Archive for Tuesday, October 30, 2012

Town Talk: City trying to determine what type of fine it can levy on Varsity House project; Deciphera undertaking new strategy, rumors of layoffs

October 30, 2012


News and notes from around town:

• When we last left the soap opera known as the Varsity House, we had city commissioners who were claiming that they had been “had” by Lawrence developer Thomas Fritzel and his plan to disassemble and then rebuild the old 1908 Varsity House at 11th and Indiana streets.

As the episode ended, city commissioners left us all with a cliffhanger by saying they would pursue some sort of cash settlement with Fritzel as a form of a punishment for not rebuilding the house in the manner city commissioners had expected.

Well, city commissioners don’t meet this week. (The commission usually doesn’t meet on the fifth Tuesday of the month. Four Tuesdays of fun is generally more than enough.) So I checked in with Mayor Bob Schumm to find out if any progress had been made in assessing a penalty against Fritzel.

It sounds to me like the whole issue is still in “cliffhanger” mode. Schumm said he may want to bring the issue up again before the full commission. When city commissioners discussed the Varsity House last week, City Commissioner Hugh Carter was absent. The four remaining commissioners ended up voting to declare the structure out of compliance with the city-approved site plan and to seek some sort of restitution, but the vote from Commissioner Mike Dever didn’t seem to be very enthusiastic. Still, it doesn’t seem likely that a majority of commissioners are going to back away from the stance that Fritzel ought to pay something for what they perceive to be a violation of a city-brokered compromise that allowed the house to be moved in order to make way for a new apartment complex.

Commissioner Mike Amyx is as mad about this issue as any I’ve seen since I’ve covered him for the last eight years. Schumm also is using sharp words to describe his frustration with the project, and City Commissioner Aron Cromwell made comments at last week’s meeting that indicated he is peeved as well — although he also wasn’t happy with how city staff members had handled the process of approving the idea of the house being dismantled. At one point he described the situation as a “fundamental breakdown.”

But Schumm told me recently he didn’t have any news to report about whether the city was any closer to getting a check from Fritzel. I suspect city officials are trying to figure out just what they can legally require of Fritzel.

I asked around at City Hall about what the city code allows in terms of fines related to violations of site plan agreements. I was told the matter would fall under the city’s development code, which generally states violations of the development code can result in fines ranging from $10 to $500.

I’m pretty sure that is not what city commissioners have in mind.

“My feeling is we have lost a substantial structure,” Schumm told me. “We have lost a piece of history. We lost the opportunity as a community to preserve a structure. What is that worth? I don’t know. But I put this in the column of major dissatisfaction. It is not a minor thing or a small insignificant situation.”

Although I’ve tried, I haven’t yet been able to get a city commissioner to throw out a possible dollar amount related to the matter. So, take this next part with a grain or two of salt. According to city figures, the Varsity House occupies about 3.5 percent of the total site at 11th and Indiana where the Varsity House and the apartments are being constructed. I’m not certain of the total dollar value of the Varsity House and apartment complex project, but in May we reported the city issued a building permit for about $4 million for the project.

If the city were to decide that about 3.5 percent of the site is not as approved, then would the city levy a penalty equal to 3.5 percent of the project’s total costs? That would equal about $140,000. What would be the public’s reaction to that type of dollar amount? That would be a huge fine in the world of Lawrence City Hall. Heck, a $10,000 fine would be a huge fine from Lawrence City Hall. So, your guess is as good as mine in terms of what the city may try to do.

What I have heard is that some members of Lawrence’s historic preservation community are lobbying that whatever settlement is reached between Fritzel and the city that the dollars be donated to a historic preservation project in the city. Currently, the Lawrence Preservation Alliance is preparing to raise money to restore the old 1869 Turnhalle building at 900 Rhode Island St. So, keep that in the back of your mind.

But also remember that Fritzel doesn’t believe he has done anything wrong here, so any talk of a “settlement” may be one-sided. Fritzel told me he absolutely disagrees with the city assessment that he violated the approved site plan.

He notes he did receive permission from the city’s planning staff to dismantle the house into several pieces instead of moving the house in one piece. The city’s planning staff doesn’t dispute that such approval was granted, but the disagreement is over what was expected to happen next.

