Administration & Finance Committee

ADMINISTRATION & FINANCE COMMITTEE NORTHBROOK VILLAGE HALL, 1225 CEDAR LANE DECEMBER 17, 2013, 7:30 A.M., TERRACE ROOM The Administration & Finance Committee of the Village of Northbrook Board of Trustees will hold a meeting on Tuesday, December 17, 2013 at 7:30 a.m. in the Terrace Room of the Village Hall, 1225 Cedar Lane, Northbrook, Illinois. The following will be discussed. MEETING AGENDA 1. CALL TO ORDER 2. HEAR FROM THE AUDIENCE 3. DISCUSSION REGARDING TIF FINANCING REQUEST - NORTHSHORE 770 4. ADJOURN Michael Scolaro, Chair Administration/Finance Committee Members: Trustee Karagianis Trustee Ciesla Village of Northbrook Cook County, Illinois December 13, 2013 The Village of Northbrook is subject to the requirements of the Americans with Disabilities Act of 1990. Individuals with disabilities who plan to attend this meeting and who require certain accommodations in order to allow them to observe and/or participate in this meeting, or who have questions regarding the accessibility of this meeting or the facilities, are requested to contact Greg Van Dahm or Debbie Ford (664- 4014 or 4013respectively) promptly to allow the Village of Northbrook to make reasonable accommodations for those persons. Hearing impaired individuals may call the TDD number, 564-8645, for more information.  MEMORANDUM VILLAGE OF NORTHBROOK DEVELOPMENT AND PLANNING SERVICES DEPARTMENT TO: RICHARD A. NAHRSTADT, VILLAGE MANAGER FROM: DAVID SCHOON, ASSISTANT DIRECTOR DATE: DECEMBER 17, 2013 SUBJECT: NORTHSHORE 770 – TIF REQUEST On December 17, 2013, the Administration and Finance Committee is scheduled to further consider a request by Morningside Crossroads Partners, LLC (the “Applicant”) for tax increment financing (“TIF”) assistance in the amount of $4.9 million to help with TIF eligible costs associated with the retail component of the development. The Applicant is requesting that the $4.9 million be provided in the form of a “pay as you go” developer note at a taxable market interest rate to be secured by 100% of TIF increment generated by only the retail component of the development (attached is a letter from the Applicant). On May 30, 2013, the Administration and Finance Committee initially reviewed the Applicant’s TIF request. At that time, the Committee found that the potential public benefits of the Applicant’s project warranted further study. The further study would include the developer demonstrating that a reasonable return on the project can only be earned through the use of TIF financing (“but for test”). Additional information was also requested regarding the developer’s request to use 100% of the incremental property tax generated by only the retail component versus the current TIF District structure which provides that 50% of the incremental property tax from the entire district be made available for tax increment financing. This memo addresses both of these issues. UPDATE ON LAND USE APPLICATION In addition to the review of the TIF proposal, the Applicant has been proceeding through the Village’s zoning and subdivision relief process, which has included review by the Plan Commission, Architectural Control Commission, Industrial and Commercial Development Commission, and Bike Task Force. Current Conceptual Site Plan Page 1 On December 10, 2013, the Board reviewed the Commissions’ recommendations regarding the Applicant’s requested zoning and subdivision relief. After discussing the Applicant’s request, the Board of Trustees directed staff to prepare the documents approving a series of Zoning Code amendments to allow the project to move forward as well as other zoning and subdivision relief, including concept plan approval of the planned development as described as follows:  101,435 square feet of one-story commercial space, which would include: o a 71,320 square foot Mariano’s grocery store, o a 6,975 square foot retail space (Identified tenant to date: Kriser’s pet supply), and o 23,140 square feet in four outbuildings that could include a bank, restaurants, or retail space; three of the outbuildings include drive-through facilities. (Identified tenants to date: PNC Bank, Verizon, Panera Bread, Chipotle, and Zengeler Cleaners) Rendering of Proposed Mariano’s Building Design  8 & 9-story luxury apartment complex consisting of: o 347 luxury rental units on floors 2-9, consisting of:  146 1-bedroom units, average size 753 square feet  201 2-bedroom units, average size 1,127 square feet o Structured parking in the basement, first and second floors. o The complex would include a number of amenities such as an outdoor swimming pool, fitness center, theater with stadium seating, E-business center, and many other features including on-site management and leasing. Rendering of Current Apartment Building Design Page 2 The approval documents will be on a future Board agenda. Should the Board adopt the documents approving the concept plan for the