Early architectural rendering of the project

   Reprising the “What do we have to lose?” mantra of previous project approvals, City Council on Monday approved a $4.1 million tax-revenue-sharing agreement for developer Robert King so that his mixed-use high-rise at 1890 Maple Ave. may 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.

   The vote was 5-4, with aldermen Cheryl Wollin, 1st Ward; Lionel Jean-Baptiste, 2nd Ward; Delores Holmes, 5th Ward; Elizabeth Tisdahl, 7th Ward; and Ann Rainey, 8th Ward; voting “yes,” and alderman Melissa Wynne, 3rd Ward; Steve Bernstein 4th Ward; Edmund Moran, 6th Ward; and Anjana Hansen, 9th Ward, voting “no.” The vote was closer than last week’s 5-2 vote at the Economic Development Committee.

   The package 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 – about the same amount as the cost of the land acquisition, according to material provided by Kane, McKenna.

   Robert Rychlicki of Kane, McKenna, the City’s long-time financial consultant, told the RoundTable he felt the City would be protected because it is performance-based and allows a recalibration.

   The sales tax sharing keeps the grocery store rent low, and the property tax rebate allows the developer to increase his rate of return by 2 or 3 percent, he said. The City can review the project after it has been substantially completed and before it commits any money, to determine if the City subsidy is needed to achieve these benchmarks, in light of then-existing market conditions Mr. Rychlicki said.

   He also said that because the agreement involves only the City’s share of the property tax revenue, the two school districts are not affected.

Property Tax Revenue Sharing

To obtain the property tax rebates, the developer must have at least 60 percent occupancy in the residential component of his development.

   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, 50 percent of any increase in the City’s share of property taxes generated by new construction 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 will receive their full portions of the property tax revenues. 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

   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 specialty 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. Kane, McKenna’s analysis projects that 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 Mr. Rychlicki 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 at the EDC meeting, 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. Wynne continued her opposition at the City Council meeting, saying the Council is “offering the developer assistance that other developers have not asked for and would not be permitted to have.”

   Ald. Moran said, “In this instance we have a developer who would appear to be avoiding these economic times. … I don’t think it is something the City should do.”

   Ald. Bernstein said he was uncertain about the property-tax sharing agreement and thus voted “no.” Ald. Hansen continued her opposition to the development.

   The aldermen who supported the proposal appeared willing to take what they said they felt was a minimal risk for a benefit for the City.

   Ald. Tisdahl said she was glad the school districts are “protected.”

   Ald. Rainey said, “The rebate occurs way down the road. … It’s a gamble we ought to take.”

   Ald. Holmes said, “What are we actually risking for the City?”

   Ald. Wollin said she “likes the Kane, McKenna recalibration. … If [the project] doesn’t get built, we have lost … nothing.”

   David Reifman, Mr. King’s attorney, said at the EDC meeting, “This is not a bailout – it’s economic development as it’s practiced every day.”

Mary Gavin

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...