Crystal Lake Park Board Interrogates City TIF Consultant  

“How can the City of Crystal Lake adopt a TIF district that takes money away from people who don’t live in Crystal Lake?” Commissioner Dave Phelps asked. “It’ll cost people who don’t live in Crystal Lake more money. Doesn’t that seem wrong to you?”

Thursday night Crystal Lake Park District Board members interrogated the City of Crystal Lake’s Tax Increment Financing (TIF) consultant Mario Ortega in an attempt “figure out which shell the pea is under,” to put in Board member Scott Breeden’s words.

“What you’re asking us to do is to ask all of those people to help pay for Crystal Lake where those people cannot take any advantage of it,” Breeden added.

After extended vigorous questioning, the Teska Associates consultant Ortega recommended people “should bring up any concerns you have at the public hearing or the joint review meeting.” The public hearing is at 7:30 PM at City Hall on Tuesday, November 1st.

The mayor and the city council have proposed two TIF districts, which will take what I calculate to be an average of about $100 million for 23 years off the tax roles for all tax districts, but city government.

One TIF is on the southern edge of Downtown. It will make more of the tax base disappear than will the Rt. 14 proposal.

West of Main Street it is comprised of where Hines Lumber Company used to be located and the two buildings to its west along Crystal Lake Avenue.

East of Main Street, the old Oak Manufacturing properties north and south of Crystal Lake Avenue west of Main Street are included, plus points south to the railroad tracks where Main Street Classic Cars is located.

That $100 of assessed valuation—on the average–will disappear from every tax districts’ tax base for 23 years. The lose will average over $6 million a year or about $138 million over the 23-year period. In fact, the amount may be more because the city expects the redevelopment of the Rt. 14 property to be completed within five years.

Because of the way the property tax cap works, local tax districts are not at their maximum tax rate. For that reason, tax districts will be able to raise their tax rates on all real estate, except what is in the TIF districts. This will result in higher tax rates for all property in McHenry County and, of course, higher tax bills.

Board member Jerry Sullivan even elicited this admission from the Teska Associate Ortega:

“We realize we’re asking for an investment on the part of the park district.”

That was right after revealing that his firm’s calculations indicate that area school districts will break even after 25 years—in 2030, two years after the freeze on tax assessments in the two proposed TIF districts is scheduled to expire. (It should be noted that the General Assembly regularly allows specific TIF districts to be extended an additional 10 years.)

In a TIF district, a city government can unilaterally freeze the assessments on properties within designated areas. When the value of those properties increases, the city ends us getting whatever real estate taxes results from multiplying the tax rate times any increase in the assessed valuation.

Currently, Crystal Lake receives about 12% of the total property tax receipts within its boundaries. After the TIF district’s redevelopment, it will receive on the order of 90% of the taxes paid.

Eligibility for putting property in a TIF district law is as loose as a goose. Although the original idea was to use the financing tool to bring back blighted areas, the bill has been amended over the years to allow almost any part of a city to be put in a TIF district. In Huntley even farmland was put in a TIF to help subsidize the developers of the shopping mall.

To be put in a TIF district, a building need only be not up to the current building code, not set back far enough from the road, according to the current zoning code, or even have inadequate parking lots, alleys, curbs, etc., according to current city ordinances. One of the possible TIF criteria is that it contain an abandoned quarry, which, of course, Vulcan Lakes is. Much of the lack of meeting city codes on Rt. 14 results from the properties having been annexed “as is” after being constructed under McHenry County government’s jurisdiction. Some were built before county government’s 1979 plan, so they qualify as being built without community planning, still another criterion.

Phelps suggested that lack of city code enforcement might be the reason for some of Teska’s findings.

Consultant Ortega spent his time explaining and defending the so-called Route 14/Vulcan Lakes proposal, complete with power point presentation. The area is 503 acres, 475 of which are the Vulcan property that the city already owns and which, a park board member observed, is off the tax rolls and can’t increase in assessed valuation.

Scant information was provided for the Main Street proposal.

Using the hints that he dropped, plus information obtained at the grade and high school board meetings during the week, plus the words of Mayor Aaron Shepley, as found in Northwest Herald articles, a vision of what the area will look like has emerged.

After getting rid of the current businesses, the city wants to have the new businesses face Vulcan Lakes, instead of Route 14.

Commissioner Michael Zellman asked, “Is there a grand plan?”

“We envision a more water-oriented, lake-oriented development…fronting on the lake, rather than on 14,” the consultant Ortega said.

