Wheeling developer to get his additional $3 million

Wheeling trustees have decided that a $7.5 million promise to developer Mark Smith is worth keeping.

Smith has developed Prairie Park, a high-end condo project on North Wolf Road in Wheeling. This week he told the village board he needs an additional $3 million from the village to pay off bank loans. It would bring the village's total financial contributions to the project to $7.5 million.

That's the figure Smith said village officials promised him back in 2003. However, when it came time to make the deal official, the board approved a much lower $3 million, he said.

"Five months after I started construction I was told things had changed, take it or leave it, here's $3 million," said Smith. "I never would've broken ground if I knew things had changed. Shame on me, I listened to people and everything seemed fine."

Village Attorney James Ferolo was at those meetings and confirmed that some village officials gave Smith an oral promise of $7.5 million.

Ferolo also said that nothing was official and that Smith knew that.

"Nothing is official until this board approves an ordinance," Ferolo said. "Before lenders approve a loan, they'll want to see the official documents the village board approved."

The $3 million Smith did receive in 2003 came 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.

So far only four of the buildings have been constructed. A promised clubhouse also is yet to be built. While 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."

Trustees asked Village Manager Mark J. Rooney to find the $3 million from TIF district funds, not the general fund. That will be tricky since the current estimated total of the village's tax increment financing district funds is at negative $4 million, meaning the $3 million would have to come from the general fund reserves, according to a memo written by Mark Angelini of S.B. Friedman & Co. in Chicago.

In coming years, the TIF district is expected to generate millions in revenues that can be used to repay the general fund.

"Really your only source of revenue is the general fund," Angelini said. "There are very serious ramifications to dipping into that fund, especially given the current economic climate. In our experience, it's unprecedented to use TIF funds to deal with a market gone awry. You will probably see other developers asking for TIF funds. You will see similar requests going forward."

Rooney said one possibility is to loan the TIF fund money from the general fund.

"This $3 million will close the door on other decisions," he said. "We may have to cancel projects. In the future I will be presenting information that will be very popular."

Trustee Ray Lang was in favor of giving Smith the additional $3 million he asked for, but not if the money comes from the general fund.

"We have to find other methods than the general fund," Lang said. "There is absolutely no way the taxpayers should be on the hook for this."

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 can be controversial when other government agencies that rely on property taxes, like schools and libraries, don't receive the increases in 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 district 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.

Trustee Dean Argiris said the village has a responsibility to those residents who have already bought condos in Smith's development.

"There was a verbal commitment made," Argiris said. "Smith came in and tried to make something happen on swampland over there and he did. He has a vision."

Trustee Pat Horcher was the only trustee to vote against the $3 million.

"We're not a bank," Horcher said. "We're teaching banks that not only can they get federal bailouts, but local municipal bailouts too."

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.