South Bend plans to sue Dave Matthews over delayed downtown South Bend grocery store

SOUTH BEND — Marshall Clevenger decided to move to South Bend a year ago with his 3-year-old daughter after he learned of developer Dave Matthews' plans at 300 E. LaSalle Ave.

Clevenger, a Plymouth business owner, told The Tribune he loves his unit on the ninth floor, where a studio rents for $1,500 a month. But part of what drew him were plans for a grocery store and pharmacy in the building. He said he's been patient about unfinished construction throughout the complex, but he worries the shell of a grocery store won't soon be filled.

His concerns weren't allayed by the South Bend Redevelopment Commission's unanimous decision Thursday to begin the legal process of reclaiming millions of dollars from Matthews for his failure to finish the store on time.

'Unkept promises':If no grocery by Dec. 31, South Bend may demand $7.5 million back from developer

"Yes, (Matthews) should have made his commitments," Clevenger said, "but the city also kind of made their bed by saying that they would fund this and it would get done."

"If they pull $5-10 million back and it's not done now," Clevenger added, "I don't know how that solves that problem. I get that the city needs their return on the money, or at least needs the money returned, but where do you go from there?"

Enforcing the agreement

Six years after offering Matthews $5 million of taxpayer money in support of a mixed-use apartment building downtown, the city is preparing to sue after he failed to open a full-service grocery store and pharmacy by a Dec. 31 deadline.

The city believes it's entitled to $7.5 million — its initial investment and a penalty — because Matthews hasn't delivered on his promises for the high-rise at 300 E. LaSalle Ave. The commission voted unanimously on Thursday to hire outside counsel and enforce a clawback provision in the 2017 agreement, the main component of which was a 125-unit apartment complex.

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Troy Warner, vice president of the Commission and the South Bend Common Council member for Matthews' district, said the city has a "fiduciary duty" to take back the money on behalf of taxpayers.

Clevenger wasn't alone among the public speaking up at the meeting. Ten residents offered public comment, with nearly all urging the city to hold Matthews accountable for his failure to open a legitimate grocery store downtown.

"We want to maintain a high level of commitment and accountability, compliance with our contracts," Mary Ellen O'Connell, a law professor at the University of Notre Dame, said to commissioners. "Otherwise, how do we enforce and maintain those high standards in the future?"

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Matthews also could be at risk of losing up to $5 million of state money distributed by the South Bend-Elkhart Regional Development Authority for the same project.

The entity pushed back the deadline to finish a grocery store and pharmacy multiple times, most recently this May, citing "numerous unforeseen delays due to COVID-19-induced labor and material shortages." But when Matthews asked for another extension at the organization's December meeting, RDA board members refused.

“We determined that he had approximately five years to complete the grocery store portion, and we weren’t going to extend that any further," Stephen Studer, general counsel for the RDA, told The Tribune.

Studer said the RDA will meet next week to consider its own legal options. Board members are still eager for a grocery store downtown, he said. They're now debating how best to bring that idea to fruition.

A no-show at meeting

Matthews didn't show up to the Redevelopment Commission's meeting Thursday. He told The Tribune afterward that public meetings aren't conducive to a productive conversation between developers and officials.

Nonetheless, he called the decision to authorize legal action "really disappointing." He maintains that a "soft opening" of the store on Dec. 31 met his contractual obligations.

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Matthews continues to frame the 10-story apartment complex as a "home run" for the city. While admitting he's "lousy at predicting construction schedules because of COVID," he says the vast majority of the project is finished. The building's units are 75% leased, according to Matthews.

“If the taxpayers think that the city gave me $5 million to build a $300,000 grocery store, that’s some corrupt (expletive)," Matthews said. "What they did is they invested $5 million into a project that would generate $1 million per year in property tax revenue."

Last-ditch efforts

Many who spoke at Thursday's meeting took offense to Matthews' last-ditch efforts to meet the bare minimum required by the contract.

The agreement stipulated the grocery store must offer fresh fruits, vegetables, meats and dairy products as well as three of the following: canned foods, frozen foods, dry groceries, baked goods and nonalcoholic beverages.

In the unfinished area where the store was to be built, Matthews in late December placed rows of potato chips, bread and other basic food items on several tables. He had a few refrigerators brought in. He also set up a cash register.

The haphazard grocery store was open Dec. 31.

The city building department slapped it with a violation for operating without a certificate of occupancy or a retail food permit, according to South Bend Director of Community Investment Caleb Bauer. Inspectors refused to offer a certificate of occupancy in the last week of December because the space was unfinished.

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Matthews confirmed he closed the store after a day.

“That shopping experience is not up to snuff for me. I have higher standards for that," Matthews told The Tribune. "Look at the buildings we've built. I have high standards.”

“We did what we had to do," he added, "to cover our butts."

Matthews said the eventual store won't be a name-brand grocer like Martin's or Kroger. Instead, he's paying a local operator to open a store, which is apparently permitted by the contract.

He said the pharmacy will open in the nearby Commerce Center, which he also owns.

Contact South Bend Tribune city reporter Jordan Smith at 574-235-6480 or JTsmith@gannett.com.

This article originally appeared on South Bend Tribune: South Bend developer Dave Matthews to face legal action over grocery store