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CITY OF WEST CHICAGO
FINANCE COMMITTEE
AGENDA ITEM SUMMARY
ITEM TITLE: A
AGENDA ITEM NUMBER: 5.4.
Scannell Downtown Apartments / Financing Discussion
FILE NUMBER:
COMMITTEE AGENDA DATE: July 22, 2021
COUNCIL AGENDA DATE:
STAFF REVIEW: Tom Dabareiner, AICP SIGNATURE —
APPROVED BY CITY ADMINISTRATOR: Michael Guttman SIGNATURE
ITEM SUMMARY:
Project Description: Scannell’s proposed development spans Blocks 3 and 4, as defined in the
City’s Central Main-Street Redevelopment Plan Update (2018). The project envisions the
construction of a four (4) story luxury apartment complex, comprised of 225 residential rental units
ranging in size from 550 to 1,100 square feet, 4,500 square feet of first floor commercial space,
and a parking garage. Rent rates for the apartments are estimated to average $2.13 per square
foot, which is comparable to similar projects in Wheaton (Wheaton 121), Winfield (Winfield Station
Town Center), and Lisle (Avant at the Arboretum), among others. The total cost of construction is
approximately $49,000,000.
Project Financing: The existing financial gap for the project is estimated to be $9,495,848. To fill
this gap Scannell has proposed the following three items: (1) Issuance by the City of Series “A”
bonds; (2) Issuance of Series “B” bonds; and, (3) permit fee waivers. Both bonds would have a 20-
year life.
Series “A” Bonds
e Issuance up front of Series “A” bonds to help the developer meet their required rate-
or-return (7.38%). This bond issue would total $6,000,000 and could be tax exempt,
depending upon the language in any redevelopment agreement, i.e. financial
guarantees provided to the City.
Secured by 70% of incremental TIF revenues generated by the Project, after statutory
school and library payments. (It is important to note that the potential maximum annual
statutory school and library payments are equal to 32% of the property tax increment
generated by the Project each year, and that the actual amount of such payments will be
determined based upon documented evidence of the number of new students actually
residing in the Project. To the extent that student generation is less than the statutory
maximum, then the City should negotiate that the savings accrue to the City’s TIF fund
for use by the City, rather than to the developer).

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e While Scannell has indicated its willingness to enter into a minimum tax agreement
ensuring sufficient tax increment will be available to service the Series “A” Bonds in
order to mitigate the City’s risk associated with these bonds, bond counsel has advised
that such a guarantee would preclude tax-exempt status for the bonds.
Series “B” Bonds
e The City will issue Series “B” bonds of $2,800,000 up front to be purchased by
Scannell.
e While the developer has proposed that this bond issue be sized to ensure capture of all
remaining tax increment following the school and library allocations and the servicing of
the Series “A” Bonds, the City should require that any tax increment remaining after
school and library payments accrue to the TIF fund for the City’s use. That is, should
school and library payments be 25% instead of 32%, the City would earn the seven
percent difference.
e The Series “B” bonds will be subordinate to the Series “A” bonds, to be secured by 30%
of incremental TIF revenues generated by the Project, after statutory school and library
payments, and after payment of Series “A” bonds. Should the revenue derived from the
TIF increment be insufficient to cover any or all of the debt service on the Series “B”
bonds, Scannell becomes responsible for their repayment, or they receive no repayment
as they are they hold all of the bonds.
Permit Fee Waivers
e Fee waivers to the extent possible to cover the remaining $700,000 gap. The City has
not estimated its building fees for this project yet and the developer is ready to accept
less should permit fees total less than the $700,000.
Additional Commentary
e Scannell will provide all necessary debt and equity financing to complete the project.
They will secure about $40,000,000 in private financing for the project, entirely at their
own risk.
e In addition to the risk associated with private financing, Scannell also risks the inability to
get paid back in full on the Series “B” bond.
e KMA, who assisted with the analysis, claims to have used very conservative parameters
when estimating TIF increment and student/library fees.
e The City can set the terms of the bonds. The 20-year period attempts to balance annual
increment revenue generated with bond and school/library expenditures. A ten-year
bond would cost more annually than the City is expected to gain in TIF increment, while
a 30-year bond is less attractive and stretches beyond the life of the TIF.
e Ifthe Finance Committee concurs in general with the approach described herein, the
developer will make a presentation to the Development Committee to review site and
building design concepts.

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ACTIONPROPOSED:
Consideration and discussion
COMMITTEE RECOMMENDATION: