FLOWERY BRANCH — Flowery Branch City Council has voted to spend $405,000 to buy two connecting Main Street buildings it had been leasing.

The city is using a short-term loan to pay off initial costs, then plans to pay off the loan by December through money raised from its 1-cent special purpose local option sales tax and property taxes next fiscal year, which starts July 1.

Then, in January, the city plans to take out another short-term loan to cover the spent property tax revenue, then repay that loan using next year’s sales tax revenues.

"Right now, it’s anticipated we’ll be paying off that (last) loan well within the next calendar year," City Manager Bill Andrew said at Wednesday’s council meeting.

The council voted 3-2 on the
measure, with Mary Jones,
Pat Zalewski and Allen Bryans Sr. for it, and Craig Lutz and Chris Fetterman opposed.

"Spending 80 percent of the allocated SPLOST funds on the acquisition of buildings, rather than the construction of administrative offices, like the City Hall, (that) has been published in our comprehensive plan, would constitute an abandonment of the intent of the SPLOST dollars," Lutz said.

The city has figured on spending $500,000 in sales tax revenues for administrative buildings and real estate. The city’s 2025 comprehensive plan calls the city to eventually build a new City Hall and free up retail space on Main Street.

Fetterman said buying the two buildings goes against the comprehensive plan, which puts city property at Main and Gainesville streets and was supported by Jones, Zalewski and Bryans.

"So, I guess all the time, energy and taxpayers’ money that paid for this plan was worthless," he said.

Jones, Zalewski and Bryans didn’t comment during the meeting and declined to comment afterward.

Lutz said the only bright spot he could see in the deal is that "we have removed the burden of paying the lease from our general fund."

The city has paid a lease amount of $2,266 per month on the two buildings this year, with the rent expected to increase to $2,334 monthly next year, said Lou Camiscioni, assistant city clerk.

Buford-based Hortman & Dobbs Developers, which is developing the nearby Old Town Flowery Branch, had owned the property.

"We were hoping that if Hortman & Dobbs build what they (have planned), then the values would rise considerably for commercial space in this area, and we would want to sell to get out of what we own," Andrew said after the meeting.

Andrew said during the meeting, in answering a question from Fetterman, that the city possibly overpaid for the two buildings based on no appraisals being done.

But later, he said Hortman & Dobbs had paid more than $600,000 for the buildings.

"We didn’t have an appraisal done because we were already getting a $200,000 discount and a commercial appraisal can (cost) several thousands of dollars," Andrew said.

"The worst-case scenario is we end up with a building that we either come out even on or make a little money on," he added. "The best-case scenario is the $400,000 ... puts (Hortman & Dobbs) over the tipping point to where they now can start phase one of that development."

The firm’s $15 million downtown project has been in the works for more than two years, stalled by the failing economy.

Flowery Branch City Council gave the project a lift in April by committing, as part of its tax allocation district, up to $135,000 in property tax increments for demolition work already done toward the project.

Kellin Dobbs, a partner in the firm who has been the project’s leading spokesman, has said the money will provide leverage for further bank financing as the company proceeds with the project, which will feature a mixture of boutiques, eateries and homes.

Phase one of the project could start in June 2010, Dobbs has said.