The price of the downtown parking deck at February One Place and Market Street set at $30 million went up Friday, Jan. 19 when Cone Denim Entertainment Club owner Rocky Scarfone filed a lawsuit against the city, which has started proceedings to condemn the easement to the backdoor of the club, an action that Scarfone says will put him out of business.
The lawsuit asks for an injunction to stop the city from building the parking deck until the lawsuit is settled, since Scarfone will suffer irreparable harm once the parking deck is built.
The lawsuit, filed by Amiel Rossabi of Rossabi Reardon Klein Spivey, claims the main purpose of the project is not to provide parking for the public but to help the Elm Street Hotel LLC (ESH) build a Westin Hotel. The last time this group tried to build a hotel on the property, it asked for $8 million from the city and, after receiving a promise of $2 million from the city, the project fell through.
The city has also permanently closed February One Place as a street, and although it will be open to traffic once the deck is built, it will also serve as the entrance to the hotel.
According to an affidavit filed in support of the lawsuit from former City Councilmember Mike Barber, the city got itself in this situation because it didn’t realize that Scarfone owned an easement across the parking lot where the parking deck is to be built.
That is actually a much better explanation than the one given by City Attorney Tom Carruthers that the city knew about the easement all along and didn’t think it warranted any action before going forward with the design of the parking deck.
Not warranting any action in this case included not notifying Scarfone that his business could be damaged because he would no longer have access to the back of his building.
The idea of encouraging development downtown is good one, much better than much of what the city spends its money on, but to do so disregarding the needs of existing businesses seems hardly fair.
The parking deck could be built so that Scarfone retained the access he needs to the back of his building, but no attempt was made to do so. The parking deck was designed before the city even began negotiating with Scarfone and, according to Barber, one of the big sticking points in the discussions was that the city said the parking deck could not be redesigned to meet the needs of his club.
There is evidence that the city has also not negotiated in good faith with Scarfone. In December, Scarfone was told that he would have a 16-foot easement behind the building during construction and 18 feet after the construction was complete. In January, that 16-foot easement dropped to 10 feet and reportedly may go up to 18 feet after construction, or not.
Even with the 18-foot easement there would be no way for the buses and trucks hauling equipment for the entertainment acts to turn around, so they either have to back in from East Market or back out on to East Market, neither one of which is ideal.
The city does have the right to condemn and take the easement for a public purpose such as a street, sidewalk or building a public parking deck. What Rossabi contends in the lawsuit is that the primary purpose of the parking deck is for the Westin Hotel, and building a parking deck for the public is only incidental.
The lawsuit notes that because the Elm Street Center was not financially successful, George House and Randall Kaplan, the principle owners, had been trying to build a hotel on the site for years.
The lawsuit states, “Upon information and belief, ESH members, House and Kaplan, and others including Kaplan’s wife, Kathy Manning, an influential and wealthy business person with National political aspirations, began communicating with Council members, including [Zack] Matheny and Nancy Hoffmann, about the Westin Plan. Hereinafter, the entire group of people described in this paragraph will be referred to as the ‘Scheme Participants.’”
“The Scheme Participants, upon information and belief, were concerned only about their own profits and gains from the Westin Plan, but they agreed to ‘market’ the Westin Plan as having a significant public use and benefit to the City, though no such public use and benefit existed.”
The lawsuit also states that plans for a public parking deck at that location had been rejected “due to concerns about viability, the use of public funds for a private purpose, and the lack of a public use and benefit for such a parking deck, the Scheme Participants or some of them improperly influenced City officials to support the Westin Plan, including the publicly funded parking deck.”
It is also noted in the lawsuit that the last downtown parking study was done in 2008 and that no study has indicated a need for a public parking deck at that location.
According to Barber, who participated in the negotiations between the city and Scarfone from August until he went off the City Council in December, the city claimed it could not alter the plans for the parking deck. So the best that Scarfone could hope for was to have virtually no access to the back of his building for as much as a year and then have anywhere from a minimum of a 10-foot alley, which is too small for buses and trucks, or as much as 18 feet, but there is no guarantee that the alley will be an inch more than 10 feet.
The question is, why wouldn’t the city consider redesigning a portion of the deck to accommodate existing businesses on South Elm Street. It’s not the fault of Scarfone or other businesses that the city didn’t notify them of its intentions before designing the deck.
When you consider the potential cost of the lawsuit, plus the delay if the court grants a temporary restraining order, it may turn out that redesigning the parking deck would have been the less costly option.
As Barber notes in his affidavit, two existing property owners will benefit from the construction of the parking deck – the Dixie Building, on the corner of February One Place and South Elm Street, and 101 Elm Street, on the corner of South Elm and East Market. Both of these buildings get walkways to an upper level of the parking deck. So people will be able to park their cars on, say the fourth level of the parking deck, and walk on a walkway over the alley directly into their building.
Rossabi notes in the lawsuit that the city paid almost twice the appraised value of the Showfety building on the corner of East Market and Davie streets. The appraisal dated Sept. 19, 2016 states the value of the property is $655,000. The city paid $1,025,000 for the property. The city has a long history of overpaying for property, but overpaying by that much is unusual.
The point is that the city has chosen winners and losers among downtown property owners with this project. The big winner according to the lawsuit is the Elm Street Hotel, which couldn’t be built without the parking deck. The Dixie Building and 101 Elm Street both will receive walkways to the parking deck, which will increase the value of their buildings. The owners of the Showfety building were paid far more than the property was worth, and then you have the Cone Denim Entertainment Center that, according to Scarfone, will be put out of business.
From a legal standpoint, not notifying the property owner before the city makes plans that will almost certainly result in taking his property through condemnation may not be a major point, but as a public policy issue it is huge.
The City Council prides itself on being transparent and open and on forcing others to do likewise. When a contested rezoning comes before the City Council, city councilmembers always ask how many meetings were held with the neighborhood and often demand that concessions be made. At times the City Council asks that the developer go back and try to reach an agreement with the neighbors.
In this case the city didn’t notify Scarfone that his easement was going to be taken until months after the design of the deck had begun.
Mayor Nancy Vaughan said, “I hope we followed proper procedures.”
She said, “It is the city’s responsibility to reach out. I don’t know how that was carried out.”
But it is a fact that the city didn’t reach out. Property owners were not notified and nobody attempted to negotiate a deal with Scarfone until there really wasn’t anything to negotiate because the deck had largely been designed and the city was not willing to redesign it.
Vaughan also noted that the city had been discussing building a new downtown parking deck for years and had even discussed building one in conjunction with Guilford County.
But she said the City Council decided it was not going to build another parking deck unless it went along with a major project. Vaughan said this fit the criteria and that the city does need more downtown parking, something that is questioned in the lawsuit.
The city has hired Bruce Ashley of Smith Moore Leatherwood to defend it in this lawsuit.