Developers of a Carol Stream grocery store are due to receive $3.5 million in economic incentives that village officials credit with helping bring the store to town.
The village board voted 5-0 Monday to approve a redevelopment agreement with developers of a new Angelo Caputo's Fresh Farms Market store, which is expected to open at the southwest corner of North Avenue and Schmale Road by 2014.
The agreement calls for the village to pay Caputo's funds generated by a tax increment financing district and a portion of sales tax revenues generated by the store.
Officials from the grocery store have said financial assistance from the village is necessary to make the project a reality.
The village will provide Caputo's with a $3.5 million "pay as you go" promissory note that would be repaid by the increased net incremental property taxes generated by the redevelopment of the land and 50 percent of sales tax revenues for a period of 13 years.
The incentive will take the form of a loan with 4 percent simple interest, according to Village Attorney James Rhodes, in a memo to the village board.
The projected interest cost to the village over the term of the note is $1.1 million.
"The negotiations were long, and sometimes arduous, but I think we have a very good redevelopment agreement that benefits both the village and the developer," Rhodes said Monday.
Officials said the incentive is intended to reimburse a portion of Caputo's land acquisition costs -- an eligible use of TIF funds.
The incentive represents 11.5 percent of Caputo's total $30.3 million project costs.
Construction on the 70,000-square-foot grocery store will begin after renovations are complete on an attached 242,000-square-foot regional warehouse, office and distribution facility.
The village board issued zoning approvals for the project last August.
The building had been vacant since September 2009, and the village set up a TIF district in 2011 in hopes of spurring development at the prominent intersection.
On Monday, Village President Frank Saverino publicly thanked Robertino Presta, Caputo's vice president, for choosing to locate in Carol Stream. Saverino said Caputo's will be an anchor for the busy North-Schmale intersection.
"This is a big move for Carol Stream," Saverino said. "That is a key corner in Carol Stream."
Trustee Don Weiss said the store will be a destination point for those in Carol Stream and nearby communities, and the village, in turn, will benefit from sales tax revenues.
"In my 10 years on the plan commission, I was hearing plans for that area that never came to fruition," Weiss said. "This is the best for this community ... I think it was a great move and a bold move for the community; $30 million is a lot of private investment in the community, and we're fortunate for that."
Rhodes said the developer acknowledges there is no guarantee there will be sufficient revenue from net incremental property taxes or sales tax revenues to pay the full incentive amount. If there isn't enough revenue generated in the 13-year time period, the village has promised to provide up to two more years of net incremental property taxes.
Kane, McKenna and Associates, the village's TIF consultant, wrote in a memo to Village Manager Joe Breinig that the repayment structure limits any village risk to the project's revenues.
"In the event the project performs greater than projections, the note is repaid sooner. If the note is not repaid after 15 years, there is no village obligation to the developer."
In addition, the village will pay the developer $147,000 for reimbursement of certain development costs, according to the agreement.
The village will also pay $10,000 in year one of the agreement, increased by 5 percent annually, for TIF administration costs, funded through TIF district revenues.
Within three months of the date of the agreement, Caputo's will be required to apply for all remaining permits necessary for the project and start construction within 30 days of receiving all approvals.
The store must be built within two years, subject to delays for "uncontrollable circumstances," according to the agreement.
The village wouldn't pay the incentive if the project isn't complete in that time.
A Caputo's consultant has estimated the grocery store will reach annual sales of roughly $30 million.
The village's TIF consultant has estimated the village would retain between $150,000 and $200,000 in sales tax revenues annually -- and double that amount at the conclusion of the sales tax sharing agreement.