Geneva council OKs $42.8M TIF deal with warehouse developer

The Geneva City Council Monday approved a $42.8 million tax increment finance redevelopment agreement with MIF-Geneva Park for development of a new industrial park as part of the city’s South East Master Plan.

In June, the council approved annexing 211 acres east of Kirk Road, from the intersection of Illinois Route 38 and Kautz Road south to Fabyan Parkway. The company proposed to build eight to 12 buildings for warehouses or manufacturing, 2.1 to 2.4 million square feet of buildings.

The TIF plan includes the extension of Kautz Road, signalization, utility extensions and stormwater management improvement, Geneva City Administrator Stephanie Dawkins said.

A tax increment finance district is a development tool local governments use to encourage development. A TIF diverts increased sales or property taxes generated to pay for specific improvements.

The $42.8 million of TIF assistance is approximately 14% of the total development cost of nearly $297 million, would be achieved by the city issuing an alternative revenue bond and pay-as-you-go notes, Dawkins said.

The increment property taxes from nine property index numbers would be pledged as the primary source of repayment to the city, she said.

“In other words, the development will generate the income to provide an incentive for development,” Dawkins said. “The city has worked with special legal counsel and bond counsel to ensure that the public-private partnership is structured to limit as much risk as possible for the city while addressing the needs of the developer to infuse capital into the project.”

Dawkins said the first priority for the TIF funds collected will be to repay the city’s bond issue, with the remaining increment split 20% to the city and 80% to the developer.

Bond proceeds available to reimburse the developer will be either $4 million or $5 million, depending on the status of water main loop construction. The remaining $38.8 million will be provided through the issuance of pay as you go notes after the second building receives occupancy, Dawkins said.

Pay as you go notes in tax increment financing means the developer receives payment for eligible projects as new tax revenue becomes available.

A third party development adviser conducted a “but for” analysis, that is, but for public support through a TIF, the project would not happen, Dawkins said.

The analysis determined the project needed public assistance to get market-rates of return, Dawkins said, because of upfront infrastructure costs.

Second Ward Alderperson Richard Marks asked for clarification on the repayment structure.

“When incremental taxes are received, they go into a special tax allocation fund,” Kent Floros of Chapman and Cutler, the city’s bond counsel, said. “Within that, we’ve created a series of accounts to insure that different levels of priority of payment on the alternate bond vs. the (pay-as-you-go) notes have their own segregated accounts.”

The city’s alternate revenue bonds will always be paid first, Marks said.

“We’re just approving the agreement right now, there’s no loan being approved tonight,” Marks said.

“You’ll approve that at some point in the future,” Floros said.

The vote to approve the agreement was split 6-3 with 3rd Ward Alderpersons Becky Hruby and Dean Kilburg, and 5th Ward Alderperson Robert Swanson all casting the no votes.

The council is one alderperson short because of a resignation.

When the project was first proposed, activists tried to protect 300-year-old burr oak trees on the property, but ultimately the company cut them down.