The biggest news in St. Charles in the near future will be whether a new residential development planned for a contaminated former industrial site is worth what taxpayers may be asked to pay to help build it.
Developers of the Lexington Club project want to bring 142 owner-occupied homes to a 45-acre section of land bounded by 12th Street to the west, 5th Street to the east, railroad tracks to the south, and Dean and State streets to the north.
The plan has at least two elements that have drawn some scorn. One is that the only residential projects aldermen have favored in recent months have predominantly featured rental housing rather than the mix of single-family homes, townhouses and row houses pegged for Lexington Club. The other knock is a pending request for tax increment finance assistance.
Typically, the city would borrow money through bonds and give the cash to the developer to offset some of the construction costs. The TIF money typically helps the developer ensure a profit by improving blighted property. Then the new property tax money generated by the improvements goes to pay off the TIF bonds.
That's not how this TIF would work.
Mayor Don DeWitte said at Tuesday's city council meeting that he favors a TIF for the project for three reasons.
"It is reimbursing the developer for the demolishing of the existing structures," DeWitte said. "It is remediation of the environmental issues that are contained on the property. And the biggest benefit to the city is that the developer has agreed to a pay-as-you go TIF. Lexington will receive their reimbursement of expenses they will fund upon the generation of property tax revenue from the construction. It's essentially a no-risk deal. A better description of this may be that it is a property tax rebate agreement."
In other words, the city has no risk of giving a developer millions then being stuck with the bill for the bonds if the project fails. The Lexington Club developers only get the money they are requesting if their project generates enough property tax dollars to give it to them. The downside is that taxing districts, such as the local schools and library, miss out on the new property tax dollars until the TIF is paid off. That leaves those taxing bodies without additional cash to address the additional service burden created by the new residents.
A study commissioned by the city already deemed the project TIF-eligible. The study also placed the redevelopment costs at $5.25 million. Some $4.96 million of those costs stem from land acquisition, site preparation, demolition of existing structures and remediation of the contamination on the site.
A public hearing on the potential TIF funding will begin at 7 p.m. Feb. 6 at city hall.