Wheeling developer needs an additional $3 million

The developer of Prairie Park in Wheeling needs an additional $3 million from the village to finish the high-end condo project on North Wolf Road, according to a memo sent to village trustees.

If approved, it will bring the village's financial contributions to the project to $7.5 million. Since the current estimated total of the village's tax increment financing district funds is at negative $4 million, the $3 million would have to come from the general fund reserve fund, according to a memo written by Mark Angelini of S.B. Friedman & Co. in Chicago. The TIF district in coming years is expected to generate millions in revenues that can be used to repay the general fund.

Angelini, a real estate adviser hired by the village. will talk about the proposal at a village board meeting on Monday.

The $3 million would allow the developer to continue repaying $25.2 million left on construction loans, Angelini said.

"This is what the bank is looking for to keep the loan in place," he said.

If the village board voted against the $3 million it would "make things difficult," but it would not necessarily throw the project into foreclosure, said the developer Mark Smith.

"Banks are not in the business of taking properties back especially now," Smith said. "No one cares about this project more than us and no one can sell it better than us."

For example, Smith said, he has sold five condo units in the last eight weeks.

"I think we're starting to see a little uptick here," he said.

Smith received $3 million in 2003 from the village by way of tax increment financing to build 306 high-end condo units in five buildings. In 2006, Smith asked for and received an additional $1.5 million to cover the rising cost of materials.

Smith said the project would be done in phases. So far only four of the buildings have been constructed. A promised clubhouse also is yet to be built.

The first two buildings are sold out. There are about 80 unsold units in the remaining two buildings. Smith said he hopes to build the fifth building and clubhouse "when the market picks up."

"Listen, I've been a team player," Smith said. "I live in this community with my five kids. I'm just trying to do the right thing."

Smith's development sits in a tax increment financing district, where tax revenue generated by a property's increasing value is diverted to a special fund that pays for improvements there, such as landscaping or sewer upgrades. Tax increment financing districts are controversial because government agencies, such as schools, don't receive the increases in property tax money for up to 23 years.

In total, Wheeling has five TIF districts. Because they are contiguous, village officials can legally transfer funds from one TIF to another. However, the total of all five TIF funds is negative $4 million in part because the village recently spent $3.8 million to buy the former Wickes site and another $1.3 million to buy the Collins Fireplace and Patio site.

At the end of 2008, the village's general fund reserves had $18 million, said Finance Director Michael Mondschain. In 2009, Mondschain expects a $3.5 million general fund deficit, which would also have to be covered by the reserve fund, he said.

Using the reserve fund to pay for both the 2009 deficit and the Prairie Park request would reduce it to $11.5 million.

"That's a tough situation to be in considering we don't know how long this economic downtown will last," he said. "At $11.5 million, some tough decisions about programs or personal will have to be made."

Trustee Pat Horcher said trustees have known about Prairie Park development's request for additional money for months. He's not in favor of granting the additional $3 million.

"The worst case scenario is the bank takes over the loan and sells everything at an auction," Horcher said. "There is no downside for the village."

However that's not an option for Trustee Dean Argiris, who supports the project.

"What are we supposed to do, let it go bankrupt and sell the units at a garage sale?" he said. "There should be TIF money for this, and it's a real problem there isn't. It seems there is shell game going on with the TIF funds."

Even if the fifth building and clubhouse aren't built, the village still would get between $14 million and $16 million in revenues by the time the TIF expires in 2026, according to Angelini's memo.