“We will find developers who specialize in developing waterfront property,” added Crystal Lake Planning & Economic Development Director Michelle Rentzsch. Both the consultant and Rentzsch said they anticipated the makeover to be completed in five years.

The goal is to make the area “a unique destination on Rt. 14,” to put it in the consultant’s words. Those who have developed waterfronts elsewhere would be asked to provide concept plans. (Cordish, the redeveloper of Baltimore’s Inner Harbor might be one. It has specialized in developing entertainment districts for 25 years.)

A boardwalk has been mentioned, as well as a marina (but not with motor boats). One can easily envision restaurants with outdoor seating and a hotel. And, if it’s a typical boardwalk, can a tee-shirt shop be far behind?

Residential housing is also being considered with condos and townhouses having specifically mentioned. (That concept has taken a large part of the southern lakefront in Wauconda, which can be seen from Route 176 and is proposed for Lake Zurich, where a contentious fight between a lakefront board and breakfast and the city is taking place.)

“It seems like it could happen without a TIF,” Board Member Candy Reedy observed.

“Would the city sell part of it to developers?” Board President Jerry Sullivan asked, concerned whether part of the Vulcan Lakes property would be sold for residential development.

“Yes,” was the answer.

Breeden then asked if the park district would get impact fees. The answer was, “Certainly.”
Breeden noted that the city had recently decided to keep 40% of the park impact fees for it to use in developing Vulcan Lakes, while leaving the park district with only 60%.

“If you add a lot of roof tops, it will add a lot of burden on the park district,” park district attorney Scott Puma observed. He asked how the city would deal with that?

“In this development, we are proposing open space. We believe this would lessen the demand on the park district?” consultant Ortega answered.

“Would the city consider a long-term $1 a year lease?” Puma asked.

“This would have to be available to all the residents of the city and the park district?” was the reply.

Phelps pointed out, “Our district is larger than the city.”

“Oh, I don’t (didn’t) know about that,” was the consultant’s reply.

The relevance of Phelp’s observation is that people throughout the park district, indeed, throughout McHenry County will see their taxes increase in order to finance improvement of Vulcan Lakes, but those living outside of Crystal Lake will not be allowed to use the lakes.

So far, Crystal Lake city government has not been in the recreation business. That has been the under exclusive purview of the Crystal Lake Park District.

Phelps, an attorney, was particularly insistent in his questioning of the city’s consultant.

“I’m curious of why the park (district) should fund purchases by the city?” Phelps asked.

“It’s going to increase the (tax) rates just to maintain our current operating expenses,” he added.

Concerning the criteria for inclusion in a TIF district, Phelps asked, “Are you saying any obsolete building in the district would qualify?”

“Technically, yes, but we as a firm think (we need) a preponderance” of the buildings fitting that criterion to cite it as a reason that a TIF district could be formed. The consultant said his firm had found that 8 of the 14 buildings or 57% of the buildings were “falling into disuse.”

Included on the map were Curran Construction, Crystal Lake Tire & Battery, Crash Collusion, Builders Plumbing & Supply, among others.

Even before the recent U.S. Supreme Court decision, which allowed municipalities to condemn property in order to obtain more tax revenue, Illinois law allowed cities to use eminent domain to force property owners to abandon their businesses and homes.

$8.75 million is budgeted for land acquisition, including several parcels still owned by Vulcan Materials.

Selecting one of the Rt. 14 businesses, Phelps asked, “How is that ill-suited to its original use?”

Another TIF eligibility criteria was that the assessed valuation for the properties have not increased as fast as those in the rest of Crystal Lake for the last 3 out of 5 years.

Unmentioned by the consultant was the recent $7.2 million sale of Conlon-Collins reported recently in the Northwest Herald. Algonquin Township Assessor Bob Kunz explained that Conlon-Collins had appealed its real estate assessment, but that he had won the appeal. Still, the current assessment of the land at the car dealer is $725,000, he said. That means it is assessed at 10% of fair market value, while the recent sale would indicate that the assessment should be about three times that amount. That would mean the assessment would triple for Conlon-Collins. Similar increases in assessment could be expected for other property along Rt. 14.

That the size of the district is directly related to the amount of money that the city believes it needs to put Vulcan Lakes into the shape it desires was elicited by commissioner Reedy.

Asked why the industrial triangle on the southwest corner of Vulcan Lakes was not included, the consultant replied, “It wasn’t necessary to raise the money we wanted.”

The budget includes $20 million for public improvements, almost $9 million to buy property, $250,000 for rehabilitation, and $1 million for marketing. Money can also be used for job training, engineering and architectural services. Interest on the borrowed money would roughly double the cost.