Lake Zurich downtown plan must be reshaped, official says

Now that the developer attached to Lake Zurich’s downtown redevelopment project has been jettisoned, the project must be reshaped to meet “today’s fiscal realities,” a top village official said Thursday.

That could mean encouraging construction of apartment buildings rather than condominiums, Village Administrator Bob Vitas said, and seeking unique, niche retailers instead of name-brand outlets.

“The economy is driving what’s possible, and I think we need to face that reality,” Vitas said.

The recent departure of developer David Smith and his Equity Services Group — prompted by Smith’s inability to deliver $12.5 million in funding by Jan. 1 — opens the door for a different firm to take over the project. But village hall hardly has been inundated with inquiries, Vitas said.

“Nobody’s banging on any doors for development these days,” he said.

Smith’s inability to make the payment by the deadline — already extended from September 2010 — essentially voided the deal he’d struck with Lake Zurich officials. At a meeting last week, the village board listened to Smith ask for an additional extension until the end of the month, but trustees opted to show him the door.

“When the first extension that was granted did not produce any results, (the board knew) any further extension would not produce any results as well,” Vitas said.

Smith can reapply to develop the project at a later date, along with any other interested developers, Vitas said.

Village officials previously have said other developers had expressed interest in the project, but relationships weren’t pursued because of the town’s deal with Equity Services Group.

Smith’s exit changes that situation.

“The field is wide open now,” Vitas said.

Trustee Tom Poynton said he’d like to see projects done in a more piecemeal manner, rather than the single, larger effort village officials have been pursuing for much of the last decade.

“Maybe our approach should be a little less ambitious,” Poynton said.

He envisions a downtown area resembling Libertyville or Barrington, an area that has a mix of basic, functional retailers and shops or restaurants that are destinations for potential consumers.

Vitas has heard of developer interest in some aspects of the project, particularly the unfinished Somerset townhouse development.

But he said the village board’s top priority must be getting a handle on what he called the project’s “financial gap” — the money the village needs to pay off loans it received for improvement efforts.

The downtown area was declared a tax-increment financing district in 2002 as a way to generate revenue during development, but because the project stalled, the income isn’t there.

The village’s current debt on the downtown project, including interest, is about $28.3 million, Vitas said.

Some of those loans will come due in the next few years, Poynton said.

“We need to get something going,” he said. “(But) we’ve got some good properties ready to do business.”

When the village board meets Feb. 7, officials will discuss hiring a consultant to analyze the financial gap, someone who can tell them how much money they need to meet their obligations, Vitas said.

Officials then must find developers who can create the types of housing or commercial properties that can thrive in the struggling economy, while not taking away business from the village’s high-profile commercial corridor on Rand Road, he said.

“Whatever plans we go forward with must be based on today’s fiscal realities,” he said. “You can’t just say, ‘If you build it, they will come’. That’s not true. Those days are over.”