Loop project poised to get another big TIF boost
(Crain's) — A city panel approved another major increase in financial assistance for planned Loop apartment development that has struggled to get off the ground because of rising costs and the tough lending climate.
The Community Development Commission signed off Tuesday on a $34-million tax-increment financing subsidy to help pay for the conversion of a vintage Loop office tower at 188 W. Randolph St. into a 310-unit apartment building.
That's more than four times the $8 million in TIF funds the city initially approved for the development back in 2006, when its total cost was estimated at $79 million.
But the projected cost had soared to $139 million in 2008, and the project's developer, Village Green Cos., went back for more. The city complied by hiking the subsidy to $20 million.
The recent increase is likely to draw fire from TIF critics, who contend that the financing mechanism has turned into a slush fund for unworthy developments that siphon property tax dollars away from municipal and school budgets.
A Village Green executive did not return phone calls seeking comment.
In TIF districts, which are designed to boost economic development in areas that don't attract enough private financing, additional tax revenue from rising property values are essentially reinvested in the area through TIF grants.
In the case of the Randolph Tower City Apartments, as the project is known, it's money well spent, according to the Department of Community Development.
"The renovation will create a bustling mixed-use building that will attract residents and customers, be a major generator of tax revenues and preserve the historic character of the area," the department says in a news release.
The building used to be in the Central Loop TIF district, but Village Green wasn't able to get the project going before the district expired in late 2008, and it lost the $20-million TIF grant. To solve that problem, the city formed a new TIF district including the 45-story Gothic Revival building.
Related story: Developer seeks TIF district for Loop apartment project
The redevelopment is now expected to cost $145 million, according to a report prepared for the commission. Among the biggest expenses, costing nearly $23 million, is the restoration of the tower's deteriorating terra cotta facade.
A lack of private-sector financing has been another challenge for the project.
Since the financial crisis of 2008-2009, "commercial bank lending to residential real estate projects has not returned, nor will for the foreseeable future," the report says.
As a result, Farmington Hills, Mich.-based Village Green is relying primarily on public-sector sources, including $40 million tax-exempt bonds issued through the Illinois Housing Development Authority and nearly $37 million in tax credits, according to the report.
The City Council must approve the TIF grant before the money is released.
