This is the first of a long series of blogs about the 2011 Consolidated Elections featuring local issues for local candidates. The purpose is to contribute to better informed voters by encouraging open discussion.
The City of Sycamore is looking at two different projects for its Tax Increment Financing (TIF) program. One would invest TIF funds for needed repairs to make the 130-year-old former Chicago & Northwestern Railroad depot located at the corner of Sacramento Street and DeKalb Avenue in Sycamore structurally sound and therefore more attractive for private investment. The other project would use TIF funding to demolish the former Fargo Motors building for a new commercial development.
The old CNW depot was listed on the National Register of Historic Places in 1978. It was donated back to the City of Sycamore by Auto Meter, the depot’s former owner. The Douglas C. and Lynn M. Roberts Family Foundation is donating $300,000 to cover a majority of the structural repairs. To provide off-street parking and access to Sacramento Street the city also purchased additional land east and north of the depot from Auto Meter for $71,025. The city may need to use about $50,000 in Tax Increment Financing money for additional repairs that would then hopefully entice private investment.
The former Fargo Motors building located at 437 W. State St., has been vacant for several years and recently went through foreclosure. Local developer, John Pappas, purchased it for $300,000 and following TIF guidelines applied for $61,680 for demolition of the building. He plans to develop more than 10,000 square feet of ground level retail space with four to five apartments on the upper levels. The project was approved unanimously at the January 18, 2011 regular city council meeting.
Which is the better use of the TIF funding? The CNW depot project preserves a historic building and a city landmark. Private funds (donations) secured the site and provided a majority of the structural repair costs but the final use of the building is speculative. The Fargo Motors project replaces a deteriorating building with a new retail shopping center with some apartments. Private investment required to complete the redevelopment has already been acquired.
For bonus discussion the merits of the TIF program is open. 🙂
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7 Comments
Kerry, it was definitely the economy but new construction residential has gigantic obstacles in the way of recovery. You cannot build a house for what you can buy one for in a glutted market and then go figure the property tax. But for TIF investment return purposes I think Malta is in good shape. From likely hundreds of dollars from farm rate property tax to at least subdivided residential lots likely paying around a grand a piece should have secured that investment.
Lateral movement of existing businesses is an under-researched element of economic development. The new development gains a tenant through the loss of one by an existing development. Win-lose. That’s more magnified whenever the economy tanks or when a community doesn’t have the population to support the amenity. DeKalb County’s got a little of both of those conditions at the present moment.
Yet there is economic benefit. Jobs are created. Demand for the trades is created. Products and services are needed. More property tax is generated. Other taxes and fees are paid.
One has to appreciate Pappas’s committment to use his own sources to fund the promary costs of the acquisition of Fargo Motors’s building. Again, though,will he be able to turn a profit (or just break even) in redevelopment of this property in this economy without merely relocating existing businesses into his new building, and thus leaving a hole elsewhere.
The Fargo Motors property is two parcels that currently pays about $11k per year in property taxes. As a Buick dealership the property likely produced significant sales tax (not subject to Home Rule) but since closing, several years ago, it has not produced any sales tax revenue.
As a comparison, there is a retail-office-residential property on the same block (opposite corner) of State Street. Apartments were added to a renovated office center and that complex now pays about $32k/yr in property taxes.
The way TIF works is most if not all of the $11k currently paid is frozen and paid to the various taxing bodies. If the Pappas project were to produce similar numbers to the comparison property then when completed it would produce about $20k per year for TIF investment until the district expires and will then go to the various taxing bodies. The City of Sycamore is certainly hoping the project also re-generates sales tax revenue.
Lateral movement of businesses is a very valid question, Sally.
Kerry, how does the Malta TIF work and how would you grade its performance to date?
Thanks, Mac. I hope we see lots of “entries” in this contest leading up to the elections. I just spoke with one District 428 school board candidate last night, asking when his “platform” will be available for perusal. I hope all the various parties hoping to be elected will come forward in one way or another and let the public know what they think about serious issues affecting all.
Regarding TIF, I’m interested in seeing how Sycamore handles TIF compared to DeKalb. I also notice Cortland is considering TIF, and Malta already has one TIF district. TIF-related articles could make for some very interesting reading, especially in this election season. Related is the DeKalb County Comprehensive Land Use Plan revision, soon to be finalized.
By the way, real nice photo of the old Sycamore train depot, complete with steam locomotive!
While I’m not a Sycamore resident, I prefer re-use of existing structures. I’m not sure why Pappas thinks that demo and rebuild would really serve the residents. Does he have businesses lined up to rent space from him? There are so many empty spaces along DeKalb/Sycamore road. Do we really need more?
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Mac-The Malta TIF is a long story and not yet fully obvious as to its success. Here’s the highlights:
The old Harkness farm southwest of town was acquired by Eagle Homes (now defunct) to become Prairie Springs subdivision. This piece of property was taxed as farmland, and somewhat wet, as is much of Malta. The developer might not have moved ahead on this project “but for” the incentives provided through TIF and other village cooperation. Unfortunately, the recession intervened, and only some of the homes built during Phase One were actually sold. Remaining unsold homes along with unfinished infrastructure and other property were foreclosed. My understanding is that after financial institution involvement, Peter Harkness now has control over the subdivision and is working with the village on improvements. TIF monies are apparently involved in this at some level but there is not nearly as much TIF money available as had been planned due to the failure of the project. Phase One was started but not finished. Phase Two was only planned.
Now here’s where it gets interesting. Malta was approached and asked to sign on to an intergovernmental agreement (Cortland, Malta, DeKalb) regarding uniform impact fees for new construction. School District 428 was particularly interested in this agreement. Prairie Springs, along with other developments in Cortland and DeKalb would have paid a uniform set of fees had Malta signed to this agreement. But Malta village fathers refused the agreement. Instead, they cut their own deal with Eagle Homes/Prairie Springs. Of course at that time, no one was expecting a major recession, but Malta apparently felt its best interest was to avoid legal entanglement with the other towns and taxing bodies.
As is turns out, (in my view) Malta made a good choice. By not agreeing to the proposed uniform fees they instead got other considerations from the developer, more in line with what the village wanted to accomplish. Smartly, Malta also required a performance bond from the developer, and now proceeds from this bond (along with TIF funds) is being used (in some degree) to complete infrastructure at Prairie Springs. For instance: last fall, roads in Phase One were finally paved. Water retention/drainage work should also resume at Prairie Springs in the next few months, which will help both the new subdivision and adjacent areas of the village. Property tax values should increase due to these improvements. Certainly, equalized accessed value of new homes is much higher than old, wet farmland.
So, the outcome is not yet clear, but I would say the original intent and what has been accomplished so far is a good use of TIF. We will see whether in the end it turns out to be financially viable for all concerned. Thus far, one developer has gone by the wayside, but that is likely due to the downturn of the economy, not specifics of the project. Certainly it would appear Malta/Prairie Springs might be in better condition than many of the other unfinished projects around the county.