Developers of Downtown 2000 are optimistic that an economic turnaround soon will produce benefits for the redevelopment project in the 900 block of New Hampshire Street.

The project — set to add a mix of retail, office, apartment and possibly hotel space to the 900 block of New Hampshire Street — gained its first retail tenant in 2003.

In February, Omaha, Neb.-based PepperJax Grill opened a restaurant on the northwest corner of 10th and New Hampshire streets.

Martin Moore, a partner in the Downtown 2000 project, said 2004 would produce several more tenants.

“It was quiet for a couple of years, but we have retailers coming back and looking at the project again,” Moore said. “The economy has changed for the better both locally and nationally. A lot of people had a wait-and-see-approach for a long time. That’s beginning to change.”

Pepperjax Grill, 10th and New Hampshire streets, is the first retail tenant for the Downtown 2000 project.

Moore, who is developing the property with Lawrence businessmen Jeff Shmalberg and Bob Shmalberg, said he was in discussions with several retailers but declined to identify potential tenants.

Vacant retail space

The project has about 3,000 square feet of vacant retail space in the building that houses PepperJax. But plans call for another building to be built on the east side of New Hampshire Street that would house 25,000 square feet of retail and 25,000 square feet of office space. No construction date has been set.

Some of the office space, Moore said, could be replaced with loft- style apartments. The project now has 20 loft-style apartments in the upper floors of the PepperJax’s building. Moore said they had been popular.

Officials with PepperJax said the downtown project was a major factor in their decision to locate a store in Lawrence, which is their first outside Omaha.

“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,” said Linda Rowher, a co-owner of the restaurant that serves a variety of wraps and sandwiches.

Hotel visions

Moore is hoping that vibrancy attracts a hotel developer to the project. Moore envisions a 100-room hotel being built on the southwest corner of Ninth and New Hampshire streets.

He said negotiations had begun to pick up with hotel developers, too.

“That industry is beginning to loosen up a little bit,” Moore said. “It is in more of an expansion mode than it has been for a while. We think if you’re going to do a hotel project in Lawrence, this is where you want to be. It gives you the opportunity to do something more unique than a roadside, limited-service hotel.”

The Downtown 2000 project did hit a snag earlier this year. In February, city commissioners denied a variance for PepperJax to serve alcohol at the restaurant. Officials with the Salvation Army protested the restaurant’s cereal malt beverage license, saying it would be unwise to have a business that serves alcohol located next to a church and homeless shelter.

The ruling puts into question the ability of the development to attract other restaurants. Moore said most potential restaurant tenants would be interested in serving alcohol. He said he hoped the city commission reconsidered its policy that required businesses within 400 feet of a church, like the Salvation Army, to receive a variance from the city to serve alcohol.

“I think the rules should be a little different for downtown,” Moore said. “It is different than other parts of the city.”

City’s finances

The lack of tenants in the development has had a direct effect on the city’s finances. That’s because the number of tenants is a critical piece of a 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 Street. Increased property and sales taxes generated by the new buildings and their tenants were scheduled to pay for about 50 percent of the $8 million garage. The project marked the first time the city has used tax increment financing to fund a project.

A slow economy has caused the amount of new taxes collected at the project to fall short of projections. For example, the project was expected to raise about $340,000 in new taxes in 2003. Instead, it added about $20,000, according to the Douglas County Appraiser’s Office.

Moore, though, said he thought the pace of the project would soon quicken.

“I think that with the economy picking up, you’ll see the results of our project pretty soon,” he said. “We continue to work hard on it, and we’ll see it through to the end.”