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Evanston’s Economic Development Committee voted Wednesday to recommend spending $2.9 million in tax increment financing funds to have a floor of offices included in the planned Chicago-Main development.

Developer John O’Donnell told the committee that the $45.8 million project can’t be financed without the city aid.

City staff estimates the total cost of the 13,400 square foot floor of offices in the nine-story buiding at $4.1 million and claims the offices would provide a public benefit to the neighborhood by increasing daytime traffic to local businesses.

That cost analysis is based on dividing the total cost of the project by the proportion devoted to offices. But a different analysis suggests that the incremental cost of adding the office space to the building is roughly the same as the subsidy being provided by the city.

City officials have tried for several years now to encourage more office development at the site on the southeast corner of the Chicago Avenue and Main Street intersection, after losing office space there when the aging two-story building that formerly occupied the property was torn down to make way for condo project that never got off the ground.

O’Donnell, who originally acquired the site with plans to build a single-story CVS drugstore there, spent more than a year, at the request of the city, trying to line up tenants for an all-office development on the property.

But that effort failed amid concerns about whether the Chicago-Main neighborhood would be attractive for businesses looking for office space.

Meanwhile, the AMLI development, a block to the south and outside the TIF district, was constructed with mostly rental apartments but 18,300 square feet of live-work office units and no city subsidy akin to the one proposed for the Chicago-Main site.

While the regular apartments at AMLI filled much more quickly than the office units, most of the live-work units now have found tenants.

City Manager Wally Bobkiewicz told the committee he’s been very involved in the effort to bring offices to the site from the beginning.

It’s a very unusual location, Bobkiewicz said. “Only a handfull of places in the metro area have both CTA and Metra stations, and more people want to come to work in Evanston because of the transportation options. It’s a wonderful opportunity to do something lasting for the community.”

Alderman Ann Rainey.

O’Donnell said that if he didn’t get the city aid for the office space on the second floor of the building, he would revise the project to move parking that is now planned to be underground onto that floor to reduce costs and stay withing the 97-foot height limit for the site.

Alderman Ann Rainey, 8th Ward, apparently looking for a solution that would involve less city subsidy, asked whether, if he were allowed to build taller, whether he’d do that.

O’Donnell said he’d have to think about that. But Alderman Melissa Wynne, whose 3rd Ward includes the site, said she wouldn’t support any additional height — and “the community” wouldn’t support it either.

To that, Rainey said, “You need to educate your community — height is not as bad as you think it is.”

Five of the seven aldermen on the committee voted in favor of the city aid for the project.

Alderman Judy Fiske, 1st Ward was absent from the meeting. Only Alderman Coleen Burrus, 9th Ward, voted against the measure — saying she wouldn’t support the TIF aid because she hadn’t supported creating the TIF in the first place.

“This isn’t a blighted area,” Burrus said, “so it shouldn’t be a TIF,” adding that she believed it would be very challenging to get the office space leased.

The plan still requires approval of the full City Council, but with five of the nine aldermen already on record supporting it, it appears likely to win that approval.

Bill Smith is the editor and publisher of Evanston Now.

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17 Comments

  1. How deep will they go ?

    The Council seems to think they can keep taking all the money out of the pockets of taxpayers.

    Pretty soon even the 'spend all you can' residents will start to feel the pinch.  Soon they may even come to see the Council needs to be replaced ASAP.  If only recalls were not so expensive !

    If it is not affordable to build without a Council gift [however they put it, it is still a gift], that settles it—it should not be built as planned. Go back to the drawing board—not the taxpayers.

  2. TIF Relief Compounds Education Funding Issues

    Evanston's continued focus on providing tax benefits to new property developments has a detrimental impact on our schools.  How?  Our new property coming on the tax rolls has dwindled and not because of the recession but now due to the fact that most of new development comes with it tax breaks.  This means that the schools that we tout as great draws to our communities aren't receiving the funding levels needed to maintain that excellence and compounds the huge statewide reductions in education funding.  Business brings revenue but so does a community with thriving schools.  Blight is one thing but this is not that.

    1. School funding and TIFs

      YES!!  Instead of all showing up to school board meetings when they have to decide if they should cut social workers or music, we should all show up to oppose TIFs.  Or at least demand the evidence that they (eventually) produce revenue (which I believe is pretty hard to show).  But of course between the PTA, the school board, our jobs, the kids' practices, tutors, etc., we can;t get to it all.  Btu we'd do much better figuring out how to increase (or at least not reduce) tax revenue.  If this is sucha  GREAT place for offices, let them come!  and pay their taxes.