mixed use development, the Applicant would then need to return for final plan approval at a later date. PROJECT GAP ANALYSIS The Village’s TIF consultant, Kane McKenna and Associates, Inc. (“KMA”), has performed a “gap” analysis of the Applicant’s commercial component of the project to determine if the use of TIF financing is needed to assist the developer with earning a reasonable rate of return on the commercial portion of the development (See enclosed document titled “Review of Morningside Crossroads Partners LLC TIF Request”). As was previously mentioned, the Applicant is at the concept plan approval stage for its development. At this time the Applicant has not secured its financing for the project, but has provided four letters of interest from several lenders. At this stage of the project, this is not uncommon. Project Rates of Return Based upon preliminary information, the Applicant has provided KMA with the assumptions used in the developer’s pro forma. KMA has concluded that $4.9 million in TIF financing does improve the project’s rates of return thus making the development more financially attractive for lenders and investors. The developer has represented a range of 20% to 25% as a target for the return on equity. Given that project’s characteristics, which includes a signed leased with Mariano’s, the projected return on equity is close to the developer’s target. The following table highlights the project's projected returns. 65/35 70/30 Debt to Equity Ratio Debt to Equity Ratio Return on Project Costs - Unleveraged Without TIF 8.32% 8.32% With TIF Note of $4.9M 9.98% 9.98% Return on Equity – Leveraged Without TIF 14.11% 15.44% With TIF Note of $4.9M 17.95% 19.77% The above returns assume a sale of the property in the tenth year and a 7% capitalization rate (the capitalization rate estimates property value by dividing the tenth year net income by 7%). The Applicant has not indicated any intent to sell the property. However, the eventual sale of the property is typically included as an assumption when calculating return rates. Given the preliminary stage of the project, development costs are still being refined and lender financing commitments have yet to be secured. Eligible TIF Expenses The developer is requesting TIF financing to assist with $4.9 million of TIF eligible expenses out of the potential of more than $11 million the Applicant has identified as TIF eligible expenses for the project. The table on the following page summarizes the Applicant’s list of TIF eligible expenses by breaking them down between site preparation costs associated with the retail portion of the development, roadway and intersection improvements, and other costs. Page 3  APPLICANT'S LIST OF TIF ELIGIBLE PROJECT COSTS PUBLIC ROADWAY & INTERSECTION IMPROVEMENTS (Does not include dual left turn lanes on Dundee Road) Hard Costs $ 1,683,000 - Excavation & Grading Demolition Note: Village Traffic - Site Utilities Consultant Estimates Total Roadway - Landscaping Improvements - Hard Surfaces – concrete, asphalt, & striping Including Dual Left - Traffic Signals & Street Lighting Turn Lanes to cost at - Landscaping least $3.9 million, - Contingency & General Contractor Fees including hard and Soft Costs $ 329,000 soft costs but - Engineering, Legal & Other Consulting Services excluding right-of-way - Permit Fees acquisition costs. - Public Bonds - Contingency & Developer Fee TOTAL PUBLIC ROADWAY & INTERSECTION IMPROVEMENTS $ 2,012,000 OTHER EXPENSES Gateway Feature $ 200,000 Zengeler Relocation Demolition, Environmental Remediation, Tenant Improvements, Etc. (excluding land acquisition) $ 758,000 TOTAL OTHER EXPENSES $ 958,000 SITE PREPARATION - RETAIL PORTION OF SITE Hard Costs $ 7,288,000 - Site Utilities ($2,345,000) - Excavation & Grading ($1,069,000) - Hard Surfaces & Striping ($1,597,000) - Landscaping & Irrigation ($760,000) - Site Lighting ($237,000) - Contingency & General Contractor Fees Soft Costs $ 1,028,000 - Engineering, Legal, & Other Consulting Services - Permit Fees - Public Bonds - Contingency & Developer Fee TOTAL SITE PREPARATION $ 8,316,000 TOTAL TIF ELIGIBLE EXPENSES $ 11,286,000 Page 4 The Applicant has planned to use TIF financing to fund roadway improvements as listed in Attachment A. The Applicant’s roadway and intersection improvement cost figures do not include the recently discussed possibility of providing dual left turn lanes on Dundee Road. The dual left turn lanes is a cost that the developer had not been anticipating, since staff just recently learned that IDOT is interested these turn lanes. The Village traffic consultant estimates that all of the proposed roadway improvements, including the Dundee Road dual left turn lanes, will be at least $3.9 million, which includes hard costs and softs cost but does not include the cost of acquiring additional right-of-way on the north side of Dundee Road, both east and west of the Subject Property. As the