Your view of the Fountain Square tower project may depend a lot on your time horizon.
The Evanston Coalition for Responsible Development spent 20 minutes Monday telling aldermen the 49-story tower would be a bad economic idea for the city.
The coalition’s John Kennedy, using an 11-year time horizon, calculated that the city would come out over $900,000 ahead in tax and parking revenue if it sticks with the existing two-story 708 Church St. building.
But that time frame only includes four years after the new building’s scheduled completion.
If the coalition’s own numbers were extended out another decade, they would show a net gain for the city from building the tower of roughly $3 million, and more gains the further out one looks.
And in developing its figures the coalition assumed:
- None of the office tenants in the existing building will relocate in Evanston
- Retailers in the existing building are generating $300 per square foot in annual sales, as much as it assumes retailers in the new building would generate.
- Residents of the new tower will spend only $75 to $125 a year per person on groceries.
The coalition also fails to account for real estate transfer tax revenue to the city from the initial purchase of the building by the developer, and the ultimate purchase of the condominiums in the new building. That amount is likely to be in the neighborhood of $500,000.
Beyond the tax argument, aldermen heard a range of other issues raised about the tower.
Oliver Gould of 1730 Hinman Ave. said he feared financing for the tower would fall through after the developers had torn down the existing building and the city would be left with a hole in the ground or a half-finished hulk.
But developer Tim Anderson told the aldermen that the existing building would not be torn down until financing to complete the full project was secured.
Nicholas Dunkas, a psychiatrist who said he’s practiced in Evanston for 40 years asked, “Where am I going to go if this building is demolished? What happens to my patients?”
Al Hunter of 1040 Elmwood Ave., a former plan commission member, said he agrees with the minority report from the commission that opposed the tower project. The development “is out of proportion,” Hunter said.
But Greg Hummel of 2240 Central Park said he favors the development, calling it an economic engine for the revitalization of downtown. “Capturing the demand for housing of those moving from single family homes to a more urban setting is a valid economic development strategy,” Hummel said.
Retired architect John Macsai of 1501 Hinman Ave. said tall buildings almost always initially arouse opposition. He called the planned building handsome and said it would help continue downtown Evanston’s development as a lively place to live and work.
Nice job. Thorough and even handed as usual.
Looking forward to the City’s analysis of the above report.
What’s seven years when you are rolling in revenue
It appears that the time value of money is no longer relevant when an “iconic” development is being considered. During that period of time the city will either have to cut services, and/or staff — or raise taxes!
The schools can limp along knowing that seven years from now, there will be a pot of gold at the end of the rainbow (which will of course arch across the Tower).
As we pay our increasing property taxes and fees, being nickled and dimed, we can be comforted that in seven years we will be awash in revenue.
Gee, that was simple. Maybe these whiz kids can solve the mortgage fiasco…
BTW Ron, most of us are mere mere citizens who happen to care about how this city is being driven to ruin by all these financial geniuses.
Extending the timeline to 2029
First off, my analysis presented on Monday night looked at the revenue to the city coffers. As such, it is appropriate that the monies channeled to the TIF be taken out of the equation. If one is going to do a thorough analysis of the TIF, one needs to start with a complete understanding of where the TIF currently stands with regard to its expected payments to redeem the bonds. Then one needs to factor in the loss of the cars coming into downtown to visit the 2nd floor professionals. That is 256 to 362 cars per day bringing in somewhere between $234,000 and $327,000 per year.
But what is key is that we used a concept called Net Present Value to assess the impact of this proposal. In a sense, the city and the community is investing in this proposal to bring good things to the community. Extending the NPV to 2029 does in fact tip the scale to the proposal with $5,771,000 for existing and $6,379,000 for the Tower. A 9.5% difference – if the Tower is built on time and provides all revenues. That is a big IF.
However, going back to our original analysis of funds flowing into the city government for general funds (something we desperately need), taking out the monies that would be going to the TIF again leads to the result that the city would be better off with the current building. ($5,771,000 compared to $4,744,000). This is an -18% impact on future fund flows.
First, let me say that I think you and the other folks who worked on the research deserve a lot of credit for the effort put into the project. I can tell it required a lot of work.
But I believe your exclusion of revenue to the TIF from the calculation is ridiculous. In fact, one might better argue, since the city captures 100 percent of TIF property tax revenue versus only 20 percent of non-TIF tax revenue, that the benefit to the city during the TIF term should be multiplied by five instead of reduced to zero as you claim.
You also assert that the tower project is risky, but assume that there is no risk to maintaining the status quo. The overall market is dynamic. What happens to your income projections for 708 Church if — just to mention one possibility — the two office buildings now occupied by the Methodist Pension Board are sold after the board moves to Glenview in 2010 and the new owners start luring office tenants from 708 Church to those properties?