    2. TIFs do not cause the schools

      TIFs do not cause the schools or any other taxing body to get less dollars. If a school district asks for a property tax budget of $ 100 and there are 10 taxpayers with equal value property, each taxpayer will pay $ 10 to the school district. If one taxpayer receives a 100 % tax break on property taxes, the remaining 9 will each pay $ 11.11. The district gets its money.

      It works the same way when 1 out of 10 equally assessed taxpayers gets a lower assessment on their property value, from 10 taxable dollars to $ 9. The remaining 9 taxpayerswill split that dollar and and pay $10.11.

      Anyway a taxing body, city government, school districts, county government, e,g,, will always get the $$$s they budget for, within the framework of the law. You, your neighbors, and others in your taxing district, will pay your share based on the assessed value of your property.

      1. TIFs can limit near-term increases in school revenue

        Hi Skip,

        The school districts in Evanston are limited by state tax cap laws to raising their total tax levy each year by no more than the rate of change in the consumer price index after adjusting for any change in the total equalized assessed valuation of property in the district.

        TIFs capture the revenue from any increase in assessed valuation of property within the TIFs boundaries for the life of the TIF and exclude that increase from the calculation used to determine how much the schools can levy.

        So, assuming there is an increase in the value of property within a new TIF, the schools will have to wait 23 years to get the benefit.

        However, the rationale for doing the TIF anyway is that — but for the TIF — there wouldn't have been new development in the area and therefore there wouldn't have been any increase in property values for any taxing body to capture.

        There's a lengthy discussion of tax caps, TIFs and other factors in setting school tax rates on the Illinois Association of School Board's website.

         — Bill

        1. True, but…

          Bill, all very true, but there should be mention that here in Evanston, the city has worked closely with the district and distributions are made to both districts from our TIFs before they expire.

          While there is no mandate obligating such distributions, because our TIFs have done well, the school districts do receive some of that benefit, early and often.  

          TIFs represent responsible long term thinking and planning. Lets ask the school districts their opinion on the soon to expire Washington Nationals TIFs effects on EAV, what that will mean to them, and whether that long term planning provides any benefit.  Pretty safe bet on what that answer would be. 

  3. Why?

    Does the City Council continue to finance projects that the developers say they cannot make work without help?  If they cannot make a business case why should I finance them?

  4. Rainey is not pro-Evanston she is pro-business

    To that, Rainey said, "You need to educate your community — height is not as bad as you think it is."

    If I wanted to live in the city then I would.  Height is a bad thing when you want to live a  community with beautiful views of trees, parks and the lake.  The higher you go the more urban we become.  I am tired of hearing we need the tax revenue but never see an impact on my bill.  I say make this a park for the community to cherish instead of an eye sore that we have to give tax relief for.  Tired of throwing our tax money around and seeing no true benefit.

    1. knowledgeable & pro evanston

      There is, without doubt, very positive impact on your tax bill, maybe you just don't understand how. 

      These developments expand the tax base, when the city decides it wants to spend XXX millions of dollars, you get taxed to cover that spend.  And your tax bill is, very simply put, nowhere near as high as it would be without development.   

      All this development basically contributes millions upon millions of dollars in tax revenue annually, if they didn't exist you would have to make up that differential of millions every year, your taxes would increase well beyond the current level.  That is, unless spending was drastically slashed across the board for all schools, parks & programs.

      Spending is a completely different question, if council decides to keep spending more dollars every year, then that increase can surpass developments contribution.  But that doesn't mean development didn't contribute very real and significant benefit. 

      You shouldn't confuse those two very separate issues or the effects of each upon your tax bills. 

      1. You make an excellent case

        You make an excellent case for selling the mansion to Pritzker so that she can build a hotel on the lake that will generate a minimum of $500,000 per year in tax to the city while at the same time increasing citizen access to Lighthouse Beach by increasing parking.

        The people who object to the hotel are the same people who approved of the city spending a $2 million parking lot for Trader Joe's exclusive use for 75 years.

        1. Agree and disagree

          Agree with you on Pritzker proposal, not so much on Trader Joe.  We, the city, purchase and now own that land, and in effect have now simply leased that land out.

          So it cost us $2 million to buy, but you must look at that investment on a total return basis.  Simplified, what did we collect from the blockbuster building, which went vacant and would probably have had taxes lowered even further? 

