2017-05-19 / Front Page

Town ready to bowl for dollars

By Wm. Duke Harrington Staff Writer

KENNEBUNK — As Selectman Ed Karytko said at the most recent meeting of the Kennebunk municipal officers, “everybody wants” Garden Street Bowl (GSB), a bowling alley and pub proposed for the long-vacant grocery store building at 11 Garden Street.

Now, local taxpayers need to not only want that new business, they need to hope for its success, as they are potentially on the hook for $300,000 if it fails deliver on a promised employment boomlet.

At their May 9 meeting, selectmen voted unanimously to submit a $300,000 Community Development Block Grant (CDBG) to the Maine Department of Economic and Community Development to help support creation of the new business.

A requirement of the DECD’s economic development program — which is designed to bring new products and services to a downtown district — is that the new business create at least 10 jobs within 18 months of any grant award, and that at least half of those jobs muse be full-time, while 51 percent must be reserved for people living in low-to-moderate income households.

According to Kennebunk Economic Development Director Mat Eddy, backers of the $2.91 million redevelopment plan expect to hire 16 people, including themselves as full-time managers. But also in the mix are two full-time and eight part-time servers, along with three fulltime and two part-time kitchen staffers and two full-time dishwashers.

“The primary risk is that we would have to pay that money back if they don’t create the jobs,” Eddy told selectmen.

The federal Department of Housing and Urban Development defines low-and moderate-income for CDBG purposes to be “generally” 50-to-80 percent of the area median income. According to Eddy, median household incomes in Kennebunk, Kennebunkport, and Arundel come to $72,489, $73,221, and $62,795, respectively.

That’s “significantly higher,” he noted in the bowling alley’s CDBG application, than the national average of $51,939. It also means the qualifying household incomes for the 10 reserved jobs would range as high as $58,577.

Eddy said that on its current timeline, the bowling alley should be “up and running” by November. The town would keep track of employee numbers, getting its first usable data six months after the first ten pins fall, at which time it would begin a six-month process of “closing out” its involvement.

“So, in essence, we are co-signing for the grant until such time as they produce 10 jobs, at which point we’re done,” said Selectman Blake Baldwin.

“That’s correct,” Eddy said.

Only one selectman, Ed Karytko, spoke against backing the grant application. But that opposition was based “in principal,” he said, and not out of any lack of support for the project.

“I’ve never been one to use taxpayer money to try and fund businesses,” he said, referencing Solyndra, the California-based solar panel manufacturer that received $535 million in backing from the U.S. Department of Energy as part of the American Recovery and Reinvestment Act of 2009. Solyndra went bankrupt in 2011, still owning $528 million to the feds.

“The company is now gone, along with all that taxpayer money,” Karytko said.

Eddy clarified that in this case the money is a state grant, not a loan, and the town is not responsible for GSB’s ultimate success or failure. Its sole interest, he said, is to assure creation of the requisite number of jobs within the grants 18-month timeframe.

Karytko relented when it came time to vote, saying good-naturedly that he feared a public backlash should he did otherwise.

“We have a problem here in that this is a bowling alley that everybody wants. So, I could be pretty much crucified if I didn’t vote for this,” he said.

Garden Street Bowl will be owned jointly by Jake Peterson, John Nelson, Dan Hardy. All three are veterans of the Village Tavern in West Kennebunk.

Peterson has been in the restaurant business for 17 years, including stints at fine dining establishments in California and the Caribbean. He will serve as executive chef for the bowling alley pub, to be dubbed Crotux Kitchen and Taphouse.

Nelson has logged 20 years in food service industry, covering all front-of-house positions up to general manager, while Hardy has 15 years under his belt, with a comprehensive background in craft beer and wine. Nelson and Hardy will co-manage the dining room and bowling alley, as well as an associated game room.

According to the narrative of the CDBG application to be filed by Eddy, other “key players” in the project include economic development consultant Roy Hebert, Village Tavern owner Rich Lemoine, restaurant consultant Jack Nahil (former owner of the White Barn Inn, Salt Marsh Tavern, and Cape Arundel Inn), builder Tim Spang, architect John Einsiedler, accountant Doug Rogers, attorney Robert Woodman and Eric Linfors of Brunswick Bowling Co., who is acting as project manager for the ten-pin bowling lanes.

The project has been funded by a $2.36 million loan from Kennebunk Savings Bank, which includes the $650,000 “acquisition cost” to purchase the property, as well as $1.3 million to rehabilitate the 14,000-squarefoot building. The Biddeford-Saco Economic Development Corporation also provided a $250,000 loan to the GSB partners for start-up costs. The town-backed CDBG grant would help fund $820,000 in business equipment, about three-quarters of which will go into the 10 bowling lanes, which have turned out to be more expensive that originally anticipated, Eddy said.

Nelson has put up $230,000 in collateral on the CDBG grant, for a term of “up to five years,” to be collected “in the event DECD elects to secure repayment.” The partners are also said to have $134,000 in working capital.

“With this grant, it relieves a little bit of their cash flow, particularly in that first and second year,” Eddy said.

According to information provide by the town, the former Garden Street Market is valued at $769,000 — including $154,300 for the 0.33-acre downtown lot, and $614,700 for the building. The estimated value after planned improvements has been pegged at $2.3 million. That would net the town $36,570 in property taxes — a $24,343 increase over what the site currently pumps into town coffers.

