Irwindale Puts Its Money Where Its Mouth Is : City Cashes In on Dining Out

Besides the ignominy of gravel pits, nothing has quite embarrassed this city more than the lack of restaurant choices. If you didn’t fancy Pudgy’s, a taco and hamburger stand, you were basically out of luck in Irwindale.

For a city booming with industry and corporate headquarters, it was an indignity not suffered lightly. Ten years ago, city leaders began trying to lure a restaurant to town. They met with operators of a posh French eatery and an upscale rib joint and, at one point, plans were even drawn for a restaurant called La Cantera.

But all the deals eventually fell through, the rejections always the same: Irwindale--with only 1,000 residents and a dusty, pockmarked appearance--didn’t have what it takes to support a quality restaurant.

So Irwindale did what any self-respecting city with several million dollars in the bank would do: It built a restaurant of its own. Located between two huge gravel and rock pits on Irwindale Avenue just north of the Foothill Freeway, the restaurant was a gamble of $2.7 million in city Redevelopment Agency money.

But today, four months after the Rapscallion opened, the gamble appears to be paying off. Managers of the seafood house and bar say an average of 200 lunches and 175 dinners are being served on weekdays and upwards of 550 dinners on Saturdays, more than double pre-opening projections. Profits are expected by the second year.

“A city building its own restaurant is unusual, but we do a lot of unusual things in Irwindale,” said Fred Lyte, the Redevelopment Agency consultant who brokered the deal.

“It’s unusual for a city to be going after the (Los Angeles) Raiders, but we’re going after them,” he said. “We wanted a good restaurant, we gambled and we got it.”

But not all city leaders are convinced. Some, such as Councilman Joseph Breceda, think the city gave away too much in its zeal to improve its image.

“I don’t think the city ought to be in the restaurant business,” Breceda said. “It might turn out all right, especially if the Raiders build a stadium across the street. But it cost the city quite a bit, and the restaurant manager didn’t have to put in anything.”

The deal that ultimately landed the Rapscallion was typical of Irwindale--a renegade city that has seen its coffers swell from $25,000 a decade ago to $36 million today through aggressive industrial and corporate redevelopment.

Lyte heard about a restaurant in Reno called the Rapscallion from a friend, John McDonald, a partner with the Birtcher real estate development company. McDonald had sold the Reno restaurant to John Leonudakis in 1977. McDonald told Lyte that Leonudakis would be the perfect choice: a multimillionaire who had built and later sold 17 Refectory restaurants in California, Oregon, Arizona and Washington. Leonudakis, 50, relished a challenge.

But after visiting Irwindale and studying the demographics of the eastern San Gabriel Valley, Leonudakis was unwilling to build a restaurant with his own money.

“It didn’t make any sense,” Leonudakis said. “I looked at the emptiness of this area and I asked myself: ‘Where am I going to get the people to work for me? Where am I going to get customers?’ ”

Lyte then went to work on sweetening the pot. He told Leonudakis that the city, using Redevelopment Agency money, would buy the property from CalMat, a sand and gravel firm, and build a restaurant along the lines of the Reno Rapscallion.

The city would then lease the restaurant to Leonudakis for 20 years at what agency officials acknowledge are favorable rates. He would be charged $80,000 a year for the first three years and $180,000 a year for the next 17 years.

At any time, Leonudakis could exercise an option to purchase the restaurant at a price equal to the agency’s investment plus the approximately $300,000 difference in rent between the first three years and the remainder of the lease.

It was an offer Leonudakis could not refuse.

“The city is building the restaurant, leasing it at their cost, there are no percentage-of-growth clauses to hike up the costs and he has an option to buy it,” said McDonald, who is now a minor partner in the restaurant. “You tell anyone that and they can’t believe it. That’s a good deal.”

Lyte said the city was protected because Leonudakis agreed to pay five years of rent no matter what the restaurant’s fate and backed up the agreement with a letter of credit. In addition, Lyte said, if Leonudakis chose to exercise a second option of developing a 25,000-square-foot office building next to the restaurant, the city would benefit aesthetically and through additional tax revenues.

“He got a good deal, no doubt,” Lyte said. “But we’re making 9% on our money, which is a fair return, and we secured a guarantee that he’ll pay rent for at least five years. And we have the building if he goes under.

“We’re not pussycats,” Lyte said. “We protect ourselves on these things.”

But a majority of the five-member council thought that the city was not adequately protected and that the venture was speculative. For several months, the council balked. Then, after some gentle arm-twisting from the Redevelopment Agency board and meetings with Leonudakis, the council changed its mind and voted 3 to 1 with one abstention to approve the project.

Council members said they were moved by a desire to have a restaurant where the Chamber of Commerce and civic groups could meet.

“We needed something that wasn’t in-and-out. We needed a first-class, quality restaurant,” said Councilman Sal Castellanos. “Now we have something to keep our businessmen in town.”

The 9,000-square-foot restaurant has a full bar and banquet facilities for up to 150 people and can seat 180 for dinner. Leonudakis says business has been so good that it looks as though he will exercise his option to purchase the restaurant and also build an office complex and coffee shop on adjacent land.

“The response has been very encouraging,” he said. “I think we’re fairly solid.”