With District 73's OK, special tax district designation next for Hawthorn Mall
The table is set for Vernon Hills to establish a special financing district to spark the $250 million redevelopment of the faltering Hawthorn Mall, a retail centerpiece since 1973.
How much mall owner Centennial Real Estate could receive is still being negotiated, but the groundwork allowing the Dallas-based company to proceed with a three-phased plan is nearly in place.
A public hearing Tuesday was the final requirement before village officials could designate most of the mall property as a tax increment financing district, a mechanism that would provide millions for eligible expenses.
The village board is expected to consider ordinances establishing the TIF district on Nov. 3.
TIFs are sometimes controversial because property values are frozen for taxing purposes for up to 23 years. Taxes are imposed on the increased value as development occurs, but the difference - the increment - goes into a special fund that is used for site improvements and other expenses in the designated area.
That can be of concern for entities like school districts that rely heavily on property taxes. The counterargument is that not providing a TIF incentive would cause the property value - and in turn property taxes - to continue to decline.
Hawthorn Elementary District 73, for example, is part of a required advisory panel of nine taxing bodies and voted against establishing the TIF when the group met Aug. 23.
However, school board Vice President Wes Polen said during the public hearing Tuesday those concerns have been resolved as a result of a pending agreement with the village.
Details were not disclosed, but the pact calls for the village to look for opportunities to declare a TIF surplus, remove parts of the property from the TIF early to provide access to new taxes, and consider ending the TIF early.
The agreement will provide strong economic development for the village while providing needed resources to educate students, she said.
District 73, Polen added, hopes TIF financing does not become the village's "default tool for economic development in other areas of the village" as it would erode the tax base.
This would be the third TIF district in the village. No opposition surfaced during the public hearing, but the questions posed resulted in a clearer picture of what will happen going forward.
For example, the arrangement will be different from the TIF established for the new Mellody Farm retail center directly east of Hawthorn Mall, which required the village to borrow $20 million by issuing bonds to provide upfront payments.
In this case, the developer will be paid only if the property value increases and construction proceeds.
"So, it's pay as you go. In other words, a pay-for-performance type of TIF district," village Trustee Jim Schultz said.
"What it means is there's no village money at risk and no taxpayer money at risk," Trustee Thom Koch added.
The amount of the incentive will be outlined in an agreement with the mall owner that will require a separate vote and be subject to public review.
"The incentive that ultimately will be agreed upon will be one that's on par with a TIF incentive for a development of this size and that meets the gap in finances that the developer had to prove up to our financial people," Village Attorney James Ferolo said.