The Portland City Council reached a split decision Monday night on a proposed lease-to-buy agreement for the Miss Portland Diner, after hearing charges that it's a sweetheart deal that would be bad for taxpayers and unfair to other restaurant owners.

Michel "Sal" Salvaggio of Falmouth, who owned the former Michel's restaurants, plans to move and expand the landmark diner on a city-owned lot on Marginal Way, at the edge of Portland's up-and-coming Bayside neighborhood.

The council voted 4-4 on the three-year contract, which needed five votes to pass. The council will reconsider the issue on April 4, when Salvaggio and his supporters anticipate getting that crucial fifth vote.

"I know it will pass," Salvaggio said, leaving City Hall.

To do that, Salvaggio must persuade at least one of the naysayers or Councilor Karen Geraghty, who was absent for Monday's vote, to back his project.

Under a contract approved by the council's community development committee, Salvaggio would pay $1 per year to lease the 48-seat diner and the city-owned lot.

The 6,000-square-foot lot is the site of a bus-stop shelter on the west side of Marginal Way, across from the Whole Grocer natural foods store. Under the agreement, Salvaggio would have a three-year option to buy the diner for $25,000 and the lot for $50,000.

Several residents and business owners opposed the deal.

"If accepted, you are basically allowing the Miss Portland Diner to reopen without any overhead, giving it unfair advantage over all the restaurants already open in Portland," said Patrick Rocheleau, who owns the Portland Street Diner with his brother, Paul.

Some councilors agreed.

"I think this is the sweetest deal going," said Councilor Cheryl Leeman, who opposed the agreement along with Mayor Jill Duson and Councilors William Gorham and Donna Carr. "This just plain is not a good deal for the taxpayers of this city."

Salvaggio disagreed. "Anybody could have put in a proposal," he said.

He said he plans to spend $350,000 to $400,000 on the project, including a 3,000-square-foot addition to the rear of the diner that would house a kitchen, a 50-seat dining room and a store selling fresh-baked breads and pastries, specialty coffees, ice cream and 1950s memorabilia.

Salvaggio would be responsible for moving the 56-year-old diner from its current location, on the east side of Marginal Way, across from the AAA building. He said the 2,000-square-foot kitchen and office space attached to the diner must be replaced.

The city received the authentic Worcester Lunch Car from Randall Chasse when he retired in March 2004, after he failed several times to sell it. Chasse then sold the diner's land to a developer, who plans to build an office building at Marginal Way and Hanover Street.

When no one responded to the city's request for proposals for the diner, Portland officials solicited letters of interest for more creative ideas. Salvaggio was one of 12 people who responded.

"We tried hard to find anybody who was willing to make that kind of investment," said Councilor James Cohen, who supported the contract along with Councilors James Cloutier, Nicholas Mavodones Jr. and Peter O'Donnell. "This is the place that we want to have this diner."

Originally published online here: http://business.mainetoday.com/news/050322bridge.shtml