Downtown Dayton Arcade in jeopardy again

More than $325,000 in unpaid taxes on the Dayton Arcade could be advertised as part of a tax lien sale next week, leaving the fate of the historic complex in limbo again.

Gunter Berg and Wendell Strutz of Wisconsin, partners in Dayton Arcade LLC, bought the complex at a 2009 tax lien sale for the minimum bid of $615,106, intending to restore the 1904-era six-building complex.

They have been unable to identify an anchor tenant, and the buildings, largely vacant for more than 20 years, have deteriorated.

The sale will be advertised Monday, said Montgomery County Treasurer Carolyn Rice, adding the owners have until Nov. 22 to make payment arrangements. Berg told the Dayton Daily News Monday he will not let the Arcade go to a tax lien sale.

“We would not waste everyone’s time and money if we did not believe in a solution for the Arcade,” he said.

The complex still inspires emotional responses from longtime Dayton residents who remember its decades as a retail hub and home of special events under the large rotunda’s dome. It has become a topic of debate among the Dayton mayoral candidates.

Candidate A.J. Wagner, a former county auditor and judge, is pushing more aggressively to save the Arcade, saying the first step should be a study of the exact renovation costs and how much of that amount could be offset.

“That’s the bottom line – we don’t know the actual cost of rehabbing that building,” said Wagner, who works in a law office next door to the Arcade. “We’ve been told it’s $60 million. We don’t know if that’s the right figure. We don’t know how much we can get in tax credits to offset the cost. Once you get all the tax credits together, it could be as little as $15 million, or it could cost $70 million. … That analysis needs to be done.”

Wagner’s opponent, City Commissioner Nan Whaley, is more hesitant about investing time, money or energy into the project.

“I’m open to discussion because I think the community is very attached to the rotunda, and I have a lot of appreciation for that,” Whaley said. “But I think you really have to have a private sector partner first. To study something and then have no money behind it is not a thoughtful way to move forward and it’s not a good use of taxpayer dollars.”

Wagner suggests that local government agencies – the city, county, Metroparks, port authority and others – could consolidate some of their spread-out office space in the Arcade. Whaley called that a bad idea, saying the focus should be on new jobs, not moving existing ones around.

“The point that she makes is that we vacate some other office space, and there’s some truth to that,” Wagner said. “But the question is, do we want to save the core of downtown, a great building with great historic significance, or do we want to save buildings that are on the periphery and aren’t as significant.”

Doug Harnish, CEO of local real estate firm Market Metrics said saving the Arcade is a tall order, for a host of reasons.

“First and foremost, historic also means old, and old buildings bring with them a whole set of issues,” Harnish said. “You’ve got years and years and years of disuse and neglect to deal with… Is the structural integrity sufficient to even consider a restoration?”

The Commercial Building in the Arcade complex, at Fourth and Ludlow, was declared a public nuisance on May 15, leading Berg to board up broken windows. The city would not allow tours of the complex on Urban Nights this year, citing safety concerns.

Harnish said the Student Suites housing development around the corner is not nearly enough to support a new retail center at the Arcade. He also said part of the Arcade’s charm – the beautiful, open rotunda – is a large space that is very difficult to heat and cool, and produces no rent. He said the economics of the building could require higher rents for those spaces that are in use, or for the developer to cover significant costs out of pocket.

“Right now, in the context of the (downtown) market, that would be a really tough sell,” Harnish said.

If Tax Ease Ohio LLC buys the liens, the company would pay off the property taxes so that Dayton schools and other taxing authorities would get what they are owed. Dayton Arcade LLC would then have one year to pay off their tax bill to Tax Ease, plus 1.5 percent per month interest. After one year, Tax Ease can foreclose.

If Tax Ease refuses to buy the tax liens, there is no easy answer for dealing with the Arcade, Rice said.

“This is a building with significant challenges,” she said. “No one has shown any interest in it.”

Berg said his team is still committed to restoration of the historic buildings.

“I have contacted nationally known companies, but we have had a hard time bringing them to Dayton. I think there must be more of a commitment from companies in Dayton,” he said.

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