Finances, Development Discussed at Annual TIF Meeting

There's a tremendous retail market both within and outside of the village limits, Village Administrator Bob Vitas told the Tax Increment Financing (TIF) Joint Review Board Wednesday. With $341 million in spending power in Lake Zurich — and $327 million within a five-minute drive — it's just a matter of capturing some of that market, Vitas said.

"The goal is not to pirate our neighbors," Vitas said. Instead, consultants told village officials, the idea is to tap into what's potentially available right here in town. "(Business Districts, Inc.) said there's a number of highly-entrepreneurial people living in Lake Zurich who would be willing to invest in the downtown if the circumstances were right."

Vitas provided the TIF Joint Review Board an update on the downtown TIF district. He gave an overview of the financial status of the TIF, and shared consultants' insights. The village is working with three consultants — Teska Associates, Inc., Business Districts, Inc., and Kane, McKenna & Associates, Inc. — to formulate a new plan for the TIF district. .

Vitas said consultants also suggested the village consider multifamily units like luxury apartments that would generate additional foot traffic. That, in turn, would generate additional small retailers, entertainment venues and restaurants, Vitas said. He added that village officials are set to meet this week with a large developer that is interested in building a luxury apartment development.

"That's a real plus, because right now there's not a lot of people knocking down the door to get in," said Vitas.

In his overview of the financial status of the TIF, Vitas explained that the TIF started and ended the year with a $12.7 million balance. He anticipates the TIF receiving $1.5 million in incremental revenues this year. The financial projections are based on no new growth within the TIF.

"There is nothing in the pipeline that is sitting there today," said Vitas. The TIF debt is due in 2014. At the 2010 TIF Joint Review Board meeting, it was revealed that $40 million to $50 million in investment, new building and businesses was needed within the TIF in order for the incremental revenue to increase enough to pay for the debt service and operation costs of the TIF. For example, $50 million dollars of improvements would generate about $1 million dollars annual of additional incremental revenue.

Eighteen months from now, Vitas said, "there's going to be a financial problem that we're going to need to deal with." In order to pay off the debt, there must be enough incremental revenue, he added. Vitas presented the TIF Joint Review Board with four scenarios to tackle this problem, including: decrease student payments by 50 percent to , separate properties with a negative TIF increment equalized assessed valuation into a separate tax code and decrease net operating and maintenance costs by 50 percent; or extend the life of the TIF by 12 years, decrease student payments by 50 percent from 2013-28, and refinance Series 2005A bonds in 2015.

The latter scenario, Vitas said, would result in a positive balance in the TIF fund for the life of the TIF, even with no additional development.

At this point, Vitas said the village needs to see about $70 million in growth to make all of this go away.

"That's significant," he said. Vitas suggested the village run different scenarios to see what happens.

He said the consultants' report will be brought back to the village board for approval this month or in early December.