          What do we now collect on the Trader Joe building?  How much is that difference?  Simply put, multiply that out over 75 years, subtract $2 million = net. We will see that $2 million back in a couple short years, still own the land, and continue collecting many, many multiples of that $2 million over time. 

          Also add to that figure, increased sales taxes and liquor taxes, none of which were collected before, plus the benefit of what I will guess to be around 75 local jobs.  

          IMO, the city would have been complete fools to not develop those parcels as they did.

          1. But how long wil it really last ?

            When you calculate value gained from taxes, you assume a building or firm will last that long.

            Probably everyone though Dominicks would be around forever.  Will one or more of Jewel, Trader Joes or Whole Foods on Chicago be put out of business by competition ? Then what happens to the investment.

            Once in a while even the Council gets lucky—much less than they or some taxpayers think—but the proof will be in the [far] future if they survive, make a profit that enables loans to be paid off and 'gifts' being equal to what they make to pay taxes, hire, enhance the community [a phrase the Council likes to use for a vague "general good" that cannot be tested or assigned a real value—in other words "trust" us], and not off set by pushing other businesses out [of business].  e.g. if Trade Joes survives but Jewel and/or Whole Foods closes, does the $2 million actually benefit the taxpayers or shoppers ? No..

          2. plenty long enough

            I understand your point, you want to quantify the risk.  IMO, TJ was an extremely low risk proposal with excellent, large, long term benefits to the taxpayer. 

            That underlying land is a hard asset of value and TJ is a very credit worthy tenant, low cash out of pocket (2MM likely financed), immediate postive cash flow, very high, long term returns, makes a solid investment with excellent risk/reward ratio.   

            The differential in r.e. taxes, plus sales and liquor taxes, basically means our risk doesn't extend out but a few years.  TJ will be in business longer than 3-4 years, pretty high probability of that, so in essense we will quickly collect back our investment and reap greater return while retaining immediate cash flow.

            If Jewel or WF goes out, as we see with the Dominicks, someone else will come in. Plus TJ must continue to pay their r.e. taxes whether they are open or not.  I doubt TJ is so stupid as to lose their property in a tax sale.   

            Both Jewel & WF sites are high value locations, new owners would take over, or, maybe even better yet, complete new mixed use redevelopment could follow, creating an even higher EAV and tax base than what sits there now. 

            Again, IMO, this was a simple slam dunk, the City would have been irresponsible financial fools not to have done what they did. I support their efforts on that project, very well done.

          3. parking lot

            If I remember correctly, the city leased the parking lot to TJs for a one time payment of 50k for 75 years. If TJs lasts 75 years, which I doubt, the city will get use of their land back.

            The city tied up the land for a long time with little return.

            Jewel and Whole Food will both be around longer than TJs. TJs is closer to being like a 7 – 11 than a modern day grocery.

          4. little return?

            For little return?  

            Whether TJ is there or not, whether Jewel or WF comes or goes is basically irrelevant.  That you think TJ amounts to nothing more than a 7-11 is simple personal opinion, one that is refuted daily by the very large number of TJ customers who obviously don't share your sentiment.

            I guess you really don't get the overall picture.  You think 2MM in exchange for ownership of a hard asset, which enables creation of annual cash flow that will virtually equal the original investment, each & every year, is a bad project?  IMO, talk about penny wise and pound foolish with no understanding beyond the immediate end of nose type of thinking.  

            But truly, I'm no expert, I guess I don't understand economic development as much as I thought. Educate me on the specifics of how you could have delivered greater, more stable returns to the taxpayer, while also creating more jobs, and in as timely a fashion, remove the vacant blight.

            Plus, TJ was expressed as highly desired by the community, so I assume you will also deliver something even more desired in your end use.  I thought the city did damn fine work, how would you do better?      

             

        2. Cost of state taking over the mansion

          I assume the state will not pay real estate taxes.  The hotel or private business would.

          Will the state want money from the city to fix the place—we all read how expensive that will be or other subsidies?

          Will the state hire Evanston residents only? Otherwise tax dollars from everyone [including Evanston taxpayers] are going out of the city—with the location I doubt if even restaurants would get income from it. The mansion would pay taxes and wages would flow back to the city.

          If Chicago wants a tax/fee on non-Chicago residents working in the city, maybe Evanston should tax Chicago residents working in Evanston—I assume there are a lot of them.

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