BATAVIA – The One Washington Place downtown redevelopment project in Batavia has encountered a new peril that will further delay the start of construction and could kill the plan entirely.
City Administrator Laura Newman told aldermen Tuesday that the time remaining on the tax-increment financing district specially designed for the development is insufficient to completely pay off the $16 million in bonds that the city would issue for its share of the project.
The developer, Geneva-based Shodeen Construction, would be on the hook for the shortfall and is unwilling to proceed under the current circumstances, Newman said.
Aldermen were flabbergasted at the revelation, which first emerged at a meeting between Shodeen and city staff last week.
“You should have known that a year ago,” 2nd Ward Alderman Marty Callahan said. “That should have been a running calculation. It doesn’t sound logical.”
“It’s ridiculous,” 3rd Ward Alderman Elliot Meitzler said.
A TIF district is a method widely used by municipalities to redevelop areas that are considered blighted or economically stagnant.
Within the boundaries of the district, property tax payment levels to units of local government are frozen, and the additional value generated by development is placed into a fund to pay for public improvements.
The city established a TIF district covering the redevelopment site in 2017. Under state statue, the district has a 23-year lifespan.
The $50 million One Washington Place project was expected to break ground in May.
The plan is for a six-level building with 190 apartments, a 343-space parking garage and 5,725 square feet of commercial space, covering most of a city block bounded by North Washington Avenue and East Wilson, North River and State streets.
As part of the deal, the city would issue $16 million in bonds to cover the cost of the two-level parking garage, which it would own at the completion of construction.
The city protected itself by including a Special Service Area in the agreement, by which Shodeen would be responsible for covering any shortfall once the TIF district has expired.
The start of construction has already been delayed by more than two years.
First, the developer miscalculated the cost of the parking garage, resulting in the city increasing its commitment to $16 million from the original $14 million.
Then, the city discovered lead contamination on the site, requiring a lengthy approval process with the Illinois Environmental Protection Agency to establish a clean-up plan.
With construction expected to last at least two years, it would be three years or more before the development could be expected to generate the tax increment needed to pay off the bonds.
“The time available to pay off the bonds is just too short,” Newman said, estimating that between $3 million and $4 million would remain to be paid after the TIF expires.
Shodeen Construction President David Patzelt confirmed this, calculating the shortfall at about $3.6 million, based on the life remaining on the TIF district and the anticipated loss of tax increment to be generated.
“I’m not willing to give up on the project as of yet,” Patzelt said. However, he said that construction cannot begin this spring.
Possible solutions include a 12-year extension to the life of the TIF district, reestablishing the district to set back the clock, or expanding the district’s geography, all permitted under the statute.
However, the Batavia school, park and library districts, among other affected taxing bodies, would need to agree to any of these options.
Third Ward Alderman Dan Chanzit said the city’s business community has too much riding on the success of the project to let it fail.
“It would be very bad,” Chanzit said. “It would be devastating.”
First Ward Alderman Michael O’Brien agreed, pointing to the considerable number of new businesses and investment that has occurred in the downtown in anticipation of the project.
Mayor Jeff Schielke asked the council to allow the staff to continue negotiations and see if a solution can be found.
Schielke has championed the project and provided crucial tie-breaking votes to keep the plan alive when aldermanic support began to dissolve after Shodeen reduced the amount of retail space in the building and asked for the additional $2 million for the parking garage.
However, the mayor indicated that even his patience has its limits.
“I don’t want to carry this on forever,” Schielke said.
Newman said that another solution would be to reduce the size of the project.
Patzelt said he is exploring this option, which would include reducing the number of parking spaces in order to cut the bond amount to be issued, as well as the number of apartments.
Like the mayor, Newman argued in favor of attempting to work past the new obstacle.
Newman suggested that scrapping the project and negotiating a new agreement with another developer would add another two years before construction gets underway.
“That might be faster,” Meitzler retorted, expressing frustration with Shodeen.