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December 9, 2018

5/15/2018 1:06:00 PM
Smylie Wishes to Terminate Recycling Center Lease
by Shawn Jones


City Council’s May 14 meeting stretched past midnight with an odd assortment of confusing debates, discussions and decisions that appeared to leave many scratching their heads. 

The future of the former Recycling Center, 2222 Oakton St., is uncertain, as Smylie Brothers is seeking to pull out of its lease with the City. A central question appears to be whether the company will be able to do this scot-free or with a penalty attached. The lease provided that no rent would be due for 18 months, during which time it was expected the building would be improved and converted into a brew-facility and restaurant. Construction should have begun after the “inspection period” set forth in the lease, which, it seems, expired in May or June of 2017.

 As anyone who stops by Home Depot or James Park knows, the former Recycling Center building, 2222 Oakton St., has sat idle for months, with no sign of construction. Instead, according to the staff memo, Evanston learned via Facebook that Smylie opened a new facility in Chicago.

What next, an irritated Council was asked. “There is no opt-out” in the lease, said Assistant City Attorney Alex Mackey. “City Council would have to vote to let them out of the lease.”

 Alderman Ann Rainey, whose Eighth Ward includes the site, moved to hold the matter in committee, pending a memo from the legal department “with a full-blown explanation" of the lease terms and a proposal including “some remuneration for the time [the building] has been off the market.”

In considering what it could take to get Council to agree to terminate the lease, Alderman Tom Suffredin, 6th Ward, said, “The number is not zero. Even if Smylie seems to think so, it is not $0,” he emphasized.

 “If we do nothing, would we expect payment from Smylie Brothers on July 1?” Ald. Suffredin asked.

 The lease requires payment of more than $13,000 per month beginning in July unless it is terminated, said Ms. Mackey.

 “It just feels wrong,” said Ald. Rainey. “I agree with people who say Smylie is wonderful and a community asset. ... but right is right” and they “have not treated us right.”

 City Manager Wally Bobkiewicz then stepped forward to seek some direction from Council. He suggested progressing down two paths at once – one to negotiate a lease termination with Smylie, the other to pursue other options for the Recycling Center. He suggested a request for qualifications or proposal for the site soon, and a negotiated settlement with Smylie shortly thereafter.

 The Council packet for the May 14 meeting included at least three viable uses – one as an event space and two for such things as rock-climbing, yoga, or other gym-type uses. 

 “We could talk about next steps,” said Ald. Rainey, but for now Smylie has a lease on the property. As long as the lease is in effect, no other use is possible.

 Yet the issue did not appear to be straightforward as another wrinkle entered the debate. “There is also an issue of outstanding taxes,” said Mr. Bobkiewicz.

 “The lease contemplated at the end of the inspection period [which ended early summer 2017], Smylie would pay taxes moving forward,” said Director of Community Development Johanna Leonard. That has not happened, she said. 

The lease also required the City to split the parcel and place the building on the tax rolls, leaving the parking lot City-owned and thus tax-exempt. According to County records, the parcel was split as required by the lease, but both parcels are listed as tax-exempt with no taxpayer of record, and therefore no taxes are owed. 

Apparently, the City seeks taxes that would have been owed had the property found its way onto the tax rolls. By email, Ms. Leonard wrote to the RoundTable, “The lease required the Smylie’s to pay taxes.  If you look at Section 8 in the lease that addresses taxes you will note that they were to put property on the tax rolls following the inspection period, which was completed last summer.  You are correct that the property is not currently taxable.  I had estimated, based on comparable industrial/commercial properties in Evanston and Skokie, that the taxes would be around $4 per square foot of building.  Therefore based on the 13,100 square foot building, the total taxes would be $52,400 annually.  This figure is what is estimated to be the total tax bill and would have been payable to all the districts based on the distribution of the tax bill for that property.  The City's portion of this tax bill would have been around $10,000.”

The lease states, though, that “Upon the conclusion of the Inspection Period, Landlord [City of Evanston] will endeavor to put the Premises back on the tax rolls with the Cook County Assessor (‘Assessor’). Landlord [City of Evanston] will also list the Tenant [Smylie] as the taxpayer with the Cook County Assessor and Tenant [Smylie] will receive and pay all installment invoices directly. Tenant[Smylie] must thereafter pay all Taxes assessed. ...”

The direction forward is far from clear.

 







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