Vernon Hills officials are considering whether the risk of a hefty upfront incentive to develop one of the village's few remaining prominent open areas will be a sound long-term investment.
Several key questions remain on the proposal for a $200 million upscale shopping center and rental housing community at the northeast corner of Townline Road (Route 60) and Milwaukee Avenue (Route 21). Chief among them is whether the village wants to double its debt load by providing a $20 million upfront incentive to Regency Centers Corp. to build the Mellody Farms shopping center or whether a smaller pay-as-you-go incentive will work.
Establishing a so-called "home run" clause, which would provide Vernon Hills with a portion of profits should Regency sell the center, is another avenue village officials want to explore nearly a year after the retail proposal was introduced.
"It gets back to how much risk are we willing to accept," Trustee Jim Schultz said Tuesday during a board discussion of the matter.
Regency wants to build 274,575 square feet of retail space in two phases east of the Hawthorn shopping center. The project is described as creating a feel like that of Chicago's Wicker Park or west Loop neighborhoods. Whole Foods Market would be an anchor store but is the only signed tenant, which also was cited as a concern by the village.
"Our expectation is to have four high-quality anchor tenants that do not exist in Vernon Hills," said Nick Wibbenmeyer, managing director for Regency.
However, village officials say borrowing $20 million could affect the ability to fund other projects and possibly require using general funds rather than proceeds from the increased value of the retail area to pay the annual debt.
Regency, which operates 311 shopping centers in the United States, has a contract to buy the 50-acre Vernon Hills site from the Cuneo Trust for $26.2 million. The company plans to sell a portion to homebuilder Focus Acquisitions LLC for a 260-unit luxury rental housing development. The projects are considered separate, but together, and are valued at $200 million.
Because of the high land cost and other factors, Regency says an incentive is the only way the project can work. The village is considering designating the area as a tax increment finance district, which would allow tax money from the increased property value that normally would go to local governments to be used for land acquisition, road improvements and other expenses.
However, Regency wants the money upfront. Since it will be years before a tax increment is generated, the village would have to borrow the incentive money by issuing bonds.
Village officials are wary, as $15 million of the village's current debt is related to the Town Center TIF district at Route 45 and Milwaukee Avenue. It has yet to break even after several years, forcing the village to find other funds to make up the difference in what is owed.
Wibbenmeyer on Tuesday declined an offer to informally poll trustees.
"There's a lot of information to digest. We'd like an opportunity to respond," he said. Another public meeting will be held in a few weeks.