even collecting a million in sales tax. By getting the city to agree with this it only allows them to a chance to impress sucker investors that perhaps somehow they will get a million bucks back every year. My guess is they will continue to come up with wild excuses as to why nothing is getting done. Such as a loan officer drowing.

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