Downtown developer to Wheaton: We need your help
With a developer saying it's “very difficult to keep momentum going” on a downtown apartment complex, Wheaton officials say they'll consider helping the builder recover some of the project's costs.
The city council agreed Monday to have further discussions June 25 about its agreement on the proposed $60 million project — a six-story, 306-unit apartment complex bounded by Wesley, Scott, Front and Cross streets.
That came after the developer cautioned that “lenders are losing faith in us, and we're losing faith in the process now.”
“We're finding it very difficult to keep all this together,” said David Strosberg, president of Morningside Group. “We're finding it very difficult to keep momentum going.”
On Monday, the council was divided on whether the agreement should include a letter of credit guaranteeing the city repayment of $503,605 in upfront tax increment financing district funds if the project wasn't completed. The TIF money would be used to bury overhead utility lines.
“If the project went into default, wasn't completed, the letter of credit would reimburse the city for that upfront round number of $500,000,” City Manager Don Rose said.
In addition, Morningside wants the city to reimburse the fees associated with the letter of credit. Rose said that is expected to cost $10,000 each year for the life of the letter of credit, set to expire when the city would issue occupancy permits for the building, expected in about two years.
Meanwhile, Bank of America is expected to issue a final letter of credit Wednesday, City Attorney James Knippen said.
Councilman Phil Suess argued that providing the upfront TIF money without a letter of credit poses a low risk for the city. “We've created a benefit that whoever else comes along subsequently will benefit from,” Suess said of the utility work.
Councilwoman Jeanne Ives agreed, comparing the work to the improvements that a consulting firm hired in April is designing as part of a comprehensive plan for the downtown.
“This is supportive of that same effort,” Ives said.
Early last month, the council unanimously directed city staff members to prepare an agreement with Morningside to supplement the proposed project with $1.3 million in TIF money.
The roughly $500,000 in upfront TIF money would cover utility work. The city would provide the remainder of TIF funds after the developer obtains the occupancy permit for the building. That money would be used for landscaping, sidewalks and street improvements.
Tax increment financing districts are designed to capture increased property tax revenues from redevelopment. The funds are earmarked for improvements within the district instead of going to taxing bodies such as schools and parks.
Councilman Todd Scalzo called the letter of credit, a good idea, a “small insurance policy.”
“This is a 300-unit development in the heart of downtown that will benefit the city and the downtown,” Scalzo said. “And this is the only proposal before us.”