Baldwin said the Garden Street Bowl redevelopment is “reminiscent of the [former] Pythian Block,” at 74- 86 Main Street, which, before a $1.5 million rehab in 2012 was, he said, “one of the 10 ugliest buildings in all of New England.”

“That’s a great story,” Baldwin said. “It was sitting there moldering, valued at $156,000. Now it’s worth more than $2 million.”

“Hopefully we can get the same kind of leverage here for this project,” Eddy said.

Because, Garden Street is in the town’s downtown tax increment financing (TIF) district, selectmen can set aside the post-development increase in tax revenue for use toward infrastructure and economy-boosting projects within the area, as they see fit. However, Baldwin noted that only taxes on real estate gets diverted into the TIF fund. Personal property taxes on business equipment inside the building, though calculated at the same mil rate, would go into the town’s general fund, he said.

According to the CDBG application, starting wages for employees of the new bowling alley/pub will start at $15 for full-time employees, and $9.27 for part-timers, with workers expected to be brought on board sometime this September.

Elsewhere in the application, the average wage for the three owner/managers of the new establishment was given as $20.03 per hour, or $47,000 per year, with benefits equal in value to and additional $26.04 per hour. The average wage for full- and part-time kitchen workers was listed at $12.11 per hour (with benefits valued at $15.74 per hour), while wait staff pay was said to average $10.79/hr. (plus $14.02/hr. in benefits). The two aborer/dishwashers rang in at $9.27/hr. (plus $12.05/hr. in benefits).

“They’re permanent jobs and they’re coming with benefits, versus some of the other lower-paying jobs that we have in town,” said Lionel Menard, the lone resident to speak during the May 9 public hearing on the grant application.

According to Eddy, between 30 and 40 jobs were lost when Garden Street Market closed its doors in 2010.

“As a result, the downtown continues to trail much of the region in growth and stability,” Eddy wrote in the CDBG application. “The downtown is in need of a new attraction to compliment the community’s investment in the Waterhouse Center and downtown infrastructure.

“The Garden Street Bowl is an ideal match, providing a unique destination, but also a second recreational venue in the downtown. The two in tandem may create the visitor attraction that can then feed the restaurants and local retail merchant needs. It is fair to anticipate that Garden Street Bowl could replace the lost jobs of the downtown market, and drive others.”

With the nearest candlepin bowling lanes between 13 (Sanford) and 15 miles (Saco) away, and given a 27-mile drive to the nearest similar site of a ten pin/ restaurant combo (South Portland), anticipation for the local alley is high, Eddy wrote.

The business plan included in the CDBG application predicts $1.4 million in first-year revenue, including $924,000 in restaurant sales. With anticipated annual labor costs of $511,733, yearly loan payments totaling $272,000, and more than $521,000 per year in fixed overhead costs, the owners will be left with just $130,000 in year one for taxes, profit and business reinvestment.

The need for the CDBG grant is thus drive by an expected cash flow crunch during the first year. That shortage is in turn driven by the fact that bids for construction of the bowling facility came back at twice the original contractor estimate.

“The primary issue is related to the specialty aspect of the building and its uses, but the development team was faced with a serious issue,” Eddy wrote. “They worked with a new design build team and drove that number down, but still came in at over $2 million, requiring more debt or other forms of assistance to offset these costs.”

As the facility catches on and more use is made of private function rooms, Eddy wrote, “the expectation is that by the third year, the part time jobs may grow to as many as 25,” as revenue climbs accordingly.

Finding a development project to replace Garden Street Market was complicated by the 2010 deal made between Hannaford supermarkets and current owner Hadcar — a Brunswick-based firm that built a number of Hannaford stores during the 1950s and 1960s, before the company created its own real estate arm.

Immediately upon buying the Garden Street Market building, Hadcar sold a $65,000-per-year lease to Hannaford that allowed the site to be sublet, but only to a non-competing business. That, said Eddy, “thoroughly blocked” a wide range of potential new tenants.

“That weird ownership — the fact that there was a lease with Hannaford though 2042 — has made this a very difficult project to resolve. But I think we can get there,” Eddy told selectmen.

Further complicating previous redevelopment efforts, Hadcar is organized, Eddy said, as a C Corporation, “with significant capital gains issues should the building be sold.”

“Rupert White, the only original owner still alive, needed to have a purchase price that was significantly more than” the property’s assessed value, Eddy wrote in the CDBG application, referring to previous purchase offers.

In the end, redevelopment basically came down to a mother-may-I from Hannaford.

“They’ve actually been a tremendous help in all of this,” Eddy said in a previous Post interview. “In return for a no-compete clause, they agreed to relinquish the lease and let the building be sold. They’re even putting a little money into the deal.”

The transfer from Hadcar to GSB is expected to close in late May, Eddy says.

The CDBG application will get three bonus points when graded by DECD staffers thanks to Kennebunk’s 2012 designation as a “business-friendly community,” under one of Gov. Paul LePage’s signature programs. However, there’s no knowing at this time what chance, if any, the grant application has in the grand scheme of things.

“I think it’s a good application,” Eddy said, “But we have no idea how much money the state has right now, how many applications they have, or how we’re competing.”

Staff Writer Duke Harrington can be reached at news@kennebunkpost.com.

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