HERCULES -- The city can't say how much rent it apparently never collected from a local fitness business, but the total could exceed the more than $100,000 in unpaid bills from a recently closed restaurant. That is, if the fitness business owed any back rent at all, a matter it believed settled.
As of Dec. 1, 2010, Hercules Fitness owed $206,484 in back rent on a building at 600 Alfred Nobel Drive it sublet from the Hercules Redevelopment Agency, according to then-Hercules Municipal Services Director John Stier; the agency leased the building from a private landowner, the Emmerich Family Trust.
Several requests to City Hall over the past year for updates on Hercules Fitness' rent status did not yield the information.
Earlier this month, Deputy City Manager Liz Warmerdam said, "I'm not sure the exact figure, but they definitely owed back rent." Warmerdam left Hercules effective Friday to become assistant city manager in Alameda.
The financially struggling city also did not collect on bills for electricity, loan debt service and rent piled up by Sala Restaurant, which closed in December, raising the question of how leases and loan agreements signed in the late 2000s with other businesses might be faring.
Last week, Hercules Fitness President Steve Buchanan said Stier must have gotten the arrears figure "out of the clouds," and that any rent arrears -- Buchanan could not immediately quantify it -- was supposed to be incorporated into a redevelopment agency financing package under an oral agreement he said he had with former City Manager Nelson Oliva to buy the building.
"In my mind, there was no arrearage on the rent," Buchanan said. "We had made an agreement all along. We never felt we were in default."
The oral purchase-and-financing deal, Buchanan said, called for the redevelopment agency to buy the building from Emmerich then sell it to Buchanan for about $3 million, with the redevelopment agency providing very low-interest financing to make up for the high purchase price "We were overpaying," Buchanan said.
He said he did not recall the interest rate or the exact term -- either 20 or 25 years -- but that the principal and interest payments were supposed to start at $16,000 a month for the first five years and go up by $1,000 a month every five years, until the loan was paid off. But the deal was never consummated, he said.
Oliva did not respond to emails from this newspaper seeking comment.
Emmerich trust co-principal Janet Emmerich on Thursday referred questions to the trust's attorney, Joshua Genser. On Friday, Genser said, "I don't know what went on. I wasn't in on those negotiations."
Oliva went on medical leave in October 2010 and returned briefly to City Hall in December 2010 before stepping down in January 2011. Later in 2011, Buchanan said, he was negotiating a "walkaway agreement" with former Hercules Real Property Manager Frank Fox that would have resolved the back rent issue with the city, but an agreement was never finalized. That rent, which Buchanan said was adjusted several times and was under dispute, was quoted as high as $28,415 a month by the city in 2010.
Around the end of 2011, Buchanan said and Genser agreed, Buchanan and Emmerich negotiated a direct lease and purchase option without the city as intermediary. Buchanan also has worked out a shared-parking deal with an adjacent building, and today, "Hercules Fitness is doing very well," he said.
Earlier, as Hercules Fitness had fell behind in rent to the city on the sublease, the city had stopped paying rent to Emmerich on the primary lease, Genser said. Emmerich sued the city, and the parties settled for about $700,000 in fall 2012, Genser said.
The settlement amount is on the Hercules redevelopment successor agency's Recognized Obligation Payment Schedule.
When Sala Restaurant closed, it owed the city about $42,000, or a year's rent, on its city-owned locale at 1991 Railroad Ave. It also was $52,441 in arrears on a $230,000 tenant-improvement loan granted by the Hercules Redevelopment Agency in early 2010.
All told, Sala is $112,000 in arrears to the city, including unpaid Hercules Municipal Utility bills that led to the power being shut off at the restaurant last month, Finance Director Nickie Mastay said.
Several former employees have since come forward to say they are owed wages by the restaurant and its co-principals Prathumrat "Kay" Sala and Glen Cole. At least two have pending unpaid wages complaints before the state Department of Industrial Relations, which scheduled conferences, but no one from the restaurant showed up, according to Kerry Lewis, a state deputy labor commissioner.