As the fate of Village Square Mall hangs in legal limbo, officials from the group trying to revitalize it appeared before the Effingham City Council on Tuesday to share their vision of paths forward.
Scott Kabbes and Karen Etter of Square Southtown drafted an option agreement with the city.
“Assuming that the appellate court reaches the correct decision and the property is acquired by the developer, Square Southtown, there’s a period of time that Square Southtown can require the city to purchase the property. The terms of that purchase are provided in the put option,” said City Attorney Tracy Willenborg. “There are a lot of things and unknowns that can occur that can impact the ability to develop, so the city is interested in the event that the developer cannot develop the property.
“It’s my understanding that the city council is interested in possibly acquiring that property to ensure future development,” Willenborg added.
Square Southtown prevailed at a foreclosure auction on Nov. 4, 2024 to purchase the mall with the intent of revitalizing the long-deteriorating property and reinvesting in Effingham’s south side, the group said in a social media post on Wednesday.
“Although the judicial confirmation of sale is not under appeal, the transaction has been unable to close due to a tangential stay currently pending before the appellate court,” the group said. “That appeal has now been ongoing for more than 15 months, with no clear indication of when a ruling may occur. As a result, Square Southtown must now confront the reality that, without intervention, the project may never move forward.”
Square Southtown said it has two choices: Walk away and allow the property to remain in the hands of the current owner, or remain committed and create a responsible path forward for the community.
Square Southtown said its option agreement with the city is designed to protect the community’s interests while the legal process plays out.
Square Southtown said it will leave its $130,000 deposit in escrow and maintain its contractual interest until the appellate court issues a ruling.
“If the court rules in favor of the city, Square Southtown would close immediately on the transaction,” the group said in the social media post. “Following closing, Square Southtown would evaluate whether the originally planned redevelopment remains financially feasible.”
If the project is no longer feasible, Square Southtown would sell the property for an amount sufficient to cover the purchase price and certain administrative expenses – ensuring the property is no longer owned by the current owner and that the city’s $1.19 million lien is satisfied, the group said.
As Willenborg noted, one option is for the city to purchase the mall from Square Southtown. The council gave Willenborg the go-ahead to retrieve and file a first right of refusal form. Once filed, the council will bring the agreement back for further discussion.
“If we are unable to see our full redevelopment vision come to fruition, that will be deeply disappointing,” Square Southtown said in its post. “But we will know our efforts were not in vain if this allows the city to finally take meaningful steps to renovate and revitalize this long-neglected area.”
In other news, Effingham resident Mark Mayhood asked the council if any changes or discussion has been had regarding the process of distributing tourism funds since the Jan. 6 city council discussion after Wheat Penny withdrew its request for $5,000 from the fund. Mayhood also requested that the public be involved in these discussions. Since the Jan. 6 meeting, Mayor Mike Schutzbach has been approached by a few different downtown groups hoping to explore the city’s tourism funding.
City Administrator Steve Miller, Economic Development Todd Hull, Tourism Director Jodi Thoele and other city staff have reviewed the city’s budget for this fiscal year and collected information about potential projects, the tourism board, the city’s policies and grant guidelines.
Miller is currently creating the city’s next fiscal year’s budget, so it’s a prime time to discuss the tourism funds’ distribution process, determine the city council’s priorities and change any necessary terminology in the city’s policies.
“So there has been a lot of communications going on in regard to receiving some of those funds,” said Schutzbach. “However, at this point, no one has come formally to address the council.”
Schutzbach suggested that Miller meet with the council members individually to discuss their thoughts and suggestions on the matter.
“It’s a good thing to get through that budget process with each of the council members to see where priorities are,” said Miller. “Then we can tweak things accordingly and change the ordinance accordingly.”
Stephens suggested researching what other municipalities are doing, as well as reviewing the requirements in order for a business to receive tourism funds.
“I think it’s time for us to take a look and have a discussion as a council as to how we really want to administer hotel-motel tax,” said Stephens.
The next city council meeting is scheduled for March 3 at 5 p.m.