Early rendering of the proposed project

   Reprising the “What do we have to lose?” mantra of previous project approvals, the City’s Economic Development Committee voted to recommend a $4 million sales tax and property tax sharing package for developer Robert King of Carroll properties that, Mr. King said, will allow his project at 1890 Maple Ave. to go forward. This would allow the developer to earn a “13.86 percent return on investment on an unleveraged basis,” according to a memo prepared by Kane, McKenna, the City’s long-time financial consultant. City Council may vote on the matter tonight, April 27.

   The vote was 5-2, with aldermen Lionel Jean-Baptiste, 2nd Ward; Elizabeth Tisdahl, 7th Ward; and Ann Rainey, 8th Ward; and EDC members Seth Freeman and Raymond Zenkich voting “yes,” and Alderman Melissa Wynne, 3rd Ward, and EDC member Robert Creamer voting “no.”

   The package – which has yet to be approved by City Council – entails about 20 years of property tax revenue sharing between the City and the developer and about 15 years of rebating the City’s 1 percent home-rule sales tax to the developer. It represents a subsidy of about 7 percent of the developer’s costs, according to material provided by Kane, McKenna.

   Robert Rychlicki of Kane, McKenna told the RoundTable he felt the City would be protected because it retained the right to “recalibrate” the amount of assistance, and because the assistance is “performance-based.” In other words, the City can review the project after it has been substantially completed before it commits money, Mr. Rychlicki said. In addition, should, for example, the liquor tax revenues be less than projected, the City would be able to decrease the amount of sales tax revenues to be shared with the developer.

   The EDC bifurcated the assistance package, with conditions for each part. Because the assistance is dependent upon taxes generated by the project, the package is termed “pay-as-you-go.”

Property Tax Revenue Sharing

   To obtain the property tax assistance, the developer must have at least 60 percent occupancy in the residential component. The City would create a “base” property valuation for the

1890 Maple Ave.

parcel – possibly the 2007 valuation – and would share annually with the developer up to 50 percent of the City’s portion of the property tax increment generated there.    

   In other words, up to 50 percent of any increase in the City’s share of property taxes due to construction of the new building would be paid to the developer over perhaps the next 20 years. The amount would be capped at $1.9 million.

   Kane, McKenna prepared two sets of projections of tax revenues. With “lower-range” assumptions, the City’s cumulative property taxes over about 20 years would be $2.6 million, of which the City would keep half, or about $1.3 million. The remaining half would be paid to the developer.

   Using “upper range” assumptions, Kane, McKenna projected $3.8 million in the City’s share of property taxes over 20 years, with the City keeping about $1.9 million and the developer receiving the other $1.9 million.

   The school districts and other taxing bodies would not be affected; they would receive their full portions of the property tax revenues, according to the proposals. Under Kane, McKenna’s “lower-range” assumptions, District 65 would receive $5.2 million and District 202, $3.6 million over the 20-year period. Under the “upper-range” assumptions, District 65 would receive $7.5 million and District 202 $5.2 million over the same number of years.

Sales-Tax-Revenue Sharing

   Under the proposal, to obtain the sales tax assistance, the developer must lease at least 12,000 square feet of the retail space to a specialty grocery store and “demonstrate an operating grocery store.”

   The assistance would essentially provide about an $11/square foot subsidy for the developer if the grocery store tenant did not pay the asking market price. The rebate would come only from the 1 percent home-rule sales tax and would not be applied to liquor sales. The City would be allowed to keep all tax revenues from liquor sales under the proposal.

   Kane, McKenna’s analysis projects that the over a 15-year period, the developer would receive about $2.1 million in sales tax revenues and the City, $878,000. Liquor tax revenues, kept by the City, are projected to be about $2.1 million over the same period, according to the Kane, McKenna projections.

Kane, McKenna Analysis

   A memo by Robert Rychlicki of Kane, McKenna entitled “1890 Maple Redevelopment Proposal – Preliminary Public Assistance/Financial Review” lists the developers’ reasons for the request as “significant increases in construction costs due to unanticipated site conditions” and “more stringent lender underwriting criteria [that] have made it difficult to obtain senior construction debt financing without increased coverage ratios.”

   Mr. Rychlicki’s memo also said the developer indicated that its rate of return without City assistance would be below market rates. He said the developer anticipates a rate of return of 10.85 percent without City assistance and 13.86 percent with City assistance, on an unleveraged basis.

   Mr. King, who attended the April 23 EDC meeting with his lawyer, David Reifman, said, “City assistance will help get the [construction] loan. … This is a $60 million project. I own the property and I’m committed to the project.”

   The developer says the benefits to the City will be approximately $375,000 in building permit fees and the creation of “approximately 230 construction job opportunities,” as well as the completed project on a parcel that now generates about $19,000 in annual property tax revenues.


    “Bailout, bailout, bailout,” said Ald. Wynne, saying she did “not know where to start with the negatives. This is a terrible precedent to set, from a policy standpoint. This project isn’t going forward because the economy is bad right now. The idea that we would twist ourselves into a pretzel here to promote some kind of assistance is absurd. This is like every other project in Evanston – it is stalled.”

    Ald. Jean-Baptiste said, “The whole country is in a bailout mode now. The Council has said, ‘Yes, we want this project.’ Property-tax sharing outside of the TIF is new.”

   Ald. Wynne asked, “What is the extraordinary benefit to the community?”

Ald. Jean-Baptiste said, “[The building] has been vacant. What I heard [Mr. Rychlicki] say is ‘But for City assistance, the development cannot proceed.’”

   Ald. Rainey said, “I’ll tell you a negative about not going forward. … This property generates $19,000 in property taxes. Going forward we have an opportunity to generate some property taxes for schools.”

   Ald. Tisdahl said she wanted to ensure that “if things become rosy and the rates come down, we can recalibrate” the amount of assistance.

   Attorney Mr. Reifman told the EDC members, “This is not a bailout – it’s economic development as it’s practiced every day.”

   City Council recently extended the start-time of the project to 2013. The present Council may vote on a redevelopment agreement incorporating these terms, rather than leaving it to the new Council, which will be sworn in on May 11.

Mary Gavin is the founder of the Evanston RoundTable. After 23 years as its publisher and manager, she helped transition the RoundTable to nonprofit status in 2021. She continues to write, edit, mentor...