The city’s planning staff expected the building would be disassembled into five or six modular blocks and then those blocks would be reassembled much like a jigsaw puzzle. The planning staff contends that is a reasonable expectation because such a process is spelled out in federal guidelines related to historic structures. But that wasn’t spelled out in any written agreement between the city and Fritzel.

What happened instead is that the building was brought back to the site one stick of lumber at a time. Old framing material is being re-used but not in the same place or manner that it was in the original structure. Historic preservationists have objected to that method.

But Fritzel told me it is important to remember that the house isn’t historic. It is not listed on any historic register, but rather is just in the environs of a historic property. He also said he wasn’t seeking any federal or state historic tax credits and, therefore, wasn’t required to follow any particular set of guidelines related to historic project.

Regardless, Schumm is indicating he’s ready to play hardball on the subject. The project has its building permit. But it doesn’t have its occupancy permit, which is needed before the apartments can be rented. Whether the city issues that occupancy permit is likely to be the topic during the next few weeks.

“The situation is he is going to need a certificate of occupancy in the future,” Schumm said. “He can’t occupy it without a certificate from us. That will probably be what drives the end result.”

Whether that end result happens at City Hall or in district court, though, will be interesting to watch.

As they say in the soap opera business (and as I often think at long City Commission meetings), like sands through the hourglass …

• If Douglas County’s bioscience industry were a soap opera set, there is one company that would have a big gold star on its dressing room door and chocolate fountains and nacho cheese machines inside. (I assume that’s what’s inside a star’s dressing room. That’s how I’m planning to remodel my wife’s sewing room.)

Anyway, that company is Deciphera Pharmaceuticals. The company studies ways to develop new cancer drugs, and it already has signed a multimillion-dollar deal with pharmaceutical giant Eli Lilly. Bioscience leaders often point to Deciphera — which has its offices on second-story space in the 600 block of Massachusetts Street — as being among the most likely local companies to hit it big nationally.

Well, there appears to be change underway at Deciphera. In early October, the company posted a message on its website announcing that it was in transition from an “oncology discovery company” to an “oncology drug development company.” You can read the statement here. But in short, it seems the company will essentially stop its efforts to develop new drugs and instead focus on further developing two to three drugs that it already has developed.

This may end up being good news for the company in the long run, as it evidently feels its current crop of drugs discoveries have great potential.

But I’m hearing from multiple sources that the change in strategy has resulted in significant layoffs at the company. Sources tell me the company essentially has cut about 24 positions in its research and development department.

I have left messages for about two days with officials at Deciphera, but haven’t yet been able to confirm the layoffs. Just this morning, Dan Flynn, Deciphera’s president and CEO, sent me an e-mail providing more information about the company’s transition, but he did not address the rumored layoffs.

If the number of about two dozen is correct, that would be a major reduction in Deciphera’s workforce. When I last reported on the company in February — when it was making news for receiving a $7 million payment from Eli Lilly — the company had 32 employees.

But that article also gave a clue that such a transition may be in store for the company.

“Research organizations cast a broad net at first to see which programs gain traction,” Flynn said in the February article. “Now, it really will be about focus and execution for us. In the next few years ahead, we’ll probably be identifying ourselves by two or three key drug assets.”

Flynn at the time said that made it difficult to make projections of how large Deciphera’s workforce may grow in Lawrence because the company will have to make decisions about whether to develop future projects internally or in collaboration with other pharmaceutical companies.

That seems to be the stage the company is at today. What I don’t know is whether the company has decided to do internal drug development work with other companies. If the company decides to go the internal route, it might mark the beginning of a new type of employment growth for the company.

We’ll wait and see. As for comments from Flynn today, in his e-mail he stressed the company’s recent changes were the result of how successful the company has been in developing three drug products that are “poised for clinical development.”

He said “some laboratory activities” related to those three products will continue.

“We are pleased to be maturing as an oncology drug development company, and continue to enjoy being a part of the life sciences community in Lawrence,” Flynn said in the e-mail.

I’ll let you know if I hear more.


EarthaKitt 5 years, 6 months ago

I love Town Talk, but I swear, Chad. If I were your wife I'd be pissed at you all the time.

SouthernMan 5 years, 6 months ago

The city should fine its planning department staff for not keeping its eye on the ball. And Fritzel should use that old house as firewood. He owes the city nothing.

