Trustee Concerns Halt Vote On New Downtown TIF Consultant

Since Lake Zurich established the tax increment financing district in 2002, past and present Village Board have been unable to find the right developer to revamp the downtown area.

With that history in mind, village officials are now pushing for a new plan and approach to achieve a successful downtown redevelopment project.

At the June 20 Village Board meeting, Teska Associates was presented by administration as the final choice for a TIF consultant after months of vetting potential firms for the job.

The decision was tabled, however, due to lack of a majority vote. Questions were raised about the timing and necessity of hiring another consultant.

“We should be making sure this process makes sense, and the requirements and deliverables are clear before we move forward,” said Trustee Jeff Halen. “What is different than what we’ve already been doing?”

“We are going to give you truths, hard facts and information to help you select appropriate developers for the redevelopment project, and we will show you the right fit for your community; that exists out there,” said Lee Brown, president of Teska Associates.

The history of attempts to bring the downtown area back to life dates to 10 years. In 2002, the TIF district was established to provide incentive for retail business and residential projects to locate or be built in the downtown area.

SB Friedman and Associates was hired as the TIF consultant in 2004, and by 2008, a couple of developers had come and gone with no concrete progress, according to Al Zochowski, finance director.

The third developer, McCaffery Interests Inc., began construction of the Somerset development at Lakeview Place and Main Street in 2006. When the economy took a downturn, McCaffery had sold just more than half of the 19 units but then ran out
of funding to complete the project.

“Genuine concerns started in the summer of 2007, which became real problems resulting in litigation from the Somerset; that led to the settlement by the village with Bank of America and McCaffery Interests Inc.,” said Village Administrator Bob Vitas.

Then, developer Equity Services Group came along in 2008. SB Friedman had remained the TIF consultant, but was relieved of its services when Vitas and Zochowski began working for the village by 2009.

No consultant for the TIF district has been hired since, said Zochowski.

After nearly three years, ESG ultimately was unable to come up with financing for the project and its contract was terminated on Jan. 1 this year. 

Since then, village administration has been working to identify a consultant for the TIF district. That consultant ultimately will assist in locating multiple developers for the project.

The first step the consultant must take is to understand where the TIF stands financially and what its fiscal obligations are moving forward.

“The village takes in roughly $1.5 million a year in incremental value from property located in the TIF district,” said Zochowski.

Zochowski added the village pays $600,000 a year to the school district resulting from 61 students living in the TIF district; the payment averages close to $10,000 per child.

The village pays $1 million a year in restructured debt payments, but in 2014 those payments will increase to $2.5 million, Zochowski said.

“During Phase 1, Teska would be looking at how debt service is due and determine what type of restructuring needs to be done in the future,” said Vitas. “We need a clear understanding of the impact on Lake Zurich, the TIF and its financing as we move forward.”

Vitas went on to say that in addition to looking at the TIF finances, the consultant would also assess the $14 million in property previously purchased by the village and how it could be used to benefit the TIF district.

The time frame for consulting work by Teska was projected to be four months and the cost not to exceed $32,825.

“I’m struggling with the duplication that is being requested by this process,” said Halen.  

Halen went on to say that the village has already spent hundreds of thousands of dollars in past attempts at redeveloping the downtown area, and without a developer yet, information provided may be outdated by the time one or more are identified.  

“There needs to be a recognition based on the economy over the last three or more years, that in order to select the right developer you need contemporary data to make an informed decision,” said Brown. “We want to look into the future the best we can to give you the greatest opportunities.”

The second component of Phase 1 will be the Community Gap Analysis, which Vitas said will give a clear picture of what is possible today in regards to potential developments considering the economy.

“This vote will start a true heading and we hope will lead to more than one developer to work in Lake Zurich and start multiple projects so the TIF will be self-funding and not affect the property tax levy of the village in the future,” Vitas said.

When it came time to vote on the issue, Mayor Suzanne Branding abstained, declaring a conflict of interest because her home and business are located in the TIF district.

Trustees Dana Rzeznik and Mark Ernst were absent and excused so that left four trustees to vote on whether to hire Teska Associates for TIF consulting services.

Regular agenda items require a majority of the full board, which is four votes. Trustees Rich Sustich, Tom Poyton and Jonathan Sprawka voted yes, but Halen voted against hiring Teska Associates.   

The motion then was tabled and is expected to be reintroduced at the July 5 meeting.