Committee considers the Applicant’s TIF request, the Committee will also want to consider whether the Dundee Road left turn lanes should be funded through the use of TIF financing, or programmed into the Village capital improvement program with more traditional funding. In addition, Committee members will want to consider whether any other eligible expenses are appropriate for TIF financing. As the Committee considers these matters, it is important to remember that all of the cost estimates are based upon concept plan documents. They are early estimates based upon preliminary designs and will change as the project is further refined and more detailed plan documents and construction documents are prepared. . TAX REVENUE AND IMPACT FEE PROJECTIONS Incremental Property Tax Revenue As previously stated the Applicant requests TIF financing to support the commercial portion in the form of a $4.9 million “pay as you go” TIF note bearing a market interest rate, which would be payable solely from 100% of the property tax increment generated from the commercial portion of the project. In the documentation provided to the Village’s TIF consultant, the Applicant has suggested a taxable market interest rate of 6.5%. The current TIF plan and enabling ordinances call for any TIF financing to be restricted to 50% of the property tax increment generated by all development (retail, office, residential, etc.) within the district. KMA has prepared the attached Revenue Forecast document. The following table summarizes the total amount of incremental property taxes that are projected to be generated by the development project over the remaining life of the TIF District as well as the net present value (NPV) of those future streams of incremental property taxes. As you will note, the table provides two sets of estimates. One based upon the Applicant’s assumptions and one based upon KMA’s assumptions. The differences in assumptions are noted in the footnotes at the bottom of the table. Page 5  Assumes Use of 100% of Incremental Property Taxes (2013 through 2030) Developer's Assumptions KMA Assumptions(3) Retail Residential Retail & Retail Residential Retail & Only(1) Only(2) Residential Only(1) Only(2) Residential Total Amount of Incremental Property Taxes Collected(2) (2013-2030) $ 10,482,000 $ 12,535,000 $ 23,017,000 $ 8,031,000 $ 11,238,000 $ 19,269,000 NPV @ 6.5% $ 5,943,000 $ 6,937,000 $ 12,880,000 $ 4,615,000 $ 6,285,000 $ 10,900,000 NPV @ 5.0% $ 6,710,000 $ 7,881,000 $ 14,591,000 $ 5,195,000 $ 7,123,000 $ 12,318,000 Assumes Use of Only 50% of Incremental Property Taxes (2013 through 2030) Developer's Assumptions KMA Assumptions(3) Residential Retail & Residential Retail & Retail Only Only(2) Residential Retail Only Only(2) Residential Total Amount of Incremental Property Taxes Collected(2) (2013-2030) $ 5,241,000 $ 6,267,500 $ 11,508,500 $ 4,015,500 $ 5,619,000 $ 9,634,500 NPV @ 6.5% $ 2,971,500 $ 3,468,500 $ 6,440,000 $ 2,307,500 $ 3,142,500 $ 5,450,000 NPV @ 5.0% $ 3,355,000 $ 3,940,500 $ 7,295,500 $ 2,597,500 $ 3,561,500 $ 6,159,000 (1) Developer requesting "pay as you go" TIF note at market rate of interest (6.5%) repayable solely from 100% retail increment. Those numbers are noted in red above. (2) Incremental property taxes and NPV of incremental property taxes after payment of school tuition costs reimbursements. (3) KMA assumes a lower initial market value for the retail development and a lower growth rate for market valuations than the Applicant assumed. Given that the Village would not be providing the TIF financing upfront to the Applicant, but making it available over time (“pay as you go”), the Applicant would borrow the $4.9 million for this project in the private market. In order to cover the interest costs associated with that loan, the developer has requested that a market interest rate be associated with the $4.9 million in TIF financing. Just like a residential mortgage, the interest rate and length of the loan affect the total cost. Assuming an interest rate of 6.5% as the developer has requested, it would take 15 years to pay off the note, and total principal and interest payments would be $7,818,840. As the tables above indicate, the tax increment on 100% of the retail portion is estimated to generate enough revenue for the Applicant’s $4.9 million request with interest of 6.5%. All four of the scenarios using 50% of the tax increment from the entire development are also estimated to generate enough revenue for the Applicant’s TIF request. It should be noted that in their pro forma for the development, the Applicant assumes interest rates of 5.0% and 5.5% for its long term private financing rather than 6.5%. Since these are only estimates at this time, the Committee will need to determine whether it is appropriate to recommend a specific interest rate, or if any approved TIF funding should be tied to the Applicant’s actual cost of financing. Page 6 School