It was standing room only in Annapolis City Council Chambers Monday night as residents, business owners and community leaders showed up to a special meeting of the city council to speak out about their views on the Market House lease.

Last week, the city announced that Mayor Josh Cohen and members of the administration had finalized negotiations with Lehr Jackson’s Baltimore-based Gone to Market and drafted a lease for the Market House building.

About 20 people signed up to speak, and crowds of others were there to listen. While many who spoke out on the topic expressed their general esteem for Gone to Market and Jackson’s concept for the Market House, the overwhelming majority expressed their dispproval for the lease as it is currently laid out. Only two people signed up to speak expressed their support for the lease, as it is.

Many business owners felt that the lease overwhelmingly favors the tenant and not the city of Annapolis. The lease states that "the annual rent is 50 percent of net profits per year during original term and any extension term."

Brian Cahalan, owner of 49 West said, “To sign the lease with 50 percent net seems kind of goofy to me.”

Cahalan added that it “just doesn’t make any sense to me as a businessman.”

He said, “If we’re gonna subsidize something, it needs to be something that benefits the whole community."

Mike Mulligan, a ward one resident, called the lease “fiscally irresponsible,” adding that the lease terms were presented to the public in a misleading way.

Bob Schwartzberg, who owns the Big Cheese on Randall Street, urged the council not to rush into a decision.

“I hear people saying don’t rush. I hear people saying rush. You need to take the time and make a good business decision,” he said, adding that the lease as it stands now is not a good business decision.

Bob O’Shea drew applause from the crowd from some of the comments he made in opposition to the lease. "A commercial lease is normally something called triple net. This right here is triple net to the tenant," O'Shea said.

He challenged members of the council saying anyone who votes for it will not be sitting on the council in 2012 beccause the city will vote them out.

Another major development of the night, was a testimony from Steve Wise, the attorney representing Nick Vaccaro, president of Vaccaro's, which had a shop in the Market House since 2006.

Wise told members of the council that in 2009, the city of Annapolis and Vaccaro’s reached a settlement agreement that took Vaccaro’s out of a lawsuit between the city and the market house vendors and told the city they have not followed through with the terms of the settlement.

Wise said Vaccaro's was the only tenant that settled in that case, “in large part because Vaccaro's wanted to remain at the Market House.” He added that the terms of that settlement included a $70,000 rent credit to Vaccaro's, a $15,000 cash payment, other financial consideration and, most importantly, a new lease

Wise said when the city told Vaccaro’s it had to vacate by Dec. 31 “in effect, the city broke the deal.”

“It matters because you have the last chance here with this lease sitting before you to honor the commitments of the city that it made to Vaccaro's when it entered the settlement agreement,” he said.

Wise said after his testimony that while he’s never had a client more opposed to litigation than Vaccaro, he “thinks that people should keep their word, so if the time comes when the only option left is litigation, I’m sure he’ll pull that trigger.”

Council Reaction

After the meeting was over, members of the council weighed in on the comments they heard.

Alderwoman Sheila Finlayson (D- Ward 4) said she agreed with some of the concerns that the lease favors the tenant and not the city.

“We have no money and we’re giving this away. That’s what I’ve been saying all along,” she said.

Finlayson said two things that concern her are the ability to transfer the Market House to someone else and the insurance. She pointed out that the current lease has the city paying the bulk of the insurance and cited the flood risk for the area where the Market House is located.

Alderman Fred Paone (R- Ward 2) said a number of things need to be looked at, including the compensation and the city’s ability to make money.

“You have to realize here, the council has not been part of this process until last Tuesday,” he said.

Paone said he believes the city ought to be able to make “at least a little bit of money from the deal,” with a minimum of expenditures.

“I love Lehr Jackson’s concept, and I mean, I’m a big fan, but if we can’t work it out, I’m a big fan of Mercedes Benz but I can’t afford to drive one, so I drive a Toyota RAV 4,” Paone said.

Alderwoman Classie Hoyle (D-Ward 3) said she’s not ready to throw the lease out yet, adding that she does think there is something good there.

Alderman Ross Arnett (D- Ward 8) said there were many valid points made at the meeting. He added that some of the people who spoke out at the meeting are looking at this as a full-blown business and emphasized the point that “government is not a business.”

“The sense of the council is that in order to make the Market House successful there is going to be some kind of subsidy to make that work,” he said.

Arnett added that he has some concerns about the current lease, including the payment-agreement, expressing that some vendors may not report accurate sales numbers in order to pay less rent.

Mayor's Response

Following the meeting, Cohen briefed reporters on his reaction to the public’s response. He said part of the debate over the lease stems from a different viewpoint over what the city’s role in operating the Market House should be.

“My feeling is this needs to be a public market and we need to bring somebody competent in that knows what the heck they’re doing [to operate it]," Cohen said.

He added that if people won’t agree with this, they won’t agree with the lease.

“The main purpose of the market is not to turn a profit [for the city government]," Cohen said.

Cohen said for this reason, a lot of the concerns addressed were “spot on."

“It is not a conventional business lease,” he said.

Cohen also addressed concerns from the public that the lease favors Gone to Market.

“The lease favored the tenant in terms of profit and that was intentional because,  frankly, the Market House carries a lot of risks for the operator as well,” Cohen said. "The operation of (the Market House) really favors the city.”

When asked about Vaccaro's, Cohen said all he could say was that they appreciate Vaccaro's cooperation with "vacating the property by the end of the year so that the council as a whole can proceed with a new tenant."

He added," We have been in ongoing discussions with Vaccaro's and I'm confident we will resolve any remaining issues."

Cohen said, according to financial analysis under the proposed lease, the city would be making in the ballpark of what it had made historically, before Site Realty. Gone to Market would be making between $100,000 and $150,000, adding that really has to do with the "added value that they are creating."

Timeline

On Wednesday, members of the Economic Matters Committee will hold a public meeting to discuss marketing and business plans for the Market House.

The council was originally slated to vote on the lease on Jan. 31 but Cohen said to both council members and reporters that the vote will likely not happen then.

He added that he does expect to have some amendments in time for the meeting, though.

Cohen said, if the council approves the lease, July 1 is still the date the city expects to be able to deliver the property to Gone to Market, with it opening shortly after.