City wants to assist restaurant with loan
by Marcus E. Howard
mhoward@mdjonline.com
May 06, 2012 12:43 AM | 4653 views | 23 23 comments | 14 14 recommendations | email to a friend | print
Kennesaw City Council will vote Monday on whether to put money toward the development of 2844 South Main St. in downtown Kennesaw for the purpose of turning it into a new restaurant. <br> Photo by Todd Hull
Kennesaw City Council will vote Monday on whether to put money toward the development of 2844 South Main St. in downtown Kennesaw for the purpose of turning it into a new restaurant.
Photo by Todd Hull
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KENNESAW – The city of Kennesaw and the Kennesaw Downtown Development Authority are pursuing plans to take out a commercial loan in order to build a restaurant in the city.

On Monday, the Kennesaw City Council will vote on a resolution authorizing an intergovernmental agreement between the city and KDDA in support of securing a lease for Giovanni’s restaurant on South Main Street at Cherokee Street, next to the Trackside Grill in downtown Kennesaw.

The plans raise concerns over how far government should go in assisting in the redevelopment of private property.

The KDDA, a government-backed agency consisting of seven citizen volunteers organized to help foster downtown development, has entered into an agreement to lease the 1,976-square-feet space for 10 years from property owner Dave Collier of Kennesaw on behalf of Giovanni Valente, owner of Giovanni’s.

Under the agreement, the KDDA will be responsible for the renovation of the building and will secure a loan from a community bank for no more than $275,000, said Bob Fox, the city’s economic development director.

The economic development department is positive that the project will provide positive cash flow over the 10-year period, based on project budget. If the restaurant defaults, then the KDDA will have the right to recover its full investment, based on the owner’s personal guarantee, Fox said.

Fox told Mayor Mark Mathews and the five-member city council at a work session agenda meeting Wednesday night that the KDDA would attempt to collect its investment from the restaurant in the role of a loan guarantor and through any revenue from the lease. He said the debt service would be approximately $2,400 per month.

He also said the lease with the property owner allows the KDDA to exit without a penalty, if necessary.

But at least one council member didn’t seem convinced of the soundness of plan.

“What are they putting in for us?” asked Councilman Tim Killingsworth about the restaurant.

“The way this is structured, we’re putting all the capital improvements in, minus the fixtures and those sorts of things that they’ll be, because they’re agreeing to pay really a premium lease amount and they’re paying the equivalent of $20-a-square-foot,” said Fox.

“So we’re taking all the risk,” Killingsworth responded.

For his part, Valente believes the city is making a wise investment in his restaurant, which he said prepares great food. He currently owns an Italian restaurant called Giovanni’s on the East-West Connector in Austell. The Italian-born restaurateur said the Austell location will remain open.

“The city is trying to develop downtown Kennesaw and trying to attract positive businesses to the city of Kennesaw,” Valente said.

However, he declined to explain why he isn’t directly taking out a private loan for his business. “That’s something I cannot discuss,” he said. “That’s none of nobody’s business, is it?”

The building Valente is looking to expand his restaurant in is the former site of a train store and has been vacant for at least a year, the owner said. Collier said he received a better offer for the property than the one the KDDA presented, but that he chose to lease it to the authority in order to help improve the downtown area.

“I wanted to see something nice downtown,” said Collier, who previously sold the city the nearby building that currently houses the Kennesaw Teen Center on South Main Street.

He declined to disclose the exact amount for which he agreed to lease the building, except only to say it’s “very cheap.” As for whether he has any concerns about the precarious nature of the restaurant industry, Collier said: “That’s the reason I wouldn’t do this for a restaurant myself. I wouldn’t build it out for a restaurant.”

Still, the majority of the city council seemed to be in support of the KDDA’s efforts to front the costs of opening a new restaurant in the city. Councilman Bill Thrash said the city ought to look for more such public-private partnerships. Councilwoman Cris Eaton-Welsh, the council’s liaison to city’s Community Development Department, said a lot of planning had gone into the project.