Tuition Cost Reimbursements. Should the residential component of the project remain within the TIF District, the TIF fund would be required to annually reimburse the elementary and high school districts for each student generated by the development, but not in an amount greater than 40% of the incremental property taxes generated by the residential component of the development. It is estimated that the maximum annual amount in the initial years would be approximately $500,000, and over the remaining life of the TIF District the total amount would be between $7.5 and $8.5 million. Impact Fees Currently through the Village’s development process, the school, park and library districts would collect impact fees from the development. Based upon the current 347-unit apartment complex, the developer would be required to pay the following one time impact fees associated with the residential component of the project: Estimated Residential Development Impact Fees District Impact Fee Amount Elementary School District $ 203,500 High School District $ 129,200 Northbrook Park District $ 1,603,400 Library District $ 64,300 TOTAL $ 2,000,400 Sales Tax Projections As a side note KMA has projected potential Village sales tax revenue generated from the commercial component of the project. Assuming that all of the commercial space is 100% occupied by sales tax generating uses, the development could annually generate between $600,000 and $740,000 in sales tax revenue for the Village in the initial year of the development. This would not necessarily be a net gain to the Village as we anticipate that some of the retail sales at the new development would come at the expense of some existing retailers and restaurateurs in the community. NECESSARY AMENDMENTS Given that the Applicant wishes to use TIF funds for only the commercial component of the project and have available for its use 100% of the incremental property taxes from only the commercial component of the project, amendments would be required to the TIF Plan and enabling ordinances. In addition, at the May meeting, the Committee also discussed the possibility of removing the residential portion of the development from the TIF District. The following table summarizes amendments that would be necessary to accommodate the developer’s request as well as to remove the residential portion from the project. Page 7  Potential TIF Plan & Ordinance Amendments If Residential Portion Removed from TIF District If Residential Portion Remains in TIF District  Amend legal description & amend map of  Amend various sections of the Plan (pages 10, project area to remove residential portion. 11, and 18) that contain language such as the  Amend to eliminate references to residential following found on page 10, so as to allow the development & limitations on residential density proposed by the Applicant: development “Tax increment generated within the RPA shall  Amend to add “relocation expenses”, if not be applied to redevelopment activities or Board wishes to reimburse for Zengeler project costs associated with projects that relocation expenses. consist of more than seventy-five (75)  Amend to remove declaring 50% of tax residential dwelling units consisting of no increment as “surplus funds”. greater than one third of the gross floor area within RPA”  Amend to add “relocation expenses”, if Board wish to reimburse Zengeler relocation expenses.  Amend to increase Overall Plan Budget Amount ($5M or approximately $5.6M in current dollars as allowed by TIF Act) to accommodate developer’s request of $4.9M and approximately $7.5 to $8.5M in school tuition cost reimbursement. (See Attachment B for a copy of the current budget)  Amend declaring 50% of tax increment as “surplus funds” by either eliminating this or changing the percentage. Amendments to the TIF Plan and enabling ordinances would require review of those proposed changes by the Joint Review Board (the “JRB”). These changes, and not the Applicant’s specific TIF request, would be the purview of the JRB. Given State Code requirements, the process of amending the TIF Plan and enabling ordinances can take three to four months. The first step in that process would be for the Village Board to adopt a TIF Public Hearing Resolution. It would be at the conclusion of that amendment process that the Village could agree in principle to a “term sheet” that establishes the general parameters of the TIF Financing and Redevelopment Agreement, which would come at a later date. SUMMARY The following are issues for the Committee to consider are: 1. Since the Village Board has determined that the Applicant’s zoning and subdivision relief is appropriate, does the Committee find that the potential public benefits of the Applicant’s proposed project support the use of TIF financing? If so, does the Applicant’s project warrant a $4.9 million in “pay as you go” developer note at a taxable market interest rate 6.5%? Page 8 2. Which of the Applicant’s identified TIF eligible project costs would the Village Board support using TIF funds? 