Lawsuit seeks to stop Elgin Tower Building plan

An Elgin business owner has filed a lawsuit that could jeopardize plans to redevelop the downtown Tower Building.

Attorney Charles Muscarello filed the lawsuit late Friday in Kane County Circuit Court on behalf of his client, his father Marco Muscarello, who owns the Gasthaus Zur Linde bar at 15 N. Grove Ave., just down the street from the iconic, historic 15-story building at 100 E. Chicago St.

The lawsuit names the city of Elgin, Capstone Development Group LLC of Missouri and the Elgin-based Stickling Foundation, which owns the Tower Building.

The city of Elgin in January approved conditional-use zoning for the plans to turn the vacant office building into 45 apartments - zoning the lawsuit seeks to invalidate saying it was "arbitrary," "capricious" and "unreasonable."

The lawsuit claims the city is engaging in illegal spot zoning and violated municipal code, the state constitution and the rules of Elgin's downtown tax-increment financing district, downtown master plan and downtown special service taxing area.

"There's lots of issues. I believe they are trying to achieve zoning that is otherwise prohibited," Charles Muscarello said. "There are rules for reasons and they don't seem to be complying with their own rules."

The lawsuit's plaintiffs are the Gasthaus and North Grove Street Properties LCC, which owns the Gasthaus building and whose sole member is his father Marco, Charles Muscarello said.

The city followed its own rules to the letter, said attorney Peter Bazos, who represented the developers during the zoning and public hearings process.

"This was one of the most straightforward planned development procedures that I have been involved in," Bazos said. "The city was very careful to grant all of the approvals that were required to facilitating the Tower Building development."

Last week, Elgin Mayor David Kaptain said he knew Muscarello might file a lawsuit.

"We already lost one prospective developer because of the longtime delays in getting through the process and working with the property owners," he said Thursday, referring to a Wisconsin-based developer who was interested in the Tower Building in 2013. "I don't want that to happen here."

Developer Richard Souyoul of Chicago, who is partnering with Capstone Development for the current project, said Monday morning he didn't know the lawsuit had been filed but was aware that might happen.

The lawsuit jeopardizes financing for the estimated $14 million project, he said.

"How are you going to get a bank on a project where there's a lawsuit questioning zoning?" he said. "You can't move forward with a lawsuit."

Souyoul claims Muscarello is interested in only one thing - selling his building to the city. Souyoul said he hasn't spoken with either of the Muscarellos but was told so by city officials.

"He wants to force the city to buy his building and he's got what appears to be an unrealistic number," he said. "That's the issue."

Charles Muscarello objected to that. "I'm not sure (my father) wants to sell the building and I'm not sure it's to any particular person, either," he said.

City Manager Sean Stegall declined to comment on the lawsuit or any building sale discussions.

Souyoul had hoped to break ground sometime before summer. The project was expected to rely on about $4.6 million in federal and state historic tax credits and the city is contributing of $4.7 million in tax-increment financing funds, property tax money above that going to local governments.

The lawsuit states Souyoul entered into an agreement to buy the building for $1 million from the Stickling Foundation.

Charles Muscarello questioned the notion that having people live in the Tower Building would ultimately attract more clientele to the Gasthaus.

"I think people are ignoring the fact that they are placing residents immediately adjacent to a bar that plays live music until 3 a.m.," he said.

When asked if his father fears complaints about what could drive the city to take punitive measures such as pulling the bar's liquor license, he said, "The city said they wouldn't, based on that, but we'll see."

Another lawsuit filed by the Gasthaus Zur Linde - this one fighting a liquor license violation imposed by the city - was dismissed by a Kane County judge in February.

Charles Muscarello also represents a group of business owners in a pending lawsuit objecting to a marijuana dispensary permit approved by the city last year. The dispensary ultimately did not get a state license.