After a three-year wait, developers of Downtown 2000 have landed their first retail tenant for the project in the 900 block of New Hampshire Street.

Omaha, Neb.-based Pepper Jax Grill has signed a lease to open a restaurant on the northwest corner of 10th and New Hampshire streets by early December.

The restaurant will feature grilled “Philadelphia-style sandwiches,” a variety of rice bowls and several salads. Co-owner Linda Rohwer said the company chose Lawrence for its first location outside of Omaha because the downtown area seemed to be full of life.

“My husband was looking for a location in the Kansas City area and ended up in Lawrence one day and was just really impressed with how vibrant the city was,” Rohwer said.

She said college students and the business-lunch crowd were expected to be two of the restaurant’s larger target markets. The store will feature a quick-service format where customers place their order with the cook at the grill and wait approximately 20 seconds for the sandwich to be prepared.

Pepper Jax Grill will occupy about half of the ground floor of the building at 10th and New Hampshire streets, said Martin Moore, a partner in the development. Moore said about 3,500 square feet of space still was available on the first floor of the building, which also has second-floor office space that is leased by the city and 20 loft-style apartments on its upper floors.

Landing the restaurant was a sign that retailers were beginning to become more optimistic about the economy, Moore said.

“We’ve seen the market loosening up a little bit,” Moore said. “Some projects are starting to come out of the woodwork, but it is still pretty early in the process. But at least people are willing to consider projects now. That’s an improvement because things were just so dead for a long time.”

But Moore said the economy hasn’t improved enough for him to predict when work may begin on two other buildings planned for the block.

Moore said he still was working with several companies on at least a 100-room hotel at the southwest corner of Ninth and New Hampshire streets. He also said a building that would house about 25,000 square feet of office space and 25,000 square feet of retail space along the east side of New Hampshire was still in the works.

City consequences

The two buildings are important to the city’s budget. That’s because they are a critical piece of the tax-increment financing district created by city commissioners in September 2000. The taxing district was established to construct the 500-space, city parking garage in the 900 block of New Hampshire.

Increased property and sales taxes generated by the buildings and their tenants were scheduled to pay for about 50 percent of the $8 million garage. The project is the first time the city has used tax increment financing to fund a project, and it hasn’t went exactly as city officials planned.

A slow economy has caused the city’s tax projections to fall well short of projections. For example, the project was ticketed to add about $340,000 in new taxes to the city in 2003. Instead, it will add about $20,000, according to the Douglas County Appraiser’s Office.

The shortfall has meant city officials have had to find a way to make up the difference to make bond payments on the garage. Ed Mullins, the city’s finance director, said the shortfall hadn’t yet required a tax increase because the city had used reserve funds to make up the difference. That strategy probably won’t work for much longer, he said.

“The real question for city commissioners will be how fast they want to draw that (the reserves) down,” Mullins said.

City commissioners also may have another decision to make about the project. At the end of September, developers will have missed a key deadline spelled out in their agreement with the city.

The agreement called for the remaining two buildings to be under construction by the end of September. But the agreement doesn’t spell out what happens if that deadline is missed. It does say that if the buildings aren’t completed by the end of September 2005, the developers will owe the city $100,000.

Moore said he doesn’t have any plans to speed the pace of the development to meet the deadline and said he hoped the city wouldn’t impose the fine. He said the fine would be unwarranted because it was only meant to penalize developers if they walked away from the project.

“We’re continuing to work hard on the project,” Moore said. “The one thing we don’t want to do, though, is build vacant space. That doesn’t help downtown. It doesn’t help anybody to build a ghost town.”