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7/26/2017 5:58:00 PM
Council Approves $2 Million Subsidy For Chicago-Howard Development
By Shawn Jones


 At its July 24 meeting, City Council voted to approve a nearly $2 million forgivable loan to a developer for a 24-unit mixed use development along the stretch of Chicago Avenue just north of Howard Street. The vote came after a request for a $1 million subsidy to be paid out of the City’s Affordable Housing Fund was pulled from the proposal. That funding would have enabled the developer to add four units of “affordable” housing above and beyond the five required by the City’s Inclusionary Housing Ordinance. 

Funding for the City’s loan will come from money the City obtains by issuing bonds, which would be paid down by property-tax revenues anticipated to be received by the Howard Street TIF. Increased property taxes on the proposed project – once completed – would provide the bulk of the money to pay down the bonds, but would not be sufficient. Added tax increment from the 415 Howard building would be used to pay the off the bonds as well. 

Plans for the project call for a garden center retail shop on the first floor, with garden space on the grounds south of the building, and parking in a lot the City currently owns but will sell to the developer. The garden center concept is being billed as “the nation’s first education-based organic garden and lifestyle center.” Per materials presented to Council, the developer will be asking the City for additional subsidies of $400,000, made up of a $300,000 construction grant and $100,000 in sales tax rebates, to construct the garden center, which will be known as “City Grange.”

 The Project’s Evolution

The project first appeared before the City’s Economic Development Committee on June 27. At that time, the developer sought about $1.74 million in forgivable loan funds, but also sought $1 million in affordable housing funds, a $500,000 grant from the City’s economic development fund, and a purchase price for a City parking lot of $1.00. By the time it reached the Administration and Public Works (AP&W) Committee, which met just before City Council’s meeting on July 24, things had changed. 

“We went back to the drawing board,” said David Brown, president of Harrington Brown, LLC, the company making the request for funding. The plan addressed a couple of issues’ raised by the Economic Development Committee. He said the
initial request for $800,000 in economic development funds, reduced to $500,000 later, had been eliminated completely. 

A request to purchase the City’s parking lot for $1 had been changed to a purchase price set by an appraisal at $240,000. The developer proposed that the purchase price be offset in part by a grant from the City of $110,000 for environmental remediation necessary on the site, a former gas station. 

The other asks remained or increased. The request for a forgivable loan from the City increased from $1.74 million to $1.96 million. The request for $1 million from the City’s affordable housing fund to include an additional four affordable housing units remained. 

Mr. Brown said the garden center would employ up to 10 “at-risk youth and veterans” as well as ex-offenders. With the $1 million affordable housing grant, a total of 9 of the 24 proposed units would be affordable, he said, or “nearly 40%.” The project proposed that all affordable units fit within the 80% of area median income (AMI) definition of affordable, meaning a one-bedroom with a market rent of between $1,880 and $1,930, depending on the floor-plan, would rent for $1,185; a two-bedroom unit with market rent between $2,194 and $2,252 would go for $1,422. 

According to EvanstonTs inclusionary housing ordinance, half of the affordable units are actually required to be affordable to residents at the 60% of AMI level, or 50% if the project qualifies as a sTransit oriented development.T 

All in all, concluded Mr. Brown, the proposal before the City’s AP&W Committee and City Council sought “more than $500,000 less in the overall request” for City subsidy.

Concerns About the Grant from the Affordable Housing Fund 

“Are you still looking for 38% of this project to be funded by the City of Evanston?” asked Alderman Tom Suffredin, 6th Ward, speaking during the AP&W meeting. 

“We were asked to consider using $1 million from the CityWs affordable housing funds to provide more affordable housing, replied Mr. Brown. He urged the Committee to view the affordable housing contribution as a benefit to the City included at the request of City staff.  We donWt think itts accurate to view that as a subsidy,s he said. 

Alderman Ann Rainey, 8th Ward, spoke at length in support of the project, saying the affordable housing money would come from a $2.4 million contribution from the developer of the 831 Emerson project.  ThereTs going to be $1.4 million left over,s she said. 

