Vernon Hills wants assurances on $25M tax incentive
In this season of ringing cash registers, Vernon Hills officials aren't worried about losing their top-tier retail status in Lake County, but a proposal on the horizon makes even village officials pause at the potential implications.
Village officials have used sales tax incentives to attract business or fill vacant big boxes, but a proposed $200 million retail and residential development at the northeast corner of routes 60 and 21 - on the last of the once vast Cuneo holdings - would be the largest.
An incentive that could amount to $25 million is sought by Regency Centers. And while they tentatively have approved the next steps, village officials want assurances they won't be left holding the bag if nothing materializes at the busy corner.
Developers have said they would cover the expense in that case. How that would work is among many details under review in advance of a development agreement the village board will need to approve.
"You've made what we've termed strategic investments," Village Manager John Kalmar recently told the board. "We have great developers and I think they'll be great partners but saying that, $25 million is substantial."
The lure is the promise by Regency Centers of a higher level of stores and restaurants than is now available in the village's vast retail landscape, which comprises about 4 million square feet.
"It's a unique development, which we don't have, which excites me for the potential of that corner," Trustee Cindy Hebda said.
"But it's a risk. Do we put off some of our capital improvement projects? My biggest concern is the financial implication."
With fees, interest and other costs included, the village is asked to borrow about $25 million by issuing bonds to be purchased by investors. The money would be used to reimburse developers for various expenses and would amount to a village debt payment of about $2 million per year just for this project.
"We're hoping this will be kind of a self-sustaining project," said Nikki Larson, the village's assistant finance director. The debt is proposed to be covered by designating the area a tax increment financing district, which would create a special fund. In that scenario, property values for taxing purposes to various agencies, such as schools, are frozen for a period, usually 23 years. Taxes on the added value (the increment) are levied but instead of being distributed to local taxing bodies, are set aside.
The question is what would happen if the increment doesn't cover the debt. Using sales tax or general revenues could affect the village's bond rating and ability to proceed with village projects, Larson said.
"That's something we'll have to work through, of what will take place or won't take place when the village sells the bonds," Kalmar said.
There is a long and uncertain path before any official approvals are given, he added.
Among them are: determining whether the property is eligible to be designated a special taxing district; working with the Illinois Department of Transportation regarding improvements at an intersection where each leg sees 30,000 vehicle per day; and, whether Lake County, which provides sewer and water to the site, will sign off on the project as there is a covenant banning residential development there.