Bond Analyst Sends Open Letter to His Lakewood Village Board

An email to the Lakewood Village Trustees from Lakewood resident and bond analyst Steve Willson, a copy of which landed in my inbox:

To the Lakewood Board of Trustees:

When the subject of a TIF district became lively, I did what I always do in these situations: I researched it. I looked for facts before reaching a conclusion.

SportsPlex Crow from back 1-20-15

A man asks a question at Lakewood’s informational meeting about the Chicagoland SportsPlex proposal.

I found one key point: The Village is required to find that, “but for the designation of the TIF district and the use of Tax Increment Financing, it is unlikely that significant investment will occur” in the designated area. This is commonly known as the “but for” requirement.

I wondered what evidence there was that TIF districts actually produce economic benefit for the community as a whole, as opposed to the tax increment itself, that is, that they actually meet the “but for” test. So I reviewed the literature.

I found three academic studies showing conclusively that in most cases TIF districts produced no broad economic benefit. That is, most TIFs actually fail the “but for” test.

I found no studies showing TIFs actually work.

I found several self-serving studies by TIF organizations showing anecdotally that some TIF districts produce TIF revenue, but none showing that such a benefit would not have occurred eventually anyway. This, of course, is the essence of the “but for” test.

So, the general evidence being against it, the Village faced a high barrier in having to meet the “but for” test for its particular TIF.

How did they do so?

The Village hired a consultant who was paid to give exactly that opinion, just like MCC [McHenry County College] hired a consultant to “prove” they needed a big addition, an abuse so egregious the legislature changed the law with regard the use of consultants to justify issuing Alternate Revenue bonds.

Your consultant’s opinion hardly constitutes an independent finding, and your consultant provides zero evidence to support his opinion.

I ask the following questions, to which I would like real answers. Consider this a FOIA request. These are the types of questions members of the board should have asked before accepting the consultant’s opinion.

  1.  How many TIF projects has your consultant reviewed?
  2. In what percentage of TIF projects he reviewed did he find the “but for” test was not met? (A low or zero percent answer would provide strong evidence he was as independent as MCC’s consultant or the typical real estate appraiser who depends on Realtors for referrals.
  3. Has the consultant ever reviewed the projects on which he has opined to determine, after the fact, if indeed there was significant additional development near the TIF districts he approved that was attributable directly to the TIF itself? (If not, then he really has no track record, no proof his opinion is valid.)

In short, absent stronger evidence than a mere bought and paid for opinion, the evidence of the independent economic analyses must stand that TIFs have a very bad track record and no evidence has been provided to overturn that general presumption in this particular case.

This is not just “a matter of opinion” on which reasonable people can disagree.

This is an issue that can be answered by well-defined tests of evidence.

Failing to seek such answers is not to exercise fiduciary responsibility.

And so far the evidence is against the Village.

Please answer my questions and, if the answers show the consultant is indeed biased and has no evidence of effectiveness, admit you do not actually meet the “but for” test in substance, even if you can find a lawyer who will opine that, technically, you have met the legal requirements.

Public policy should be based on facts, not loopholes

= = = = =
A meeting will be held to consider zoning the SportsPlex and approving the TIF District at 7 PM next Tuesday, January 27th, at the Turnberry Country Club.


Comments

Bond Analyst Sends Open Letter to His Lakewood Village Board — 7 Comments

  1. Complete Kabuki Theater!

    The final act should include some props.

    Tar and feathers would be a good start.

  2. Hey, don’t let some facts get in the way of an emotional judgment.

    Lakewood has no business anywhere near 176 & 47.

    The pols just want to beat their chests!

  3. Who is the TIF Consultant, SB Friedman?

    Please cite sources of the TIF studies (names, URL’s) for documentation and research purposes.

    Note the following sentence in the Illinois Municipal Code about TIF Districts.

    “On and after November 1, 1999 (the effective date of Public Act 91-478), no redevelopment plan may be approved or amended that includes the development of vacant land (i) with a golf course and related clubhouse and other facilities or (ii) designated by federal, State, county, or municipal government as public land for outdoor recreational activities or for nature preserves and used for that purpose within 5 years prior to the adoption of the redevelopment plan.”

    http://ilga.gov/legislation/ilcs/ilcs4.asp?DocName=006500050HArt.+11+Div.+74.4&ActID=802&ChapterID=14&SeqStart=209500000&SeqEnd=211700000

    That sentence appears twice in the above URL.

