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

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.