Des Plaines city council refinances TIF debt

Des Plaines city officials acknowledged Monday night two of the city's five special taxing districts are in trouble.

With two hotel projects stalled by the economy, the city's tax increment financing district No. 6 will be $3.2 million in the red by 2012, officials said.

The city council Monday night agreed to refinance some of the TIF No. 6 debt to push to 2013 those principal and interest payments due now. That ultimately increases the total TIF cost over the lifetime of the district to $15.2 million.

Tax increment financing captures increased property tax revenues from development within the district in a special fund used for redevelopment of that area.

TIF No. 6 was created in 2001 to spur redevelopment in the area north and east of Mannheim and Higgins roads.

Des Plaines entered into a redevelopment agreement in 2007 with Oak Brook-based developer The Harp Group Inc. to build two hotels along Mannheim Road and Pratt Avenue north of Interstate 90.

In 2008, the city signed a second redevelopment agreement to build two Hyatt hotels and two restaurants on property it owns along Mannheim just south of I-90

Both projects are up in the air. The only revenue being generated in TIF No. 6 comes from a commercial shopping center built in 2007 housing a Starbucks and Potbelly Sandwich Works. The yearly revenue amounts to $120,000, while the annual principal and interest payments is $900,000.

The district is projected to have a negative fund balance until 2022, Wisniewski said.

The total debt for that TIF is $12.8 million. City officials already have borrowed $5.6 million from the general fund to make principal and interest payments toward that debt.

If nothing was done now, the city would have to continue to cover that deficit out of its general fund revenues, said Finance Director Dorothy Wisniewski.

Officials project if one of the two hotel projects is built, the increment generated would be enough to pay the debt service on the bonds issued for TIF No. 6. With all four hotels built, the debt can be retired early, said Mike Conlan, Des Plaines director of community and economic development.

"It's just a matter of when the construction starts," Conlan said.

Resident Dion F. Kendrick asked city officials to consider what would happen if the projects don't get off the ground as anticipated.

"In my humble opinion, you are looking at at least three to four years before a shovel ever gets turned to build any hotels," said Kendrick, who has spent 40 years in commercial real estate development. "We're getting a short-term cash savings (with refinancing) but unless those hotels get built and soon, we have a problem."

City officials on Monday also authorized a one-time money transfer from downtown TIF district No. 1 to TIF No. 5, which had an ending fund balance deficit of $854,714 in 2008 and is projected to have a negative fund balance for 11 years. The transfer would eliminate the negative fund balance in 2009 and beyond since TIF No. 5 is starting to show positive cash flow, officials said.