    Just search on “golf” in the URL.

    The proposed Lakewood IL Route 176 / IL Route 47 TIF District includes two golf courses, Crystal Woods and Craig Woods.

    The proposed Chicagoland Sportsplex encompasses all of the Crystal Woods Golf Course.

  4. So is the interpretation of the golf course sentence that a TIF can’t include golf courses?

    Or is the interpretation a TIF can include a golf course, but the golf course can’t be used as a golf course within 5 years prior to the adoption of the redevelopment plan?

    Or is the interpretation something else?

  5. Another problem with the lack of information available on the Village of Lakewood website, and the lack of information in the SB Friedman TIF Eligibility Study for the IL Route 47 / IL Route 176 Lakewood TIF, is there is no map of the parcels that study deems as “obsolete platting of vacant parcels.”

    First note the definition of vacant parcels in the SB Friedman TIF Study includes active golf courses and farmland.

    “In total, 12 vacant parcels totaling 294 acres throughout the RPA show evidence of obsolete platting.”

    The Village of Lakewood should (even though its presumably not required by law) present to the public and have posted on its website a map of the entire TIF district subdivided into parcels, identifying each parcel number and which of the 12 parcels totaling 295 acres show evidence of obsolete platting.

    There are 37 parcels in the TIF.

    Each 37 parcels is not uniquely identified in the TIF study on a map, rather, none are uniquely identified by parcel number, and some are clumped together.

    For more details refer to the TIF Eligibility Study on the home page of the Village of Lakewood website.

    http://www.village.lakewood.il.us
    http://www.village.lakewood.il.us/vertical/sites/%7B46B6A78E-D4CD-44FD-AD04-48899B9E3E7A%7D/uploads/TIF_Document.pdf

    Village of Lakewood, IL
    Tax Increment Financing (“TIF”) Eligibility Study and
    Redevelopment Plan and Project
    Illinois Route 47 & Illinois Route 176
    Redevelopment Project Area
    Final Report: November 12, 2014
    Prepared by SB Friedman Development Advisors

    The TIF Eligibility Study also identifies structures on Crystal Woods and Craig Woods Golf courses and other structures in the TIF District as “Structures Below Minimum Code Standards.”

    The study goes on to say some are not in direct violation of the McHenry County Stormwater Ordinance and other ordinances as they may have been grandfathered in, but they “may present a health or safety hazard”, and they may “reduce the overall competiveness and economic viability of the area.”

    These structures are not uniquely identified by address.

    The structures should be uniquely identified by address (again presumably not required by law).

    Te code violation, ordinance violation, or whatever specifically qualifies each structure to be designated as “Below Minimum Code Standards” should be identified for each structure.

    What is an estimated cost to correct the code violations?

    The TIF study is so vague that one can conclude it’s possible that a large number of farms in Illinois can qualify for TIF status using these rules.

    The TIF Study lacks many specifics the public needs to determine how exactly specific parcels and buildings qualify for TIF status.

  6. Good point from Mark about the golf course violating TIF law.

    Worth investigating.

    Any lawyers out there who could look into this?

    As for the Village, they’ve already promised me answers, so let’s give them a chance and see what they come back with.

    I will pass on whatever information they send me.

    Because of the facts I disagree with what they’re doing, and I think they have made their minds up with inadequate evidence because they are so focused on development they aren’t taking adequate account of other factors.

    They seem to have confused “development will happen with a TIF” and “we think the project will succeed” with “this is adequate evidence to support creating a TIF”.

    Unfortunately, those two statements are not adequate to meet the “but for” test.

    It’s exactly the mindset I saw on the board in 1992 when they bought the golf course, so convinced they were doing the right thing they just couldn’t listen to objective evidence from someone who wasn’t already emotionally committed.

    It’s difficult to maintain perspective from the inside.

    But I don’t think they are all badly intended or dishonorable.

    I think they should be thinking more about what happens if the project fails, though.

    They seem to think defaulting on bonds is a “no hurt, no foul” situation.

    But the rating agencies and the markets do not look kindly on municipalities that issue bonds that default, whether they are legally responsible or not.

    And their view that if the Sportsplex gets partly done and fails that somebody will come in and rescue it with no problems is naive.

    I’ve seen a lot of projects fail, and cleaning up the mess is often a long, drawn out and difficult affair with land sitting empty with big scars for a long time.

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