Wheaton Council Rejects $2.7M Funding Proposal for Downtown Apartment Complex

Wheaton City Council rejected a proposal to supply Morningside Equities Group with $2.7 million in Tax Increment Finance (TIF) funding for the construction of a 300-unit luxury apartment complex on Monday. Council will revisit the issue after city staff and Morningside rework an agreement for TIF funding for the development.

initially requested $2.3 million for assistance with several planned improvement projects, including 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. Rent for the apartment complex is expected to range between $1,000 and $2,300 per month, excluding utilities. The proposed site at 218 Wesley Street, a vacant, bank-owned property on a block bordered by Cross, Front, Scott and Wesley streets in downtown Wheaton, is within the boundaries of TIF District 2.

Without the TIF funding to support the development, Nancy Hill of Ehlers and Associates, the city’s financial adviser, said the developers would not be able to seek investors to help with construction due to a low rate of return. With TIF support though, the site could generate an annual return of 8.5 percent, or about $700,000.

Ehlers’ data speculated that Morningside could pay back the TIF funds within seven years following completion of the project and assuming full occupancy.  

While praising the construction project, council members unanimously objected to using TIF money for improvements they said were the responsibility of Morningside, not the city. Council members said light poles, public plazas and bike racks are not proper items for TIF funds. Council said TIF funds could be used to bury some overhanging electrical lines, if approved.   

However, upon the realization that nearly $1 million of the proposed TIF monies would be used to pay interest, council members objected.

Councilman Phil Suess balked at the notion of using TIF funds to pay interest rates on the project. He called it a “disproportionate and unreasonable” use of TIF funding.

“To incur 9.5 percent of interest costs for the city is not appropriate,” Seuss said. “For the TIF to incur such an expense is ridiculous.”

Councilwoman Ives echoed Seuss, saying TIF funds could be used for improving the city, not paying off interest.

“That is real money able to be used for something else by the city,” Ives said.

Mayor Michael Gresk said the city must be diligent in using TIF money for improvements that benefit the public as a whole. He said the money should be used for projects the city would normally undertake. Putting TIF money to use paying off interest debt is not in the best interest of the city, he said.

Councilman John Rutledge also challenged some of the numbers presented by Ehlers. He questioned the use of projected equity in prospective returns. He said the projections made no sense. He also reiterated a stance he took in November saying the city should not subsidize a developer that paid too much for land.

“I can’t support the taxpayers putting money in the developers pockets,” he said.

Following the debate on the appropriate use of TIF funds, council unanimously tasked city staff to examine uses of TIF funding for the project that fit the city’s established guidelines.

Gresk said the city still wants to see the development proceed, but staff and Morningside would need to work out better use of TIF funds.

In a related issue council unanimsouly approved rezoning the land for the development that despite passing the city zoning board, was one vote shy of to council.