Administration & Finance Committee

Approved MINUTES OF AN ADMINISTRATION AND FINANCE COMMITTEE MEETING VILLAGE OF NORTHBROOK COOK COUNTY, ILLINOIS May 30, 2013 Committee Members Present (3) Michael W. Scolaro, Chairperson Kathryn Ciesla James A. Karagianis Village Staff Present Philip A. Kiraly, Assistant Village Manager Richard A. Nahrstadt, Village Manager Tom Poupard, Director, Development and Planning Services Jeff Rowitz, Finance Director David Schoon, Assistant Director/Economic Development Coordinator Stacy J. Seiden, Recorder Additional Attendees Matt Castro, Morningside Crossroads Partners LLC Steven M. Elrod, Village Attorney, Holland & Knight LLP Sandra E. Frum, President, Village Board of Trustees Gregg Graines, DLA Piper LLP Katie Jahnke Dale, DLA Piper LLP Mark Kurensky, HKM Architects + Planners, Inc. Michael S. Laube, Laube Companies Michael E. Nortman, Morningside Crossroads Partners LLC Brian Pawlik, Morningside Crossroads Partners LLC David M. Strosberg, Morningside Crossroads Partners LLC 1. Call to Order Chairperson Scolaro called the meeting to order in the Terrace Room of Village Hall, 1225 Cedar Lane, at 7: 45 AM. A quorum was present. 2. Hear from the Audience There were no comments from the audience. 3. TIF Request - NorthShore 770 Assistant Director Schoon provided an overview of the Morningside Crossroads Partners, LLC request for tax increment financing (TIF) for its proposed development, NorthShore 770, at the corner of Skokie Boulevard and Dundee Road. Morningside Crossroads is requesting $4.9 million in TIF funding for “TIF eligible costs” in the form of a “pay-as-you-go” TIF note bearing a market rate of interest and which would be payable from 100% of the tax increment generated from the retail portion of the project. No portion of the tax increment generated by the residential component of the project would be used for TIF payments. Page 2 Administration and Finance Committee Meeting May 30, 2013 Assistant Director Schoon emphasized that this meeting serves as an initial discussion, in which committee members should decide whether the potential public benefits of the proposed NorthShore 770 project warranted further study of the relevant TIF request, understanding that: 1) the proposed development must undergo the necessary zoning entitlement process and 2) the developer must provide the Village with a detailed financial analysis demonstrating the need for TIF financing. Assistant Director Schoon reviewed the 2006 Village redevelopment plan and TIF ordinance, which expires in 2029, as well as a map of the relevant TIF district. The total TIF Plan budget was $5 million (approximately $6 million today) and called for mixed-use development. He explained that the TIF ordinance was unique in that only 50% of the increment went towards the TIF fund. The remaining 50%is declared surplus and distributed to other taxing districts. The base estimated assessed value of the district was $3.1 million. Assistant Director Schoon noted that the Morningside Crossroads request may necessitate amending the 2006 ordinance. Trustee Karagianis clarified that all taxing districts were eligible to receive the 50% of TIF revenue under the current TIF plan. Assistant Director Schoon reminded committee members that, for the Center of the Northshore project, the Board agreed to use $2 million of the increment for public roadway improvements and $150,000 for establishing the relevant TIF district. He also emphasized that each TIF request should be evaluated on its own merits. Village Attorney Elrod confirmed that most TIFs are structured such that the developer was reimbursed as TIF revenues were collected—pay-as-you-go. Assistant Director Schoon explained that a developer could potentially receive up to $5 million under the current TIF plan and more if that plan were to be amended. He also noted that the $2 million in public roadway improvements for the Center of the Northshore included installing and restriping turn lanes, as well as installing new and modifying existing traffic signals. Similar improvements were likely to be necessary for the NorthShore 770 project. Assistant Director Schoon recommended the following next steps to review the NorthShore 770 TIF request. Upon further study of the request and any necessary plan amendments, the committee would make its recommendation to the Board. The Board would then review the committee recommendation and request that the Joint Review Board be convened to review any proposed changes to the TIF Plan. Village Attorney Elrod clarified that should the Joint Review Board recommend disapproval of the proposed changes, a supermajority at the Village Board would be necessary to implement those changes. Assistant Director Schoon noted that the developer has requested that the TIF request and zoning review processes occur simultaneously. Mr. Nortman thanked the committee for inviting him and several of his colleagues, whom he introduced, to the meeting today. He described the recent Morningside Crossroads acquisition of the Zengeler Cleaners property. The cleaners will have a new facility, including a 24-hour drive-up service, as part of the NorthShore 770 