Evanston Aldermen Want Compensation From Smylie Brothers Brewing

EVANSTON, IL — Aldermen declined Monday to act on a staff recommendation to voluntarily terminate a lease with a local brewery for a city-owned property at James Park. Members of the City Council at the Administration and Public Works committee favored negotiating the terms of a Smylie Brothers Brewing Company's withdrawal from its lease for the former recycling center at 2222 Oakton St. The lease included an 18-month grace period that would require the brewery to start paying rent after next month.

Smylie Brothers founder and CEO Michael Smylie wrote to City Manager Wally Bobkiewicz on April 10 to inform the city that his company was "unable to raise sufficient funding" and asking to be released from the deal. According to a memo from Bobkiewicz to aldermen, staff learned only from an April 26 social media post that the brewery had instead begun producing beer from the site of a Chicago brewery that went out of business last summer — several months after the lease with Evanston took effect.

"It is within this council's sole right to terminate or not terminate the lease," Bobkiewicz told aldermen. During Monday's discussion, he said it was clear aldermen would like to see "some compensation" for the time the property has been off the market. Since shutting down recycling operations in 2000, the site has only been used for storage.

Ald. Tom Suffredin, 6th Ward, confirmed that next month is the end of the lease's 18-month rent-free period and suggested the company should have to pay some amount to withdraw from the lease at this point.

"The number is not zero. Smylie Brothers seem to think it is. That is certainly not the number," Suffredin said. "We have an enforceable lease at $13,645.83 a month. Starting in July we can expect that payment from Smylie Brothers every month for the next 8 1/2 years unless we take any actions to alter that," he confirmed. That adds up to nearly $1.4 million over the rest of lease.

"I don't think they felt that we were in a position to hold them to their lease," said Ald. Ann Rainey, whose 8th Ward includes the site. "Given the fact that we are, they may find a way to reconsider their decision."

CEO Smylie, who has previously declined to comment, has not responded to a request for an interview with a company representative. No representative from the company spoke publicly at the meeting.

Evanston resident Junad Rizki said during public comment he has noticed city equipment move back into the space in recent months and suggested the city should have taken action after the first six months when the deal appeared to be off track.

"It's so much how we run projects and can't run projects," Rizki said "We wasted a lot and we continue to waste." He said the building was built for $4 million and noted it had been recently appraised around $850,000.

Representatives of a company that operates gyms with climbing walls and yoga studio spoke during public comment to confirm their interest in purchasing the property. The memo from city staff also noted there has been interest in leasing the space from Peckish Pig and a co-working fitness center.

City staff also revealed that the brewing company has not paid taxes on the property. Community Development Director Johanna Leonard said the lease anticipated the company would put the property on the tax rolls after the end of its inspection period on June 30, 2017 but Smylie Brothers never provided finalized development or site plans.

The property could have paid more than $50,000 a year in property taxes if Smylie Brothers had developed the portion of 13,100-square-foot building they leased, Leonard estimated. The site remains exempt from property taxes.

Revenue projections provided to alderman before they approved the deal calculated that the brewery would generate more than $75,000 in new revenue in 2018 in the form of rent, property taxes and liquor taxes. That number was anticipated to rise to more than $200,000 annually next year, according to a November 2016 memo from Bobkiewicz.

Rainey was a vocal supporter of the Smylie Brothers project for her ward when it was picked following a request for qualifications. The city received two qualified responses and decided to skip the request for proposal stage and move directly to negotiations with the brewery.

At the time, Rainey and other aldermen anticipated the site would become an environmentally friendly, carbon-neutral operation including a windmill and a composting operation with educational and employment opportunities. Other proposals — "including the guy who built the Walmart who wanted to build a so-called climbing wall" – would not be able to pull it off, she said.

"Everything that seems to come in the 8th Ward is under attack as being a money-sucking-grubbing organization that can't stand on its own, for God's sake, these people can stand on their own," Rainey said in 2015. "Not only do they have the experience, but they have the financial capacity, and for that reason we need to be grateful and not make another mistake."

The alderman promised that the recycling center would not become "South Evanston's Harley Clarke," another vacant city-owned asset that has undergone multiple requests for proposals that did not come to fruition.

"The city, over my dead body, is going to put any more money into this," Rainey promised nearly three years ago.

Monday, Rainey said city legal department had informed her that the city would not be able to hold the brewery to the terms of the lease. (In an email Tuesday, she clarified that she had misinterpreted a statement that the city could release the brewery from the lease to mean it was unenforceable.)

Rainey said she still believed Smylie Brothers was a great asset to the community and was surprised that the plan failed. She asked for a full explanation from city attorneys as to how the city could obtain some compensation in exchange for letting the brewery out of the lease.

Ald. Cicely Fleming, 9th Ward, also expressed interest in exploring some sort of "buy-out or payback" and whether it would interfere moving forward with alternate plans.

At a minimum, said 5th Ward Ald. Robin Rue Simmons, the city should be collecting taxes for the site, but she did not favor forcing the brewery to stick to the terms of the lease.

"I don't have much interest in trying to negotiate with a business that has decided that they don't want to move forward," Rue Simmons said.

"It just feels wrong," Rainey said at the May 14 committee hearing. "Right is right, and wrong is wrong, and they've not done us right."

More: Brewery Wants Out Of Recycling Center Lease Before Rent Comes Due