Jacobson Auto Parts’ fate uncertain

Posted June 6, 2019 at 7:51 pm

By Julie Ann Madden

Akron councilors approved taking steps to terminate the city’s building lease agreement with Jacobson Auto Parts owner Clayton Jacobson at their May 28 meeting.

Jacobson leases the former 300 Reed St. medical clinic building, which is owned by the City of Akron.

Akron City Administrator Dan Rolfes and City Attorney David Stuart apprised the council of Jacobson’s lease violations.

“We’ve been having problems with Clayton for awhile at the store — between being late on paying the (property) taxes habitually and smoking in the store — all of which are against his lease,” said Rolfes. “I have had several conversations with him.”

After several visits this spring to remind him to pay the property taxes, which were due March 1 and delinquent on March 31, Rolfes presented him with a Notice of Default earlier this month. At that visit, Jacobson was smoking in the store.

“It doesn’t seem like it does any good to say anything,” he said. “It just seems to fall on deaf ears.”

“It’s gotten to the point I felt like something needs to be done differently,” said Rolfes. “Last time I went and talked to him I pretty much told him we don’t know what else to do. We’ve told you several times at some point it’s just going to be time to terminate your lease. You just keep doing it.”

Recently, when Rolfes presented Jacobson with the Notice of Default, drafted by Stuart, Jacobson did give Rolfes a check — payment for the March tax bill.

Technically, he’s still six months behind as taxes are paid in arrears (first half of 2019 taxes is due in October 2019, second half of 2019 taxes will be due in March 2020).

Rolfes explained it wasn’t only the 300 Reed St. property taxes that were delinquent but the former 211 Reed St. Jacobson Auto Parts building’s taxes were paid with city funds, and Jacobson still owes the city for that.

As to the smoking, it’s not only a violation of the lease but it’s against state law to smoke inside public places such as businesses as well as government-owned properties.

The Notice of Default basically puts Jacobson on notice that he’s in default and city officials intend to terminate his lease, said Rolfes, noting Jacobson hadn’t paid the property taxes on time since the first lease agreement, which was approved by the council in February 2016.

“(The Notice of Default) wasn’t a Notice of Termination,” said Stuart, explaining the final paragraphs informed Jacobson the council would be discussing the lease agreement, including the amount of time he’d have left in the building if councilors decided to move forward with termination procedures. “I encouraged him to attend this meeting.”

However, Jacobson did not attend the council’s meeting.

Councilor Jenell Lanning asked if Jacobson was taking care of the building, and Rolfes said as far as he could tell — there were no holes in the wall, and it appeared the front area was being kept clean. He hadn’t been in other parts of the building.

“It comes back to all of you, as the council, to start talking about whether you want me, as the attorney, to start moving forward and enforcing the termination portions of the lease or where you want to go with it,” Stuart told the council.

Lanning asked if Jacobson had given city officials a plan or endgame regarding the lease, and Rolfes noted people had approached Jacobson about purchasing the business but nothing has come of that.

“I hate to lose a business but I don’t want someone flaunting it in my face either,” said Councilman Joseph Small.

“You’re setting precedent,” said Lanning.

“When we have other people with leases, too,” said Rolfes. “I don’t know how far we want to let things get.”

Akron city officials own the South Street Plaza building, which has six tenants, and several vacant lots.

“Can we have one more conversation, have him get current on taxes, give him a final warning,” asked Councilor Kasey Mitchell.

“We’ve had that conversation several times,” replied Rolfes.

“It’s never come to the council table so I was unaware,” said Mitchell.

“There’s only so much you can do — so far you can let the chain out before none is left,” said Lanning.

“That’s something you have to think about in your position,” said Stuart. “What the city has to do is to recognize the taxes aren’t being paid so we’ve preserved our own rights under the lease where (City Clerk Melea Nielsen) has to expend city funds and pay the taxes because we don’t want them to go into delinquent status,” said Stuart. “In the lease we have the ability to cure that default and make sure it doesn’t get to the point of a tax sale or something happens at the county level. By the time you’re starting to expend city funds to protect that leased asset, you run the risk of is he going to pay in the future?”

“We know it’s been an issue,” he added. “I don’t think he would have paid if (Rolfes) wouldn’t have been over there again in May. Once I think the realization a Notice of Default was setting on his desk, all of a sudden a check comes over and we got paid. Yes, technically he’s cured the default but it’s been an ongoing issue.”