 This is the best deal youTre ever going to get on this or any other corner in Evanston,r said Ald. Rainey.  LetLs show this City we mean what we say about affordable housing. You can mix it up. Affordable housing is just like regular housing.s 

“You are everything that we are looking for,” said Alderman Robin Rue Simmons, 5th Ward. “Somehow we complicated it by requiring four additional units” of affordable housing. “It’s a brilliant plan… but it seems unfair to put your schedule in our lap to make a decision.”

The developer cited a need to make a decision on purchasing the property before Aug. 1. Ald. Rue Simmons said, though, City Council has not yet established a strategic plan for addressing affordable housing; and it would be unfair to other residents who provide affordable housing to award $1 million to this developer.  

She asked for an analysis showing where the greatest need for affordable housing was in the City, by income, location, size of unit or family and other metrics. 

“My concerns are that [Council] talked earlier about what to do with our affordable housing fund,” said Alderman Cecily Fleming, 9th Ward, but has not reached any conclusions yet. She said she would be “more inclined to support this if not for the $12 million affordable housing contribution.”

 With the affordable housing component being the main issue at the AP&W Committee meeting, the Committee voted to send the matter to full Council by a 4-1 vote. Ald. Suffredin was the “no” vote.

 Pulling Out the $1 Million for Affordable Housing at Council

At Council, sensing the affordable housing component was the sticking point, it was removed. Ald. Rainey cited “a great deal of controversy and concern over the use of $1 million of affordable housing funding,” and she proposed Aa massive amendmenta removing  all references to the $1 milliona and leaving the rest of the proposal the same. 

Mr. Brown declared himself “surprised by some of the twists and turns of the discussion” saying, “We thought” including $1 million of public funding for four additional 80% AMI affordable units  would be very much welcomed. That was not the case… If it makes more sense, in a very odd way to me personally, to delete that from the proposal  then so be it, he said. 

“I agree with Ald. Rainey, this project is magnificent,” said Ald. Rue Simmons. “I don’t think to question our commitment to affordable housing is the right response.” The City has families, the disabled, and many other categories of residents to think about when addressing affordable housing, not just those few who would benefit from the three one-bedroom and one two-bedroom units that would be provided by the $1 million grant, she said. 

Alderman Don Wilson, 4th Ward, questioned the project s economics. sIt looked like your projected return was about 5% with an incentive target [including Evanston subsidies] of 12%,I he said. 

 We did not get there,W said Mr. Brown. 

With the incentives, the return reached 10.9%, said Ald. Wilson, according to the pro forma provided by Mr. Brown. “Did you rough out your return without the other incentive [$1 million in affordable housing funds]?” asked Ald. Wilson.

“We did not, in the last 45 minutes [between the AP%W Committee meeting and Council meeting]. This might turn me into a not-for-profit,W said Mr. Brown. 

 You are confident you can deliver this project?Y asked Mayor Steve Hagerty. The other major project undertaken by Harrington Brown, the Montrose Green project at the Montrose Brown Line station in Chicago, has been in the works since at least March 2012, and is still not complete. 

Mr. Brown said he was confident, but “these are all subject to financing” which is more challenging for “mission-based real estate development projects. We ll have to get creative.l 

Council voted, 6-2, to adopt a resolution approving the $2 million loan, with Alds. Wilson and Suffredin voting “no.”

The proposed sale of the parking must be done by ordinance, and Council’s rules require that a proposed ordinance be read at two separate meetings, and the rules may be suspended only by unanimous consent. Ald. Rainey asked the “no voters” on the loan to agree to suspend the rules so Council could adopt an ordinance to sell the parking lot at the July 24 meeting. Ald. Wilson agreed, but Ald. Suffredin did not.

Council thus voted 7-1 to introduce an ordinance approving the sale of the parking lot to the developer. Council will likely take up the issue again at its next meeting.

Ald. Rainey noted earlier in the meeting, the project is a long time from a “shovel entering the ground,” likely about 18 months. The proposal now heads to the Plan Commission and through zoning review, and then returns to Council’s Planning and Development Committee before returning to full Council.

 







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