Elgin City Council members Wednesday will consider allocating an extra $250,000 of Tax Increment Financing money for the Artspace project. Financing for the project is set to close July 31, pending the receipt of the additional funds.
Heidi Kurtze, director of property development for Artspace Projects Inc., said the Minnesota-based not-for-profit has been trying to fill an $800,000 gap in project funds for the past six months. When the organization exhausted its other options, it decided to ask Elgin for a larger contribution.
"It truly is a last resort," Kurtze said. "I didn't want to have to ask for this money."
The plan calls for 55 rental units and additional retail space in the former Fountain Square campus of Elgin Community College at 51 S. Spring St., with a new three-story building along its southern edge.
The city already donated the land for the project after a property swap with ECC, worth approximately $2.6 million. If the extra $250,000 is allocated by the council, it will push Elgin's cash contribution to just more than $1 million.
And staff members think that's worth it.
Assistant City Manager Rick Kozal said the extra contribution will be offset by tax revenue soon to be received from a property that isn't currently earning the city anything.
"Making the investment in the TIF is perfect because it's a way to make an investment in the property and get a return on it," Kozal said.
A portion of property taxes within a TIF district are collected and saved in a special fund for future development. That money can only be used in the TIF district in which it was collected, with the goal being to steadily improve the area. The Artspace project is expected to generate almost $1.4 million in tax increment per year, which will go back to the TIF fund for future projects.
The community benefits also have been heralded by those supporting the project from arts organizations to downtown businesses excited for an increasing clientele base.
Tonya Hudson, executive director of the Downtown Neighborhood Association, said the project encourages more private investment in Elgin and gives a boost to the development community.
"Being both new construction and an adaptive reuse of an existing building, hopefully it will be a really great example of the type of development that can happen in the downtown," Hudson said.
Elgin first approached the not-for-profit in 2007 with an interest in bringing housing for artists to both live and work in to the city's downtown. After a consulting visit and community survey, Artspace Projects Inc. decided to add Elgin to its list of projects; completed housing projects now number 28 nationwide.
If the city council approves the extra funding Wednesday, the project will proceed on schedule, with construction starting in mid-August.