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.