A lease agreement between the city of Lancaster and a brewery near Lancaster’s Fire Station No. 1 at 425 W. King St. threatens to throw a monkey wrench into the city’s timeline for replacing the station and its sister Station No. 3 at 333 E. King St.
The issue could end up costing the city an extra $200,000 or more, and could delay the much-needed replacement of the two outdated stations, Mayor Danene Sorace said.
The city wants to rebuild the west station first, then the east. Construction on each would take about eight to 10 months.
But to proceed with the west station, the city needs Wacker Brewing Co. to vacate an aging concrete-block building at the rear of the property, the former home of the city's sign shop, which the brewery is renting for storage. Wacker has 3 1/2 years remaining on its five-year lease, plus the option to renew for two five-year terms.
Wacker’s brewery and taproom are a few yards away at 417 W. Grant St. The business is owned by Bryan Kepner, who also owns Pour restaurant on North Prince Street.
Wacker's Harrisburg-based attorney, Peter Carfley, said the company is a big supporter of the city and the fire department and has no intention of delaying or derailing the station replacement.
But it has been rehabilitating the storage building “with the city's blessing” at its own expense, he said, and deserves to be made whole for the inconvenience and expense of going elsewhere.
In return for vacating, Wacker is seeking $495,000 in compensation, plus moving costs and reimbursement for the improvements it made. The proposal is contained in a May 23 letter from Carfley to the city solicitor.
That’s unreasonably high, city officials contend. On Monday, they asked City Council to authorize eminent domain as an option if agreement can’t be reached.
Eminent domain would only be used to end the lease as a last resort, said Randy Patterson, director of economic development and neighborhood revitalization.
Council agreed to introduce the ordinance at its regular meeting Tuesday, allowing a vote at the meeting after that.
If the issue goes to court, Wacker could get far more than it’s proposing, Carfley said. Based on prevailing rental costs and its lease term, it's entitled to well over $1 million, he wrote, citing as precedent a 1998 Pennsylvania court decision.
The city disagrees. The value Wacker is being asked to forgo “does not come close to $1 million,” Sorace said.
Wacker says market rent for a comparable space is about $90,000 to $130,000 a year.
Currently, Wacker is paying $554 a month, or $6,648 a year, to use about 6,600 square feet of space, Sorace said. Were it to use the whole 11,000-square-foot building, that would rise to $11,304 a year, she said.
In the letter, Carfley wrote he is “not convinced” the city has the right to exercise eminent domain on a property it owns to terminate a lease it signed.
The lease took effect in January 2018. Patterson said the city previously thought — incorrectly, as it turned out — that the site wouldn’t be needed when the fire station was torn down and rebuilt. The plan had been to make it a separate real estate parcel and put it up for sale, which would have given Wacker the opportunity to buy it.
The city plans to start on the first fire station this year. Because of the lease issue, it is considering tackling the east station first, though starting with the west one remains the preferred option, Sorace said.
It also had hoped to save about $200,000 by bidding both jobs together. But officials can’t solicit bids for the west fire station until they can establish a firm construction timeline, and they can’t do that until the lease issue is resolved.
“We remain hopeful that Mr. Kepner and Wacker Brewing will be amenable to coming to some kind of reasonable solution,” Sorace said.
Carfley, too, said Wacker hopes an “amicable resolution” can be reached.