project. Mr. Nortman reported no difficulty attracting retailers to the space, with approximately 75% leased to date. Mr. Nortman acknowledged the sensitive nature of the TIF request. He described himself as a Northbrook resident who successfully developed other properties in town. His goal with any project was to “leave the community in a better place.” Morningside Crossroads deliberately sized its request to meet a minimum rate of return and limited the request to under the approved $5 million mark. Mr. Nortman described the NorthShore 770 project as a Page 3 Administration and Finance Committee Meeting May 30, 2013 “unique opportunity” to develop the property as a whole and they have worked diligently to include Zengeler as part of the overall project. He appreciated the fairness of the TIF review process and maintained that his firm had the staying power to see the project through to its successful completion. Morningside Crossroads representatives began meeting a year ago with neighbors, including the Northbrook East Homeowners Association and surrounding businesses. According to Mr. Nortman, neighbors were generally excited about the project. Their only concern related to traffic. Mr. Kurensky reviewed the overall site layout, south and north landscapes, gateway corner feature, as well as several different site views. Mr. Kurensky also highlighted the urban architectural features, such as sidewalks, pedestrian lighting, benches, and bike racks, intended to humanize an otherwise heavy vehicular area. President Frum emphasized the importance of securing emergency easement for the site. Committee members requested to receive the slides shown during the meeting with more detailed financial information. According to Mr. Laube, the TIF request was designed to be as minimal as possible and even-handed in terms of cost-sharing. He projected that the sales tax generated by the site would repay the TIF assistance within approximately five to six years. President Frum confirmed that the residential lot was separate from the TIF request. Mr. Strosberg explained that the residences targeted empty nesters and young professionals with primarily one- and two-bedroom units. Chairperson Scolaro noted that school receptivity to the TIF request would partially depend on the projected number of students—approximately 35—from the residential component. Mr. Laube explained that, under the current TIF plan, 50% of the residential increment was for taxing districts and an additional 40% was carved out for school tuition costs. Assistant Director Schoon observed that “100% commercial” was not possible under the current TIF documents and that any changes to the plan would have corresponding implications. President Frum clarified that Morningside Crossroads was requesting a total of $4.9 million in TIF assistance payable solely from 100% of the tax increment generated from the retail portion of the project. Based on preliminary Morningside Crossroads figures, the total projected annual incremental property tax revenue from the development would be $1.88 million—two-thirds from residential and one-third from commercial. The committee focused on three potential funding mechanisms for the NorthShore 770 project: 1) 50% of the annual increment to the TIF Fund/50% surplus, 2) 100% to the TIF Fund/100% of the commercial increment to the developer/100% of residential increment to be determined by Village, and 3) removing the residential from the TIF district/100% of the commercial increment to the developer. Chairperson Scolaro perceived the second scenario as the least appealing. Other committee members concurred. Chairperson Scolaro also noted that he was “getting comfortable” that TIF was appropriate for the site and requested further investigation of options 1 and 3. Trustee Karagianis stressed that TIF payments should not be used toward the land acquisition of Zengeler. President Frum commented that including Zengeler benefitted the community and resulted in a better development. She also emphasized that TIF funds should not be used toward the land acquisition for the parcel being purchased from the bank. Trustee Ciesla stated that the traffic issue “absolutely needs to be addressed.” Page 4 Administration and Finance Committee Meeting May 30, 2013 Village Manager Nahrstadt sought clarification regarding staff direction. Accordingly, Trustee Ciesla moved, seconded by Trustee Karagianis, that Village staff study, with relevant consultants, Option 1 — 50% of the annual increment to the TIF Fund/50% surplus, Option 3 - removing residential from the TIF District/100% of the commercial increment to the developer, and other possible funding mechanisms for the $4.9 million NorthShore 770 TIF request and report back to the Administration and Finance Committee. On a voice vote, the motion unanimously carried. The next committee meeting will be determined at a future date. 4. Adjournment There being no further business, Trustee Karagianis moved, seconded by Trustee Ciesla, to adjourn the meeting. On a voice vote, the motion unanimously carried. Chairperson Scolaro adjourned the meeting at 8:40 AM. Respectfully submitted, /s/ Stacy J. Seiden Recorder