3. Are there other public improvements, such as the addition of dual left turn lanes on Dundee Road that should be funded through the TIF financing mechanism? Or should those improvements be funded through other more traditional funding mechanisms available to the Village? 4. Given the potential net present value of future incremental property taxes from the proposed development and the Applicant’s request that TIF financing for the commercial component of the project come from 100% of the tax increment generated by the commercial component of the project, should the Village: a. Amend the TIF Plan and enabling ordinances to remove the residential component of the development from the TIF District and to make available 100% of the incremental property taxes generated by the commercial development available for TIF financing, or b. Leave in place the existing TIF funding mechanism that uses 50% of the incremental property taxes generated by the entire development, or c. Amend the TIF Plan and enabling ordinances to come up with a different TIF financing mechanism? 5. Is the Committee ready to make a recommendation to the full Board of Trustees and to begin the process of amending the TIF Plan and enabling ordinances? Page 9  ATTACHMENT A PUBLIC ROADWAY & INTERSECTION IMPROVEMENTS IDENTIFIED DURING PLAN COMMISSION PROCESS Roadway & Intersection Improvements. Contingent upon the Illinois Department of Transportation approval, the Applicant shall be responsible for constructing at minimum the following improvements to Skokie Boulevard and Dundee Road: 1. Skokie Boulevard, North of Dundee Road: a. Installation of a traffic signal at the main development entrance that is interconnected with the Dundee Road/Skokie Boulevard signal and the Henrici Drive/Skokie Boulevard signal. b. Removal of the Skokie Boulevard striped median and re-striping of the roadway between the Dundee Road/Skokie Boulevard intersection to the Henrici Drive/Skokie Boulevard intersection; c. Extension of the single southbound left turn lane at Dundee Road the maximum length possible; d. Installation of a northbound left turn lane at the main development drive; e. Extension of the southbound right turn lane at Dundee Road to the most southerly right- in/right-out development entrance; f. Installation of a two-way left turn lane north of main entrance drive to the Henrici Drive/Skokie Boulevard intersection; g. Installation of a southbound right turn lane at main development drive; h. Installation of a median at the north development drive to prohibit outbound left turns; and i. Installation of a median at the south development drive to prohibit inbound and outbound left turns. 2. Skokie Boulevard, South of Dundee Road: a. Extension of the northbound right turn lane the maximum length possible; and b. Extension of the northbound left turn lane the maximum length possible. 3. Skokie Boulevard-Dundee Road Signal & Pedestrian Improvements: a. Installation of new traffic signal equipment that accommodates right turn overlap signal phasing; and b. Improvements to existing crosswalks, sidewalks and safety islands to enhance pedestrian safety at the intersection 4. Dundee Road, West of Skokie Boulevard: a. Extension and provision of a painted single left turn lane from Skokie Boulevard to the westerly site driveway along Dundee Road. b. Installation of a painted single left turn lane accessing the westerly site driveway along Dundee Road. c. Installation of a third westbound through lane to at least the western boundary of the unused Union Pacific Right of Way, if not all the way to Midway Road. 5. Dundee Road, East of Skokie Boulevard a. Installation of a new westbound right turn lane, so as to be able to convert the existing right turn lane to a third through lane, so long as the right of way is available. Page 10  ATTACHMENT B DUNDEE ROAD/SKOKIE BOULEVARD REDEVELOPMENT PROJECT AREA ESTIMATED PROJECT COSTS Program Actions/Improvements (A) Estimated Project Costs (B) 1. Site Preparation, including Environmental Remediation (as $1,000,000 provided for in this Plan) 2. Public Improvements including, but not limited to, water, storm, $2,000,000 sanitary sewer, the service of parking facilities, and road improvements 3. Interest Costs Pursuant to the Act $500,000 4. Planning, Legal, Engineering, Administrative and Other $500,000 Professional Costs 5. Job Training $100,000 6. School Tuition Costs Pursuant to the Act $900,000 TOTAL ESTIMATED RPA COSTS $5,000,000* *The TIF Act allows the budget to be adjusted by a 5% factor and the CPI from the date of the designation of the TIF District to the current year. The TIF Plan budget is currently estimated to be approximately $5,688,778 in 2012 and would be updated pending final 2013 data. Page 11  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