Property Tax Break For Bakery's Expansion Recommended By Staff

EVANSTON, IL — City staff recommend granting the owners of a local bakery a property tax incentive to encourage them not to move out of Evanston. If they receive the reduction, they plan to invest almost $730,000 in renovations to a 92-year-old building on Central Street and add six new jobs over the next 18 months. Without the tax break, they "will have to identify an alternative location in another community," according to a staff memo.

Ellen King, director of baking operations, and Julie Matthei, director of business operations, founded Hewn Bakery in 2013 at 810 Dempster St. with a focus on hand-made baked goods. They began with five employees and 1,200 square feet, expanded a 2,400-square-foot space in 2016 and now have a staff of 25.

According to a July 22 memo to the mayor and City Council from Community Development Director Johanna Leonard and Economic Development Manager Paul Zalmezak, the bakery has outgrown the Dempster Street space and begun looking for a new location.

"Staff has worked closely with Hewn ownership over the last two years to retain the bakery in Evanston," the memo said. "Hewn recently identified a space in Chicago that fit space needs, but could not negotiate a financially feasible deal. Because of Hewn's history with Evanston, and knowing that Evanston is overall receptive to granting incentives, they ultimately decided to keep their expansion local and support the community that allowed them to first open their doors."

Hewn wants to move into a 6,000-square-foot property at 1731 Central St. that has been vacant since June 2018. It was last occupied by subprime auto lender Honor Finance and is owned by an entity managed by the company's co-founders, James Collins and Robert DiMeo.

The owners have the building listed with an asking price of nearly $900,000, but it was not clear how much Hewn would have to pay for it and to what extent taxpayers would be subsidizing Collins and DiMeo by allowing them to sell the property for more than it would be worth without such a property tax incentive.

The bakery hopes to use the building as a manufacturing hub, which will allow it to open two or three additional Cook County locations, according to the staff memo. But the building needs a lot of work, including a new roof, repairs to water damage, tuckpointing and more. Renovations would convert most of the property to a manufacturing facility while keeping a retail area for customers.

"[Hewn's ownership] also plans to create a viewable production area for citizens to walk by and observe artisan bread and pastry production," said Christopher Zarek, an attorney for the bakery, in a July 25 letter to City Manager Wally Bobkiewicz. "Hewn wants the public to be able to witness authentic, old world baking while going about their daily lives."

Without approval of the tax incentive, the bakery's owners do not "believe it will be financially feasible to substantially remodel [1731 Central St.] because of [Cook] County's high tax burden," the attorney said. "Therefore, [Hewn] will be forced to look to expand its business in a county with a lower tax burden, or a community in Cook County who offers a Class 6b Tax Incentive."

The Cook County 6b tax incentive program is designed to encourage industrial development, the rehabilitation of existing industrial buildings and the reuse of abandoned buildings — defined as those that have had at least 24 months of continuous vacancy.

The 12-year incentive program cuts the assessed value of the commercial property for taxing purposes from 25 percent to 10 percent of its estimated market value for the first decade. The assessment increases to 15 percent in the 11th year and 20 percent in the 12th year of the program.

According to speculative estimates, if the property remains empty, it will generate less than $62,300 in total property tax revenue, with less than $10,400 of that going to Evanston.

If the incentive is granted and the bakery spends about $729,000 to improve the building, the property will generate an estimated $563,711 in total property taxes, with about $93,500 going to Evanston.

If the incentive was denied — or after it expires — and the property were to be fully occupied with the same amount in renovations, it would generate more than $1.25 million in property taxes, with Evanston receiving nearly $208,000. But, as the bakery's representatives made clear, they have no interest in buying the property without the incentive being granted.

In order to be eligible for the Cook County incentive, a building must be used primary for industrial purposes. It must be either new, substantially rehabilitated or a substantially re-occupied abandoned property, and the municipal governing authority for wherever the site is located must approve a statement finding the incentive "necessary for development to occur" on the site, according to the Cook County Assessor's Office.

"There exists a need to aid in financing the cost of economic development projects in order to encourage an increase in commerce and industry within [Evanston], thereby reducing unemployment and providing for the increased welfare and prosperity of the residents," according to a draft City Council resolution endorsing the incentive.

"[Hewn Bakery] has documented that such incentive provided for in said ordinance is necessary for renovation of an existing building to occur [at 1729-1733 Central St.], " it said.