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Downtown DeKalb development projects need approval before districts expire

Published: Thursday, March 16, 2017 11:38 p.m. CDT • Updated: Thursday, March 16, 2017 11:50 p.m. CDT
(Matthew Apgar – mapgar@shawmedia.com)
Vehicles pass through the intersection of Lincoln Highway and First Street on Thursday, where the old Otto's building is located in DeKalb. The building is going to be demolished to make way for residential suites and commercial space.
(Matthew Apgar – mapgar@shawmedia.com)
Vehicles pass through the intersection of Lincoln Highway and First Streets, where the old Otto's building is located,on Thursday, March 16, 2017 in DeKalb. The building is going to be demolished to make way for residential suites and commercial space.

DeKALB – With two downtown revitalization projects requiring tax increment financing dollars totaling $3.4 million being approved within the past 30 days, city staff is recommending that the time is now for the city to invest TIF funds in other efforts to mend the struggling downtown area.

And with one of the city’s two TIF districts in or around downtown DeKalb set to expire within two years, time is running out for businesses looking to take advantage of these special-use funds.

DeKalb economic development planner Jason Michnick said the point of the city’s Cornerstone project, which was approved by the City Council last month, was to build momentum for other businesses to invest in downtown DeKalb, and it wouldn’t be wise to wait.

“If you can keep your foot on the gas, and not do a one-off project and wait, you can keep the investments moving in,” Michnick said. “One single project downtown won’t have the same effect as multiple projects.”

The city’s two TIF districts, which encompass most of the commercial property in the area, allow property tax dollars to be capped for all taxing bodies within the district, and funds above the cap are diverted into a special account reserved for rehabilitating blighted areas. This has amounted to between $6 million and $8 million annually in recent years.

The money has been used annually to repair roads in the districts and support buildings such as the Egyptian Theatre and Barb City Manor.

The downtown Cornerstone development will tear down buildings at 122 S. First St. and 112-118, 122 and 124 E. Lincoln Highway to build a four-story upscale apartment building with commercial spacing on the ground floor.

There will be 51 fully furnished, single-unit apartments and a 40-space parking area for tenants.

One of these properties, at 112-118 Lincoln, has been vacant since 2014, when a burst pipe caused water damage in the building and led city inspectors to find multiple code violations that required significant repairs.

First Ward Alderman David Jacobson said that in the past, TIF funding for projects was assessed under a target guideline of 25 percent of a project’s total costs and no more than a 10-year paydown, which has not been the case in recent proposals.

John Pappas, the principal developer of the Cornerstone project, will receive a $3 million TIF contribution from the city for the $7.5 million project.

For some development projects, the assistance of TIF funding is required.

Sundog IT, at Hillcrest Drive and Sycamore Road, will be renovating and moving into the former Moxie building, which has been vacant for two years.

Cohen Barnes, owner of Sundog IT, said it would not be economically feasible to bring the building up to code without assistance from the city.

His project will be receiving $400,000 in TIF funds or a third of the total cost for the project, whichever is less. The City Council approved Barnes’ plan to move forward during its last meeting.

Pappas said he plans to complete the project in about 10 months and Barnes hopes to be moving into the Moxie building by early December at the latest.

Michnick said that if there are projects coming up next year that exceed TIF fund balances, there could be two options.

Since the two districts touch each other, funds could be transferred from one district to the other.

The city also could take out a bond based on TIF revenue projections, which would be paid back using TIF dollars.

Although the first district is set to expire Dec. 31, 2018, and the other will expire Dec. 31, 2022, any projects approved to receive TIF revenue before that time still would be funded after those dates.

Other downtown revitalization projects have been proposed to the City Council, such as a science, technology, engineering, art and math, or STEAM, Learning Center. This project requests a $4 million TIF contribution.

Development proposals from Geneva-based Shodeen also have sought TIF funding for property south of Lincoln Highway between Pearl Street and First Street to be turned into a hotel and conference center.

Although the Cornerstone and Sundog projects were criticized for being expedited, Michnick said other projects that could receive TIF funds, such as the STEAM Learning Center, would be more transparent.

“We just have to evaluate projects on a case-by-case basis and the impact they would have on the surrounding areas, as well as whether the project will have a return on investment in those areas,” Michnick said.

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