88 apartments proposed for downtown McHenry; developer seeks millions of dollars in city incentives

To make the numbers work for a proposed mixed-use development downtown work, help from the city is needed, the developer told the McHenry City Council.

Geneva-based Shodeen Group, which has been meeting with city officials for about the past two years, gave the council its first look Monday night at a new plan that would put 88 apartments, commercial space and two levels of parking at 1111 N. Green Street.

To make it work, company President David Patzelt said, Shodeen needs $6 million in public assistance from Tax Increment Financing, and an additional $2 million.

“That was our ask,” Patzelt said.

The company has not yet worked out all of the financials, but believe that, based on potential rents and interest rates, the development would generate $6 million for a TIF district.

But it wouldn’t be the TIF district the building is currently in. To make the project work, the company is asking McHenry to pull the property – the former city hall site – out of the existing TIF district and create a new one. That would restart the clock, giving the site 23 years of benefit from a new district.

A TIF district is a tax subsidy that allows new property taxes generated by redevelopment within the district to be channeled back into the property rather than distributed to other taxing bodies like school districts until the TIF expires.

Patzelt’s plan as presented this week was the sixth the company developed for the site, he told the board. A previous plan called for just one level of parking and 66 apartments with first-floor, riverside commercial space for a potential restaurant.

The second level of parking is needed, in part, because The River Place Residences across the street was not built with enough parking, Patzelt noted. Residents have been parking in the old city hall lot.

Residents of both that building and the Shodeen project would need to purchase parking permits from the city to use the new garage, which would “sell it back to the city for $10,” Patzelt said. During the day, the garage would be open to the public but permits would be needed for overnight parking. Spaces would not be assigned.

“We are here as a partner. We want to work jointly together to make a project successful.”

—  Shodeen president David Patzelt

Prior to Shodeen’s presentation, the city’s TIF expert, Geoff Dickinson of SB Frideman, also gave the council a primer on TIF districts. Just one Alderman, Andrew Glab, Ward 2, was on the council when the existing TIF was created.

Shodeen has a contract to purchase the old city hall property, which is completely separate from an agreement arrived at last year between the city and Shodeen.

That agreement, approved by the city in March, promises that McHenry will not market to another developer its former wastewater treatment plant site on the Fox River or 2¼ acres of vacant downtown city-owned land. Instead, Shodeen and McHenry have until March 2025 to come up with an agreeable plan.

The new proposal “is specific to this property,” city Community Development Director Ross Polerecky said.

In a non-binding vote to continue working with Shodeen for the “1111 project,” a majority of the council indicated the city should do so.

Glab indicated he would rather see condos on the site, saying, “I am not approving more apartments.”

Banks, Patzelt said, are not approving construction bonds for condo developments unless a portion of those units are pre-sold.

With the council’s blessing, city staff will begin looking on how it can fund the $2 million ask, said Polerecky.

In a related issue, the board was asked to consider spending $30,000.01 to engineer the burying of power lines that run from Waukegan Road to Route 120 – through the area Shodeen and the city are working to develop.

Alderman Frank McClatchey, Ward 3, and Alderwoman Chris Bassi, Ward 4, voted no on the spending, and Glab voted “pass.”

Before the vote, McClatchey asked why the city was paying for the engineering and if Shodeen had “skin in the game” for the proposal.

The company has paid to design six different proposals for the 1111 Green Street site and have incurred other costs, Patzelt said.

“We are here as a partner,” Patzelt said. “We want to work jointly together to make a project successful.”