===== PDF PAGE 8 =====
[Extraction: OCR (rendered-page OCR)]
CITY OF WEST CHICAGO
FINANCE COMMITTEE
AGENDA ITEM SUMMARY
ITEM TITLE:
AGENDA ITEM NUMBER:
Proposed Use of Notes as a Financing and Incentive
Tool
Pritzker Realty Group
SEC Roosevelt at Fabyan
FILE NUMBER:
COMMITTEE AGENDA DATE: April 28,2022
COUNCIL AGENDA DATE:
STAFF REVIEW: Tom Dabareiner, AICP SIGNATURE _~ € Ty
APPROVED BY CITY ADMINISTRATOR: Michael Guttman SIGNATURE
Pritzker Realty Group (PRG) proposes to build one or two warehouse distribution facilities in the far
southeast corner of Roosevelt and Fabyan TIF District. The City has had several interested parties for
this location but, to date, none have made it through their due diligence period. Several things need
to happen before this project could take place, including a rezoning from Office Research Industrial
(ORI) to Manufacturing. Also, PRG is seeking incentives to pay for certain Tax Increment Financing
(TIF)-eligible expenses up front.
PRG proposes an incentives approach that would require the City to issue Notes to help pay for TIF-
eligible costs. The basic difference is a Note is more like a traditional loan, with payments made at set
time periods and, and includes a specified return. While they can run as long as 20 years, most
Notes run two to ten years. The terms of a Note are set by agreement in advance, which include the
profit amount and payment timing. Notes carry less risk for the City than the Bond approach that will
be needed for the Central-Main Street Project, as previously discussed by the Finance Committee.
With Notes, the Developer will front the money for the TIF-eligible improvements and a portion of the
annual property tax increment will repay the Developer until it is whole. With Bonds the City borrows
the money and it in then repaid with the property tax increment.
Before arriving at the amount of the Note, it is important to have a clear understanding of what it
means to be a TIF-eligible project. In brief, if the project is in the ground or on its surface, it is a TIF-
eligible expense. Once a project goes vertical like a building, the building is not TIF-eligible. There-
fore, roadways and sidewalks, along with stormwater and other utilities, are eligible expenses. The
cost of the land is also eligible. PRG seeks assistance with these expenses through the use of Notes.
There are certain subtleties to this process that should be mentioned. As a matter of policy, the City
may wish to pay only for the infrastructure projects, such as a roadway and utilities, rather than for the
cost of land. Or the City may choose to pay only for the portion of infrastructure that exceeds the de-
mands of the proposed demand in order to serve a larger area and other projects. By example, a new
project will require the construction of a stormwater facility on the property. If that facility is built to ac-
commodate more than the runoff from the new building, parking lot and other related impervious sur-
faces, the City might agree to pay for the 100% of the oversized capacity, while paying a lower share
for the infrastructure costs that are normal and anticipated parts of the proposed project. Finally, in
general, the City may not wish to pay for a portion of the land costs, which might have been best han-
dled between the seller and the buyer during negotiations.

===== PDF PAGE 9 =====
[Extraction: OCR (rendered-page OCR)]
Staff has been holding regular meetings with Kane McKenna & Associates, our TIF consultant, and
PRG representatives to establish and double-check values of the infrastructure in comparison with the
amount of increment anticipated to be generated by the TIF by the PRG project. This will help deter-
mine the value of the Note. In addition, whether the Note is tax exempt and the magnitude of the in-
terest rate will affect the Note. Notes may also be sold to qualified institutional buyers at any time, per
the agreement, after completion of the first phase of the project or during this period to eligible owners
with a majority interest in the development.
Because the City has not issued Notes as a method for incentivizing development and because it car-
ries some differing characteristics from the more familiar Bonds, Staff seeks to gain direction to pro-
ceed with the approach using Notes as the primary tool, which would provide cash up front to the de-
veloper for specified improvements.
If the Finance Committee is comfortable with issuing Notes for this project, Staff and PRG representa-
tives will subsequently discuss the types of improvements for which the Notes will be issued, a well as
the percentage of the incentive to be paid to the Developer versus other costs within the TIF District.
ACTIONS PROPOSED:
Consideration and Discussion of Notes as a Financing and Incentives Tool.
COMMITTEE RECOMMENDATION:
Pc: Economic Development Coordinator