“I definitely consider this an incubator project,” she said.

After questioning how the KDDA would recoup its money if the restaurant failed and what other measures could be instituted to protect the city, the mayor gave the project his support.

“It’s kind of like what we did with Trackside originally and over the years,” Mathews said. “I think it’s a great opportunity.”

If the agreement is approved, the next step for the project will be for the KDDA to complete construction documents and bid the work. If the budget is exceeded based on the approved bid, the KDDA will have a right to terminate its leases, according to the city’s economic development department.

The Kennesaw City Council will meet at 6:30 p.m. Monday at City Hall.
Comments
(23)
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kennysawyer
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May 08, 2012
I would like to commend the Kennesaw Mayor and Council for tabling this proposal at lasts nights council meeting
Mike O. Bedenbaugh
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May 07, 2012
$275,000.00 for remodeling this building ??? It could be built and furnished for that!!! No this is not a sound investment of Kennesaw Taxpayers's money. Mr. Collier I think does not have a better offer otherwise he would take it. There is the old restaurant across the street that is still boarded up after the fire and Ms. Burrell went to the shopping center on U.S. 41 and Barrett Pkwy. to open her new restaurant; that should tell you something. Then there is other restaurants that have opened and closed on South Main Street and on Cobb Pkwy. North at Guiles Rd. area.
Interesting2
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May 07, 2012
City officials say they dont have any money to give employees a raise in over 5 years, but they can buy a restaurant..
SG68
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May 07, 2012
If Mark Mathews is in favor of this idea that should tell you all you need to know.

He will probably try to add this to the TSPLOST project list!!
Borrow
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May 07, 2012
Borrow money like other businesses and quit begging taxpayers for handouts. The party's over.
TIC
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May 07, 2012
Not a good idea.

If the restaurant operator can't get a loan from a bank then that in and of itself should raise some questions.

Even if the deal was without risk, this is sounds like a bad idea.

If they do it in this instance, what are they going to do when the next business comes knocking on their door for assistance?
Mayret Resident
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May 07, 2012
Only advice I have as a City of Marietta resident to the City of Kennesaw, is do everything in your power to keep P. Goldstein out of downtown Kennesaw real estate ownership.
Mike Jones
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May 07, 2012
If this is such a good idea and investment, why don't private investors step in to do it?
mk- BINGO!!
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May 08, 2012
Some of these local cities are really overreaching w/ their DDA's & POWER!

Take Smyrna, for example! It's a CRIME that the Smyrna Downtown Development Authority(which is chaired br mayor or Smyrna & includes a sitting Senator- Doug Stoner))- are using taxpayers money to GAMBLE on real estate deals!

First, the city DEVALUES a property , (by not letting code enforcement do its job),... then when the price is low enough, the city, under direction of the mayors DDA, float bonds at taxpayers risk, to purchase!

Highlands Apartments(purchased for almost 10 million, now bulldozed for elementary school).

Hickory Lakes Apts(purchased for 14 million, bulldozed, now empty lot)

Concord Road-abandoned 1/2 built structure(purchased 275,000 now no plans for property)

Concord Road(purchased approx. 20 businesses for approx. 6 million SPLOST , paid relocation fees-now the area is deserted and abandond)!!

If these cities were doing what they were elected to do, the PRIVATE businesses would come into these areas,.. but seems the PRIVATE sector steers clear of dishonest run cities!

The corruption in Cobb is out of control!!
Kennesaw council
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May 07, 2012
Kennesaw desperately needs Giovanni's...and retail and other eateries...please allow this to happen...Of course everyone in the area knows as long as other eyesores are allowed to stand downtown will always be limited in what it will become...and as most auto insurance agents will tell you...since it is a ridiculous speed trap, many stay away because of the city police...just telling the truth here.
Mike Jones
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May 07, 2012
Hey Kennesaw Council. why don't you pool your own money (cash out your 401k, take mortgages out on your property, borrow from someone etc..) and do this WITHOUT tax payer money? After all, it's such a great idea.
Frankie58
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May 06, 2012
So...the KDDA wants to put the city on the hook for 275K on a notion the this restaurant will improve the downtown area. So, suppose this doesn't work or the owner goes bankrupt....who then pays off the loan.....THE TAXPAYERS that's who, regardless of the "personal guarantee". "However, he declined to explain why he isn’t directly taking out a private loan for his business. “That’s something I cannot discuss,” he said. “That’s none of nobody’s business, is it?” Yes Mr. Valente, it is our business, why should the TAXPAYERS be on the hook for something YOU should be paying for if YOU want to expand...IT'S CALLED RISK, it happens everyday in the business world...the city council needs to rethink this, when the main player makes a comment like this, red flags should go up!!!
VWGTO
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May 06, 2012
The City is going to basically invest in his business, yet the owner's reasons for not obtaining a loan directly is "nonbody's business"? What is wrong with that picture?
Vorant1
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May 06, 2012
Its wrong for the Feds get in bed with big business with bail outs and its just as wrong for a city government to expose taxpayers to "probable" losses with a restaurant. Someone needs to have their head(s) examined on that council....
Big Shanty Girl
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May 06, 2012
Oh oh; look at what our city council got into at

the intersection of US41 and Kennesaw Due West Road. Here comes another boondoggle.
DWREZ
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May 08, 2012
WE call 41 and Due West Rd the desert with its White Elephant! Lots of parking.
anonymous
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May 06, 2012
I wonder if the City realizes that another Italian restaurant is opening in downtown Kennesaw just 2 blocks from the site they are going to take out a $275,000 loan for?

Ron King hopes to open "Pizza Brothers Company" in the site of the closed 'My Country Kitchen'. He is totally redoing the place. I wonder how he feels about the City guaranteeing a $275,000 loan for a competing restaurant?

Seems to me that it would be hard enough for one Italian restaurant to survive in this down economy, now we are going to have 2 trying to make it? You might recall that the old My Country Kitchen, that went out of business last December was around for 35 years and couldn't make it. Now the City is going to bat for one Italian restaurant over the other one which is to open in June?

This seems to be poorly thought out. You can see the work going on at I wonder if the City realizes that another Italian restaurant is opening in downtown Kennesaw just 2 blocks from the site they are going to take out a loan for?

Ron King hopes to open "Pizza Brothers Company" in the old site of the now closed 'My Country Kitchen'.

He is totally redoing the place and said he is putting $240,000 into the project. I wonder how he feels about the City guaranteeing a $275,000 loan for a competing restaurant?

Seems to me that it would be hard enough for one Italian restaurant to survive in this down economy, now we are going to have 2 trying to make it? You might recall that the old My Country Kitchen, that went out of business last December was around for 35 years and couldn't make it. Now the City is going to bat for one Italian restaurant over the other one which is to open in June?

This seems to be poorly thought out.
boondoggle
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May 06, 2012
Didn't Marietta try to do this with a hotel?
Just Wait
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May 06, 2012
They better check the zoning for the area first!
anonymous
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May 06, 2012
If he can't afford to get a normal bank loan, then what good is his personal guarantee?

This is not a good deal for the city, and will only end badly if approved.
anonymous
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May 06, 2012
Good Gosh. If the private sector does not believe there is a good business reason to invest in a restaurant in Kennesaw, why in the world would the the city of Kennesaw invest it? Oh yeah, its other peoples money (the taxpayers) and it's the way the government worker class thinks...aided by the encouragement of the chamber backed welfare queens.

That said, put me on the list for a city loan. Geez.

RealTaxpayer
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May 06, 2012
why is the city wasting taxpayer money giving it to restaurants?? the place will probably go under in a year or two and all that money will be gone.
rjsnh
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May 06, 2012
The City of Kennesaw has no business investing in this business. This is simply wrong.

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