“This could easily spill over into the other properties we are leasing,” said Lanning. “You can’t let one person break, then not let other people break rules.”

It was noted that Jacobson is current on rent and utilities through a special arrangement city officials set up with Jacobson’s bookkeeper. Both rent and utilities are due at the same time — “just to make it easy for him.”

Mayor Sharon Frerichs suggested giving Jacobson until June 30 in the termination proceedings — hoping that would prompt Jacobson to try to sell it, then city officials could let him continue to operate in the building until the sale was final.

“Chances of (selling it) within 30 days, I don’t see it,” said Mitchell.

“Are we going to put a cut-off date on his lease then?” asked Frerichs. “Or are we going to let it ride again?”

Stuart compared terminating procedures with an apartment tenant to this. He explained there are two types of tenants. One will receive the termination notice, be respectful and move out. The other will stay until a judge orders eviction and a sheriff goes and removes them.

“I don’t know what this would be like,” said Stuart. “My only thought on this is you’ve got an active ongoing business. It’s different — you have inventory, all kinds of suppliers, customers — and I think we need to be cognizant of that.”

“The only thing, depending on where you want to go with your decision, is the trap you get into — a lot of times when you extend the courtesy, say we’ll give you 30, 60, 90 days — you don’t want to be in the same position 90 days from now that you are right now…they’re still in your building and we haven’t gone to court or done anything further to make sure we’re protecting our rights.”

“Hopefully, we’d be able to keep open lines of communication,” added Stuart. “It seems like he’s been willing to talk with (Rolfes). I know it’s not the most fun conversations but he has had conversations and at least visits with you.”

“I kind of hoped he’d been here tonight,” said Rolfes.

Stuart agreed, adding “but I also understand it’s not easy to come to a public meeting and have that kind of conversation…I think we should definitely keep lines of communication open because it is an ongoing business in town. You hate to see a business have to shut doors if there is an opportunity (with a buyer).”

“Keep in mind we are not closing his business,” said Councilor Alex Pick. “We’re just saying he can’t operate out of this particular building so whatever decision he’d want to make after what we decide is his.”

“How he runs his business is not city’s business,” agreed Lanning. “It’s just the building that’s our business.”

She asked if Jacobson was interested in buying the city’s building but Rolfes didn’t know if that was financially feasible for Jacobson.

Stuart asked the council if they wanted him to move forward with the termination procedures or not. He explained there were several steps he’d need to take and depending on the lines of communication, city officials could negotiate details of the termination with Jacobson.

“Like Alex said we aren’t making him sell his business, we’re just making him get out of that building,” said Councilor Denise Loutsch-Beitelspacher. “It’s a tough call.”

“He’s violated the lease agreement,” said Pick. “That’s the way I see it. He’s not upholding his part of the deal so if he wants, he can move his business to a different building and at that point, he’d own it and if he’s delinquent on taxes, then it’ll get taken away from him by that route.”

“The city’s ending up being a buffer for him right now from that issue,” he said, “and we’re using taxpayer money to be that buffer for him.”

“I don’t think it’s fair for other businesses in town to have that type of program going,” said Pick, making the motion to “move forward with termination.”

Lanning seconded the motion, and the vote was 4-1 with Mitchell dissenting.

In other business, Council:

• Unanimously approved a resolution adopting an Integrated Resource Plan for Akron’s supplemental electric power supplier Heartland Consumers Power District. Rolfes told the council this plan must be updated every five years in order for the city to receive power from federal electric sources.

• Unanimously approved amending the FY 2019 Budget after holding a public hearing on the matter. There were no comments made or presented at the hearing. Rolfes reported the amendment was needed as the Substation Project’s were taken out of this year’s budget instead of the FY 2018 Budget year. In addition, city officials had to purchase more supplemental electric power than had been budgeted for.

• Unanimously approved a resolution regarding changing from making Substation loan payments to Bankers Trust to UMB bank because Bankers Trust was acquired by UMB.

• Unanimously approved the annual renewal of a facility agreement between city officials and Connections Area Agency on Aging. The FY 2020 agreement is identical to the FY 2019 contract.

Unanimously approved appointing former City Administrator/now Plymouth County Supervisor Gary Horton to temporarily fill the city’s Zoning Administrator vacancy due to the resignation of Zoning administrator Trent Ruhland.

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