Public hearing presentation dempster dodge proposed tif 5.14.12

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Proposed Dempster/DodgeTax Increment Financing (TIF)

District

City of EvanstonPublic Hearing

May 14, 2012

TIF is a hyperlocal economic development tool - the value created is recycled directly back into the district

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TIF will give City and the property owner the ability to:

1. Attract strong quality retailers;

2. Minor property renovations / build out; and

3. Provide improvements to the public infrastructure and right of way

Improving Economic Climate and Change of Ownership

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The center has suffered in recent years from deferred maintenance and high vacancies resulting from a number of factors:

• economic downturn,

• the previous owner’s bankruptcy and the long receivership

• general restructuring of national retailers including consolidations, format downsizing, bankruptcies.

• Local competitive pressures from Downtown Evanston, Old Orchard, Lincolnwood Town Center, Howard Hartrey, and Main Street Commons

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“Stand Alone” TIF District –Addresses the Current Market RealityAllows for focused revitalization efforts

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• Not included in West Evanston TIF – designated (2005) / amended (2007) because the assessed valuation of the property was too high;

•Current value “base” is at a level where redevelopment can be expected to generate tax increment;

•Keeping TIF separate allows for targeted redevelopment / revitalization at Evanston Plaza

• “Protects” increment in West Evanston TIF for designated projects within that TIF – very distinct needs.

Short Term Goal –Limited Upgrades/Space Reconfiguration/Attract Quality Tenants

(Requires Minimal TIF Investment)

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1. Help reposition Evanston Plaza - improve occupancy levels, with “step above” quality tenants

2. Neighborhood Commercial Redevelopment and Revitalization

3. Increased tax revenues from the property (both sales and property taxes).

Longer Term –Prepare for the Unknown Retail World Changes Rapidly(potentially greater TIF Investment required)

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Allow increment to accumulate in preparation for the next major change in retail.

Longer term use of TIF could be used for:

1. Site preparation2. Rehabilitation of structures3. Job training4. Construction of public improvements

TIF assistance is at discretion of City Council

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Upon TIF designation:

1. Negotiate redevelopment agreement with developer that will yield the highest number of quality tenants with limited expenditures on physical improvements

2. Determine level of public infrastructure improvements in public spaces / right of way.

3. Proposed budget is based on projected increment collected over 23 year life of TIF district and is intended as framework for potential funding.

4. If the city and property owner decide to move forward with a redevelopment agreement to use a portion of the TIF budget, it will go through the public process and requires city council approval

Proposed Dempster/Dodge TIF Staff Contact InformationAvailable to discuss tenant ideas, answer questions, etc.

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Paul Zalmezak City of Evanston

Economic Development Division847.448.8013

pzalmezak@cityofevanston.org

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Overview

I. Background on Proposed TIF District / Plan for Dempster/Dodge Corridor

II. Factors Qualifying Area as a TIF District

III. Key Elements of TIF Plan

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• The Dempster/Dodge TIF Area – Tightly “focused” TIF– One project/one developer/one tax parcel

• Strategic Importance – Important space for western Evanston

• Ongoing viability of major user (Dominick’s) important for western Evanston residents

– Dempster major arterial road– Based on location and traffic counts, has potential for success

• Has faced chronic vacancies past decade – Despite location and strategic importance

I. Background

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The TIF Plan complies with key legal provisions of the TIF Act, including but not limited to:– TIF Plan conforms to the City’s

Comprehensive Plan– Area consists of contiguous parcels –

exceeds 1 ½ acres– “But-for” requirement is met - Redevelopment

is feasible only with the utilization of tax increment financing• As documented in the TIF Qualification Report

(Appendix V of the TIF Plan)• As represented by the developer

I. Background

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I. Background

SpecificTIF

Objectives,Strategies &

Measures

General Economic Development

Goals

Comprehensive Land Use Goals

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• City has considered alternative economic development tools, with only limited success

• The City has considered, in succession:– Financial tools other than TIF (sales tax

sharing)– Ongoing monitoring of owner proposals

and/or new tenant potentials– Now considering TIF

I. Background

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I. Background

Review of TIF Financing

TIF involves splitting property tax revenue generated from properties within the TIF District into two components or “buckets”:

Bucket for Base Revenues – For All Local Governments

Bucket for Incremental Revenues – For Redevelopment within TIF

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I. BackgroundReview of TIF Financing- Ideally, a successful TIF produces positive incremental revenue over time

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I. BackgroundReview of TIF Financing- In practice, a successful TIF faces certain challenges in seeking to generate positive increment

TIF Performance Adjusted for Project-Related Risks

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Base EAV Total EAV - Adjusted for Market Factors