Adrienne Sanders 5 years, 6 months ago

What does "in the environs of a historic property" mean? It's near a historic property? That makes no sense in context.

Chad Lawhorn 5 years, 6 months ago

It is a legal term of art. There are designated areas around historic properties, and they are called environs. Sorry for the jargon. Thanks.

Chad Lawhorn 5 years, 6 months ago

Environs is a legal term of art. Historic properties have a designated regulatory area around them, and the area is called an environs. Sorry for the jargon. Thanks.

zackattackku 5 years, 6 months ago

The Varsity House sits in the Mount Oread Historic district, downhill from Corbin Residence Hall, up the street from some historic homes and down the street from some historic homes, particularly the Snow House. The problem is that even if it is not listed on the National or State Register, that does not mean that it is not historic or of some historical significance. The property sits within close proximity to Memorial Stadium which is an historic structure. I know of a handful of National Register and State Register buildings close by to this project.

Matthew Herbert 5 years, 6 months ago

Being CLOSE to something of value does not make it of value. Until it is legally recognized as historic, it can be treated as simply "old". Fritzel is probably guilty of being a jerk, but sadly being a jerk is not a crime.

Budgets_Smudgets 5 years, 6 months ago

And the City will transfer $20 million to KU Endowment, which will build a sports center on a no-bid contract using Fritzel, making him millions, and the sports center will then be given back to the city with the associated costs of $1 million a year to operate it.

Does anyone else have questions about this logic?

rubysmom 5 years, 6 months ago

Fritzel knew what he was doing the whole time, just ask anyone who works on his construction crew. There was no thought or concern for returning the building in any sort of recognizable fashion. He swindled the city and he will do it again with no hesitation. Unfortunately, he will probably get a way with it, again....hopefully, the city will be all the wiser the next time he needs a building permit though.

Terry Sexton 5 years, 6 months ago

A deal is a deal but, c'mon, the raccoons had been poopin' in the Varsity House for the last umpteen years. The place was a dump. It had history, yes but it's been recorded. The building wasn't worth the effort that it has already received.

I hope my future caregivers never read this, but just because somethin's old doesn't mean it's worth savin.'

irvan moore 5 years, 6 months ago

wanna teach him a lesson? take him off the city bid list the next 5 years and quit rewarding him for screwing the city, the commission would be doing the taxpayers a favor at the same time

dougfirst 5 years, 6 months ago

He did all of this on purpose. Money and power control a lot of things

opinion 5 years, 6 months ago

This developer/architect combo has developed quite a habit of doing whatever they want and then playing it as an innocent misunderstanding. Shame on them the first time but.....

Armored_One 5 years, 6 months ago

So let me get this straight...

He repaired the majority of the significant structural issues the building had, but since things like the trimwork, which was rotten, couldn't be reused, City Hall is throwing a temper tantrum?

flyin_squirrel 5 years, 6 months ago

Varsity house was a dump and is an example of how our HRC has become a joke. The blame for all this falls on the HRC and the city for not monitoring it. And if the city doesn't see it that way, they should take his contractors license from him and let the courts decide. But if I were a betting man, I think Fritzel would win this one in court.

And in the aftermath of all this, we are going to get an apartment complex with an ugly cutout of house on the corner....

Greg Walter 5 years, 6 months ago

I know the building has historic values, but seriously the city wasn't doing anything to maintain or preserve it. From the first day I came to town it has in my eye been an eye-sore on the edge of campus in a very nice and historical district/neighborhood. There was no signage explaining what the building was, but instead an empty gravel lot next to a building which looked like it was abandoned many years back because of unfit living conditions and no developer wanted to buy the lot. What Fritzel did might not have been what the city wanted, but its what the city need to do and just won't admit it. I have taken many historical preservation classes at KU and this appears from what I have read that the building needed to be torn down. Yes they could have rebuilt it using original techniques but it wouldn't have lasted. How they are doing it now is fine, JUST as long as they use the proper materials on the exterior and interior to make it appear as a period piece without making it look fake or messing with dimensions and details of appearance and floorplan.

Richard Heckler 5 years, 6 months ago

$100,000 fine and pull the building permit on the entire project until they pay up.

repaste 5 years, 6 months ago

Deciphera got about $3 million plus incentives from the city, half million fron the KBA, for ten - twelve jobs?

