City Council Denies $175k Restaurant Incentive, But Will Consider Secured Forgivable Loan

After hearing uniform opposition from small business owners and even from within their own ranks, the Elk Grove City Council last night rejected a proposed $175,000 incentive being sought by a group that hopes to open an restaurant in Old Town Elk Grove. Instead, the council said it will consider extending a forgivable-secured loan to a group that claims they can revitalize the struggling district.

The incentive, which would have come from the city's $275,000 dedicated economic development fund, was sought by Working Class Heroes, LLC (WCH). The group currently operates the Brodrick Club in West Sacramento and is proposing to open a restaurant in the historic Old Town Elk Grove structure that formerly housed the Elk Grove Brewery.

In their appearance before the council, three of the five partners of WCH said the incentive was needed for improvements to the structure. In return, they said the addition of the restaurant would be a catalyst for revitalizing Old Town.

Speaking on behalf of WCL partner Marvin Maldanado said the success of their restaurant has revitalized the Broderick neighborhood of West Sacramento which has long suffered from a bad reputation. Maldanado and his partners all suggested their success in West Sacramento could be replicated in Elk Grove's Old Town.

"We feel can revitalize the area by using very similar means of social media marketing tactics," WCH partner Matt Chong said.

During public comments, locally-noted restauranteur Marie Mertz said she welcomes the addition of WCH to Elk Grove's fledgling dining scene, but that it should not be done at taxpayers expense. Mertz also said the city should consult with other local small business owners before extending the incentive and if the money is spent on small businesses, it should be spread out.

"I don't think they will fail, so I don't they will need this incentive," Mertz said.

During their deliberations, the council showed varying degrees of support for the proposal with Mayor Gary Davis strongly supporting the incentive and Council Member Jim Cooper expressing skepticism. Davis said it was needed to help revitalize Old Town while Cooper said it would set a bad precedent as other restaurants will come for incentives should this one be approved.

"I think it sets a bad example for us to give out that amount of money," Cooper said.

After deliberating for close to an hour on the matter, a consensus formed around a suggestion from Council Member Pat Hume who suggested a forgivable loan of $125,000 be structured. Under the tentative proposal, the the loan amount would be forgiven by equal amounts over five years and be secured by hard assets.

If the loan was defaulted at any point of time in the five year period, the remaining balance would be secured by some unspecified asset. WCH projects the operation will annually generate an equal amount of sales taxes for the city.

Throughout the deliberations Cooper expressed concern that modifying the rules of the incentive program on the fly was dangerous and should be avoided. City Manger Laura Gill and City Attorney Jonathon Hobbs advised the council that if they this course, the programs rules should be concurrently modified.

Four of the council members reached a consensus and directed staff to develop a proposal for a secured, forgivable loan for WCH and bring it back to council perhaps as early as the next council meeting on May 8.

"Even though we are not voting on this, let me go on record I am opposed to this," Cooper noted.