Delay in Project Absorption

Reduction in Growth

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• The proposed TIF District is found to qualify under the following criteria:– Improved property - As a “blighted-improved

area”, based upon the findings that:• A combination of 5 or more of the 13 factors set

forth in the TIF Act are present in the area

II. Qualification Factors

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Improved Property – Conservation Area Findings Underlined

II. Qualification Factors

1) Dilapidation

2) Obsolescence

3) Deterioration

4) Presence of Structures Below Code

5) Illegal Uses

6) Excessive Vacancies

7) Lack of Ventilation and Sanitary Facilities

8) Inadequate Utilities

9) Excessive Land Coverage

10) Deleterious Layout

11) Environmental Clean-up

12) Lack of Community Planning

13) Lagging EAV

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Obsolescence

II. Qualification Factors

The area is economically and functionally obsolete– Economically, obsolescence is

manifested by the EAV stagnation + declining market values + vacant storefronts

When one part of the City stagnates, such as this area, this shifts the tax burden onto other parts of City

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Excessive Vacancies

II. Qualification Factors

• The area has had numerous vacancies– Situation has deteriorated in past 3 years

• Larger-scale vacancies occurring as well

– 52% vacancy as of January 2012– Vacancy levels well in excess of

normal “churn”

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Vacancies

II. Qualification Factors

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Vacancies

II. Qualification Factors

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Vacancies

II. Qualification Factors

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Vacancies

II. Qualification Factors

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Vacancies

II. Qualification Factors

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Deleterious Layout

II. Qualification Factors

• Per the TIF Act, deleterious layout evidenced by inadequate ingress/egress, limited buffering vs residential areas, and other indicators

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Environmental Clean-up

II. Qualification Factors

• Per the TIF Act, there are a certain environmental problems that have required remediation/clean-up expenditures

• Previously a contaminated area was:– Remediated with an “engineered barrier” put in place– Barrier limits re-use of portions of the site

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Inadequate Utilities

II. Qualification Factors

• Utilities are over 100 years old and use obsolete materials• E.g., combined sewers use outmoded

materials prone to breakage/outage such as cast iron (modern materials include PVC and ductile iron)

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Lagging EAV

II. Qualification Factors

• Equalized Assessed Valuation (EAV) of the proposed TIF District has lagged behind the balance of the City’s EAV – Four of the last five years

• TIF Act requires a minimum finding for three of the last five years

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Lagging EAV

II. Qualification Factors

  2010 2009 2008 2007* 2006 2005

Total EAV for TIF District

10,816,879 10,712,129 14,148,341 13,508,513 13,346,272 13,493,788

EAV Change (%)

1.0% -24.3% 4.7% 1.2% -1.1%

 City-wide EAV (Excluding TIF)

3,031,067,208 3,295,277,240 2,924,249,551 2,758,831,516 2,232,546,474 2,229,259,234

City EAV Change (%)

-8.0%

12.7%6.0% 23.6% 0.1%  

CPI

1.6%

-0.4%

3.8%

2.8%3.2%  

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• Base EAV: $10,816,879 (2010 EAV)• Projected EAV: Upon completion of redevelopment

and “re-tenanting,” approximately $30,000,000 to $35,000,000

• Proposed TIF Budget: $20,000,000 (see next slide)– The TIF Budget is:

• A maximum amount which does not obligate the City to expend such amounts

• Sized to accommodate potential development requirements• 23 year budget, not annual budget

• Proposed Land Uses: Retail, commercial, institutional, and residential uses

• Key “but for” finding – redevelopment will not go forward without the TIF assistance

III. Key Elements of TIF Plan

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 Program Actions/Improvements Estimated Costs

Land Acquisition, Assembly, and Relocation $500,000

Site Preparation, Including Environmental Remediation, Demolition, and Site Grading $4,000,000

Utility Improvements (Including Water, Storm, Sanitary Sewer, Service of Public Facilities, and Road Improvements)

$3,000,000

Rehabilitation of Existing Structures; Taxing District Capital Improvements $4,750,000

Public Facilities (including Parking Facilities and Streetscaping) $4,000,000

Interest Costs Pursuant to the Act $1,250,000

Professional Service Costs (Including Planning, Legal, Engineering, Administrative, Annual Reporting, and Marketing)

$1,250,000

Job Training $1,000,000

Statutory School and Library District Payments $250,000

TOTAL ESTIMATED TIF BUDGET $20,000,000

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• Budget Guidelines– Overall budget cannot be exceeded– Line-items in budget are flexible – Covers 23 years; hence difficult to estimate with

precision– Budget expenditures subject to:

• City approvals• Determination of appropriateness of costs• Special TIF audit • Review by JRB annually

III. Key Elements of TIF Plan

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Next Steps

• Clerk will continue to receive written comments on the TIF Plan

• TIF ordinances may be introduced 14 to 90 days after the Public Hearing– Subject to additional review/approval by City

Council – Two open meetings with opportunity for

additional public comment