Steve Jacob 5 years, 6 months ago

Upstart drug companies are such a risk reward for investors let alone city governments to get involved with.

just_another_bozo_on_this_bus 5 years, 6 months ago

Regardless of what the city did or did not do, the expectation that this house would be truly preserved was clear, and Fritzel and Company just as clearly thumbed their noses at that expectation.

The American justice system is only marginally predicated on doing the right thing, so Fritzel and his deep pockets might be able to fend off any sort of fine or other punitive measures. Let's hope, at least, that city officials have learned that they can't be trusted, on anything. But that goes for pretty much every major developer/builder in town, and that's been the case for a long, long time (and not just here.)

victor_lustig 5 years, 6 months ago

Repost: A brokered settlement with Tommy Fritzel??? The same guy Schumm, Corliss et al have been negotiating with for months on a 25-30 million dollar -No Bid- city recreation center??? What's a significant monetary settlement for a project with a 5 million dollar mortgage and potential monthly rents of $65,000 that’s shut down while legal issues are sorted out??? Try an amount commensurate with the projects value and large enough to make Schumm et al look good, say $250,000 - $300,000 dollars. Tommy can simply add a measly 1% to the recreation center cost… the unsuspecting tax payers pay, city commission looks good, historical group gets paid and Tommy is very, very happy… what a wonderful solution.

just_another_bozo_on_this_bus 5 years, 6 months ago

While it could be interpreted (twisted) that way, I think it's obvious that's not what I meant.

City officials didn't acquit themselves well in this, but it's pretty clear that it wasn't they who were acting in bad faith.

zackattackku 5 years, 6 months ago

I study Historic Preservation for my graduate studies and this is a clear violation of Preservation Law. Fritzel broke the rules with regard to the moving of this historic structure. Regardless of how the contract was worded, this man is manipulative and shouldn't be trusted. I don't think he should be allowed to do any more projects in this city. One historic structure was lost. Lets use this as a lesson learned and make sure that history doesn't repeat itself. HRC and the city do need to be more on top of things when it comes to an historic structure. That is the only way to save these homes and buildings. There are many examples of failed Historic Preservation attempts and the lessons learned and the fines levied against the developer of the site. Developers do end up paying fines for this flagrant disregard for what was agreed upon in a contract. Sometimes the HRC and the City succeed in this. Sometimes, they fail. The main way to prevent this kind of mishap again is to watch them like a hawk and make sure everything contracts and all documents are worded in such a way that there is absolutely zero wiggle room and absolutely no way the developer can get out of following what is agreed to.

just_another_bozo_on_this_bus 5 years, 6 months ago

It was not on any historic register. That doesn't mean it shouldn't be, or that it didn't represent an important part of Lawrence's history.

Matthew Herbert 5 years, 6 months ago

no hysterical society registration = no hysterical society regulations. The man polished a turd and we're mad because he didn't use all the old rotted out portions? Sounds like he improved the property to me. I wish more home owners would replace the "historic" parts of their homes

Michael Shaw 5 years, 6 months ago

Saying this house was a "dump" and that it could not be restored are merely opinions. This house was determined by the Historic Resources commission to be a contributing structure in the environs of a historic district. They had no choice; under the definitions in the law that is what it was. What remains is that this developer agreed to preserve this house in return for approval of the larger project. He says that he did not break that agreement. That's where things stand.

Matthew Herbert 5 years, 6 months ago

100 years from now, I hope my grandchildren fight to preserve all these 90's housing boom cookie-cutter properties in West Lawrence. They'll all probably still be the same beige color

just_another_bozo_on_this_bus 5 years, 6 months ago

Unlike today, builders 100 years ago weren't just throwing up houses as fast as they could with no attention to aesthetics or quality or potential longevity. If a house lasts for a couple of years without any callbacks, that's good enough in the ethos of most builders these days.

Inquiringmind393 5 years, 6 months ago

In the end Mr. Fritzel will have to do something to appease the city. He has awakened a sleeping giant and also is poking it with a stick. For years there have been 'stories' throughout the biz how this company has been dancing around rules, codes, and procedures, this time it has gotten real public. City Hall does not like being embarrassed. If people noted in the article, this project still needs to get and pass an occupancy inspection. This can be a VERY difficult thing to procure if the inspection department is motivated by those higher in their food chain to make sure every code is followed to the letter. The delays can go one indefinitely.

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