Hofbräuhaus is opening 2 years late. Here’s why its developers won’t pay a penalty.

When Belleville city officials decided to annex sites for the proposed Hofbräuhaus restaurant and hotel complex and Parkway West homes and office buildings, they agreed to spend nearly $3 million to extend sewer lines to the two developments that were once valued at $153 million by developers.

But after multiple delays, neither project has yet to come to fruition although the city already has installed sewer lines to the two sites on the west side — $2.42 million for the Hofbräuhaus site and $502,000 for the Parkway West project.

And the two annexation agreements approved by city leaders did not include deadlines for the two sites to be developed or penalty clauses that would allow the city to recoup its costs if the land is not developed as proposed. Also, the development agreement with the Hofbräuhaus owners did not include either a deadline or a penalty clause. However, the agreement does have a remedies clause. “This agreement contains a remedies clause that allows the city to enforce the contract in the event of” a breach, according to a statement on the city’s Economic Development, Planning and Zoning Facebook page.

This development agreement calls for the Keller family, of Effingham, to receive up to $32.36 million in tax incentives based on revenue generated by businesses in the complex.

Mayor Mark Eckert said the city extends sewer lines to vacant land in an effort to spur economic growth and that penalties imposed on developers would be counter-productive and could have “killed” the Hofbräuhaus project. But Ward 2 Alderman Mike Buettner said the lack of deadlines in agreements leaves the city at the “mercy” of the developers.

While the Hofbräuhaus development agreement does not include a deadline or penalty clause, most of the city’s development agreements for smaller projects in recent years have included deadlines and penalty clauses.

Indeed, earlier this year, the City Council approved an out-of-court settlement that required Fischer Lumber Co. to pay back $135,000 to the city. Belleville alleged in a 2011 lawsuit that Fischer violated a 2004 development agreement, which included a penalty clause. The agreement required Fischer to stay open for business for 15 years as promised, but the company closed its Belleville site. The lumber company had to pay back the $135,000 it received in property tax rebates.

The council also has voted to extend deadlines for business owners who ask for extensions to finish their projects.

But in another case this year, the council dealt with a development agreement that did not include a deadline or penalty clause.

In September, aldermen agreed to vacate a 2001 development agreement that called for public money to help pay for infrastructure needed to clear the way for a commercial business park off South 74th Street. But the development agreement with two men and the Diocese of Belleville did not include a deadline for the developers or a penalty clause.

And while the proposed business park was never built on 51 acres, a road for the business park was constructed with the boost of a $535,000 Illinois Capital Development Board grant. The city was obligated to pay an estimated $68,000 and the Diocese was required to pay $175,000 for the infrastructure costs, according to the development agreement.

Today, the road called Comwest Parkway is surrounded by vacant land.

Hofbräuhaus agreements

The 2014 annexation agreement for the Hofbräuhaus site was executed between the city and the Missionary Oblates of Mary Immaculate, the religious order that owns the land and the National Shrine of Our Lady of the Snows next to the site off Illinois 15.

Belleville agreed to extend sewers to the Hofbräuhaus site and subsequently finished the project that cost $2.42 million.

In 2015, the City Council approved a development agreement with Chuck Keller, of Effingham, and his son, Chane Keller. At that time, the Kellers’ proposal included three hotels, a conference center, the Hofbräuhaus German restaurant and brewery, a convenience store and up to four upscale restaurants, according to the development agreement. The Kellers valued their side of the development at $90 million and a company that proposed a sports complex at the site valued the development at $13 million. But work on the soccer park never started and the developer who proposed the plan died in 2016.

Construction began in late 2015 on the Hofbräuhaus and earlier this month, Chane Keller said in a news release the restaurant is expected to open in late January. The original target date to open the Hofbräuhaus was in the summer of 2016 and subsequent goals have been missed.

A representative for the Hofbräuhaus could not be reached for comment about the development agreement.

Eckert said the $2.42 million investment in sending sewer lines to the Hofbräuhaus site is necessary to promote economic development along Illinois 15 and imposing a deadline and a penalty requiring developers to help pay for the sewer line could have stopped the project.

“We’re trying to jump-start some development along that 15 corridor,” Eckert said. “We’ve expanded our potential area for growth in a pretty dynamic fashion.

“For us to draw a line in the sand, could have possibly instead of seeing the project where it’s at today, might have killed the project,” Eckert said.

The mayor also noted that the Kellers have not received any tax incentives yet because they are based on revenue produced by businesses that are opened.

“If they couldn’t have delivered and we would have what? Stopped, you know, dig up the sewer?

“If you were in charge, what would you have done different? We’re not happy it has taken this long,” Eckert said. “How many times can I underscore that? However, I still believe in the project.”

Buettner thinks all future annexation and development agreements such as the ones used for the Hofbräuhaus project need to have deadlines and penalty clauses.

Since the Hofbräuhaus agreement did not include a deadline, Buettner said the city has no “leverage” with the developers to withhold the promised tax incentives.

“I don’t know if we can legally do anything with them because in their agreement there are no specific dates that you’re supposed to have this done,” Buettner said of the Hofbräuhaus developers.

“I think we’re just hanging there at their mercy.”

“They promised us the world. Talk is cheap,” Buettner said. “I want it to be successful. I hope the Hofbräuhaus is successful, but where is it?

“The city and the council and this administration need to realize this is taxpayers’ money,” Buettner said. “It’s not theirs. It’s taxpayers’ money, and we’ve got to be responsible for it and we’re not being responsible in my opinion.”

Buettner said construction delays in the Hofbräuhaus complex have caused the city to miss out on sales tax revenue it could have received if the business had opened as initially planned.

Annissa McCaskill, director of the city’s Economic Development, Planning & Zoning Department, said a project the size of one proposed by the Keller family would be expected to take longer to complete than the original goal of the summer of 2016.

“What we’re seeing is more of a typical timeline for a development,” McCaskill said.

Parkway West plans

Todd Keller in 2015 proposed a residential and professional office building project he valued at $50 million. The homes would be worth $500,000 to $1 million.

To get the Parkway West project rolling, the city agreed to annex the 51-acre site off Frank Scott Parkway near Belleville West High School and spend $502,000 to extend sewer lines to the site.

Keller, who said he is not related to the Keller family developing the Hofbräuhaus, said he hopes to break ground this spring on the office buildings. He said “upscale” single-family homes are now scheduled to be built after the office buildings. He initially had targeted to have some buildings ready by the summer of 2016.

Keller said developers usually don’t help pay for sewer lines. Instead, the local government pays for sewer lines when territory is annexed.

“I’ve worked on both sides of the river in my career, I don’t know of any case where a city has annexed a property and not offered that unless it was not available,” Keller said. “When you look at the economic benefit over a period of time, that is basically a revenue generator for the city. It’s an investment in the city.”

Keller said if a deadline had been placed on his project, the impact would depend upon the type of deadline.

“I guess it depends upon what the timetable is,” Keller said. “The size of the project and the economy determine how long it takes to get things done.

“It’s better to make sure it’s done right than quick. Quick doesn’t always work,” Keller said. “We’re wanting to do something that adds real value to the city, not just do something that is done quickly.”

‘Bit of a chance’

Sewer line extensions paid for by the city of Belleville have helped pace growth on both the east and west sides of the city, Eckert said.

The Green Mount Crossing shopping center off Carlyle Avenue on the east side and the Belleville Crossing shopping center at the intersection of Frank Scott Parkway and Illinois 15 on the west side were aided by Belleville having sewer lines ready for the developments, Eckert said.

“Are we taking a little bit of a chance? I think so, but I think we’ve proven numerous times already” the expense is worthwhile, he said.

McCaskill said potential developers scouting sites need to know about the city’s sewer system.

“Typically, when someone contacts us and they’re doing their due diligence to select a site, a lot of the times one of the first questions they ask is, ‘Is there sewer? or ‘How close is it to the site?’”

Eckert said the city extended sewer lines out to Carlyle Avenue in the late 1990s. And about 10 years ago, Walmart and Lowe’s decided to anchor the Green Mount Crossing shopping center.

“That’s what helped us win that site,” Eckert said. “The fact that we had sewer there. We were ready to go. There’s another example of being prepared and have a little bit of vision in areas where growth seems to be very obvious.”