Calculating net present value is a useful exercise, but it will not yield a credible result when the underlying assumptions used to develop the yearly figures are incorrect.
Are you planning to make any revisions to your calculations?
Correction – grocery’s per year for new residents.
The quoted figure of $75 to $125 a year per person in the lead story is wrong. It is $75 – $125 / person per WEEK – or $20,400 to $$47,700 per year. We used the high figure in our estimate of impact which included dining out 3 times a week on average.
Please recheck your math
Nope, the figure in my story is what you actually used. You multiplied the per person per week figure by the number of units and residents per unit in the building but forgot to multiply by the number of weeks in the year.
The total grocery bill for the tower per year should be between $1,062,750 and $2,479,750 … not the $20,438 to $47,688 range you used.
You are correct
You are correct, however, it really does not change the main analysis. We used $18,000 for the spending per unit in EV. If you average the high and low range of the analysis you are speaking of, the average is $21,000/unit. If you take the difference of $3K times the units = $654,000 / year, with the cities share being 1.75%, that adds only $11,445 per year to the total the city receives, or a correction of 1.3%.
But again, these are just assumptions. The $18,000 figure came from the assumptions on the NPV sheet. We worked backward from the average price per unit which is $717,000 and assumed that to be 3 times the income of the owners, which is what most people use for figuring out how much of a house they can afford. That came to a household income of $239,000. Given that discretionary spending in this bracket is about 30% ($71,700), we then figured that 25% of that was spent in EV or $17,925. The auxiliary analysis were you caught the error, was just a check to see if we were in the ball park.
Mild Opposition to
I was a 25 year resident of Evanston and executive of a major hotel that opened there years ago. I am currently looking at spending 5-6 months of each year back in my hometown and the other half in southern California. I am carefully weighing the options now with the looming prospect of “the high-rise” in downtown Evanston.
I work in L.A. but I live in Dana Point (on the ocean in the same way Evanston is on the lake). I live here because I love the quaint ambience, the proximity to where I want to go (car, train, metro) in L.A. or San Diego. If you want to see what happens when the high-rises start, I urge you to look at Santa Ana vs. Dana Point. What increases is crime (higher police and enforcement of laws), parking needs, trash…to name but 3. And folks who WORK there WILL want to LIVE in the area. The illegal immigration factor will exist with those who work for the janitorial company. (They certainly were a part of the hotel’s staff “back in the day”. We had a few “raids”.) Then a few people will want fast food so they eat their lunches… Can McDonald’s and BK Your Way be far behind? Keep Evanston’s character and charm, PLEASE! I may have to wait and see, or buy my condo up the road in Wilmette or go to Highland Park. Maybe some of your committee can take a trip to other cities that are similar and who have added a high-rise or two to their cityscape. I’m open to take ’em on a tour! ;-D
A Mild Counter Dana Point
Dear Lucy: I am delighted that you are interested in residing in Evanston once again. I have had occasion to visit Dana Point and it is indeed a beautiful place. If however, you are looking for Evanston to be (or want to be) a Dana Point, I suggest you look further up the North Shore — althought the surfing anywhere on Lake Michigan will not equal the Orange County coast.
With respect to your beliefs about “what happens when the high-rises start”; high rises have been in Evanston for over 35 years, the first being at 1603 Orrington Ave. Second, serious crime is down significantly in Evanston from the 1970s and 1980s, paralleling the trends in many urban U.S. centers. Third, Evanston indeed has more residents than ever before who both live and work here (almost 40% of our residents also work in Evanston) and that is something we are very proud of. These residents are inextricably bound to Evanston financially, socially, politically, and emotionally because they are “24-hour” residents.
Although, I have no empirical evidence, my common sense would tell me that there may actually be an inverse relationship between more high rises in Evanston and our decreasing crime rate and less residents commuting for their employment.
I haven’t surveyed our janitorial companies in Evanston but I do know quite a few janitors who work in our office buildlings, who happen to come from other countries, and they seem like mighty fine people, as well as good janitors.
With regard to the “illegal immigration factor” that you cite, it is hard to imagine that an “illegal” immigrant would want to come to Evanston because we have an increasing number of high rise buildings. Most studies suggest immigrants (“illegal” and “legal”) are drawn to this country because:
they have family that are already here
there are better economic and educational opportunities
they face religious and political persecution in the country they currently reside in
As an aside, my family came to this country for all three of the above reasons.
If the hotel in which you were an executive “had a few raids” than I suppose one might conclude that either: your employer hired illegal immigrants and may have broken federal law, or did not hire illegal immigrants and broke no laws but was inspected by federal authorities.
Finally, Evanstonians have been able to purchase a Whopper or Big Mac in their hometown for three generations.
Again, thank you for your interest in Evanston.
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