City Council members told developers Monday to continue with their plans to build an apartment complex on a vacant downtown property after hearing how the city would need to provide financial assistance for the project.
The developer, Morningside Equities Group, Inc., is the contract purchaser for 218 Wesley Street, a vacant, bank-owned property on a block bordered by Cross, Front, Scott and Wesley streets in downtown Wheaton. The developer has until Nov. 21 to perform due diligence to be sure it can, and will, purchase the property. Morningside plans to build a 300-unit apartment complex, but needed council assurance it can receive financial support through Tax Increment Financing (TIF) from the city before proceeding with the deal.
Representatives from the Chicago-based firm and architectural firm BKV Group presented plans for the development and financial needs to the council Monday.
Morningside attorney Scott Day told council the developer hopes to attain three commitments from the city. They are: $2.3 million through the TIF to assist with “hard costs” for public improvements; support in its negotiations with the park district and DuPage County to reduce impact fees; and a commitment to reimburse the $2.3 million if the city realizes the projected tax increments by the end of the TIF in 2021.
$2.3 million needed for public improvements
Mary Ellen Martin, Morningside senior development manager, said that the public improvement items the requested $2.3 million would afford include: utility relocation and improvements, site amenities such as light poles, benches, trash, recycling receptacles and bike racks, public plazas with fountain features and seating, a detention and lift station required because of the depth of Wheaton’s sewers, environmental remediation, design, construction and management.
David Strosberg, Morningside founder and president, said that to provide the quality of the public improvements, the development itself cannot support the costs for items such as underground wires, fountains, public benches and the detention and lift station.
“We can’t afford to do that as a private development," Strosberg said. "These are improvements we believe are completely appropriate for use in the TIF.”
Support for negotiating impact fees
Day explained that Wheaton city ordinances provide that as developers move into Wheaton, they make contributions to the school district, park district and pay a transportation impact fee to DuPage County.
With around two-thirds of an acre of outdoor space in the development’s courtyard and additional public improvements on its adjacent streetscape, Morningside will attempt to reduce, or get a waiver for, its park site donations, Day said. Martin said the park district contributions are expected to be $336,000.
Morningside would also face the county’s transportation impact fee because of the development’s proximity to Naperville Road, a county road. They are asking for nothing related to the school district impact fees.
Day explained Morningside’s proposal to underwrite the risk of the development by investing its own money on the front end of the project.
Historically, Day said, government entities commit to providing economic assistance early into a project and if the tax increment does not increase as projected, the risk is on the city.
Only when and if the city sees the projected revenue would Morningside be forgiven the $2.3 million it invested, Day said.
Morningside projects annual revenues to the city of around $1.5 million to more than $2 million between 2014 and 2021, Martin said. Morningside would break ground on the property in 2012 and the complex would reach a stable occupancy in 2014, said Martin. Revenues for 2012-2014 would be low in comparison to the growth projected for 2014-2021.
Martin explained the Morningside revenue projection includes utility tax revenues, gross downtown business sales—with the assumption of each tenant spending $200 downtown per month—and projected annual property tax increment revenues.
Morningside projected an annual property tax increment of around $600,000 in 2014, which rises each year to more than $900,000 in 2021. The City of Wheaton hired its own consultant, Ehlers, to do its own the tax-increment projection through 2021. Ehlers predicted an increment of less than $600,000 in 2014, which rises each year to almost $800,000 in 2021, according to Martin.
Morningside and Ehlers also projected a cumulative property tax increment. Morningside projected a cumulative increment of more than $6 million. Ehlers projected more than $5 million.
Wheaton City Manager Don Rose said that Ehlers has begun an analysis to determine the city’s potential return on the investment in the project, which will help staff determine Morningside’s needs. He added that $2.3 million is an estimated figure that doesn’t account for all of the details of public improvements Morningside would make.
“They have not had the detailed engineering done, they haven’t gotten into the real nitty-gritty of developing the plans," Rose told council. "I wouldn’t necessarily concentrate on that number.”
Rose added that whether the city realizes an increment of more than $5 million, as projected by Ehlers, or an increment of more than $6 million, as projected by Morningside, “It’s safe to say there’s going to be a significant increment created by this project.”
Council supports development at 218 Wesley Street
Councilman John Rutledge said he would like to see development on the property. However, he said that if the project can’t happen without financial assistance, “That says that the land is priced too high. … It tells me you’re asking taxpayers to subsidize the seller’s of the land and I personally don’t have any interest in doing that."
Councilwoman Jeanne Ives said that she would be OK with funding some of the public improvements, but not all of them.
Councilman Phil Suess said he would support moving ahead with the project and thanked Morningside for its interest in Wheaton. “I think it (the project) has significant benefit to the community and I think we would be more than willing to work with you in offsetting the public development costs to facilitate the development,” he said.
Mayor Mike Gresk said he supports Morningside’s plans, and that the proposed public improvements are necessary. “The list of things we would be subsidizing with TIF money are things we probably want to do anyway.”
Despite the public funding, he added, “In this day and age to have a project of this scope and quality come to our community is a definite long-term benefit.”
Morningside has until Nov. 21 to determine its plans for the project and finalize the sale.