SPRINGFIELD – The new owners of the Eagle Creek Resort on Lake Shelbyville will pay the state Department of Natural Resources an annual rent of $40,000, according to the lease agreement signed July 7.

But the agreement is structured in such a way that the state may never receive any revenue from the resort's operation.

The lease agreement was obtained by The News-Gazette through a Freedom of Information Act request.

The 21-year lease, which runs through June 29, 2032, says that Eagle Creek's new owners, BMDD Resorts Inc. of Decatur, "upon inspection and approval by DNR shall be permitted to offset the annual rent due under this paragraph against the reasonable costs incurred and paid by lessee and reported to DNR."

Reasonable costs include "those that are appropriate and necessary for the rehabilitation of any part of the premises" as well as capital improvements.

In the bid proposal it submitted to the DNR last winter, BMDD estimated it would cost $3.7 million to rehabilitate the 138-room lodge and resort that was closed last summer because of extensive mold problems. The former owners of the property, Barry Shiffman and Edwin Edelberg, had abandoned the 24-year-old resort.

Eagle Creek is about 70 miles southwest of Champaign-Urbana on Lake Shelbyville.

Chris McCloud, a spokesman for DNR, acknowledged that it may be some time, if ever, before the state receives any lease payment.

"This wasn't our property to begin with. It was the former owners and operators of the facility who foreclosed on the property. The bank did not choose to keep the property. So in that sense this problem was given to the state," McCloud said. "So if we were not able to sign an agreement and not turn it over to a responsible party that has some expertise in running theses kinds of facilities, then it would have cost us much more than forgoing the lease payment for however long it takes for BMDD to recoup some of their costs for renovation.

"The trade-off is that it would have cost us a lot more if our only option was if we had to run it or renovate it."

In another section of the lease agreement, DNR is required to remove at its expense all furniture, furnishings and equipment at Eagle Creek that BMDD does not want.

That could be a considerable expense to the cash-strapped state government.

A report last January estimated it would cost $892,500 just to remove mold-damage infrastructure and contents from Eagle Creek.

Dennis Fayhee, owner of the nearby Sullivan Marina and an unsuccessful bidder for Eagle Creek, called the lease agreement "a sham."

He asserted that state officials had said they didn't want to be burdened with more Eagle Creek expenses, but that the lease agreement did so.

"That's a big expense, especially when the primary purpose the state had was to not commit any state money to the renovation," Fayhee said. "That's a major, major part of the mold remediation. That could be carpeting. That could be wall covering."

McCloud said he did not have an estimate for how much the state would end up paying to remove unwanted furnishings and equipment.

"I don't know what has to be taken out and what is going to be used and is not going to be used. There are a number of things that are going to have to be taken out," he said.

Fayhee said the lease agreement requires little from BMDD.

"There's just no commitment. I've never heard of anyone signing a lease agreement that doesn't commence for nine months," he said of the provision that says the lease begins April 1, 2011.

"They signed a lease with no development plan? In the last 4 months they didn't have time to come up with a development plan? They've got no commitment from the guy they gave the lease to."

Other provisions of the 22-page lease agreement, which was signed by Gov. Pat Quinn, BMDD President Michael Ballinger and DNR Director Marc Miller, include:

– BMDD to deliver by early September a plan for its improvements to the resort. DNR has 14 days to review the plans and to provide written comments.

"I think it's just a chance to review what their plans are for the facility. We have full confidence they know what they are doing in terms of how they want to go about renovating it," McCloud said. "I don't believe there is any kind of looking over anybody's shoulder on a daily basis."

– Permitting BMDD to open the 18-hole golf course at the resort as soon as possible.

"IDNR hopes that you are able to open the course soon – it would be a wonderful show of commitment to the local community to have it open," Miller wrote.

– Requiring BMDD to pay prevailing wages in the renovation project and in the operation of the resort.

– BMDD to file quarterly reports with DNR documenting all renovation costs and capital expenditures.

– Allowing DNR to shut down the resort permanently in the event of a fire or other casualty.

– Requiring BMDD to provide the state every May 31 a copy of the previous calendar year's annual financial statements.

– Permitting both sides to terminate the lease at any time upon mutual agreement.