Lake Zurich, developer parting ways
Lake Zurich is severing ties with its master downtown developer, McCaffery Interests, and looking to other developers to jump start redevelopment projects that have been stalled for nearly a year.
Village officials made that statement during the annual Tax Increment Finance Joint Review Board meeting Wednesday night while giving area government representatives an update on the status of the downtown projects.
Officials said they have reached an impasse with McCaffery on project costs and cannot afford to wait much longer for redevelopment to occur.
Based the village's original agreement with McCaffery, the developer had exclusive rights to undertake seven phases of downtown redevelopment. Village officials said they have now secured McCaffery's permission to approach other developers without the fear of litigation.
McCaffery's first downtown redevelopment project, the construction of 39 townhouses, is only half complete with no indication whether the developer will finish the project, Lake Zurich Mayor John Tolomei said.
The developer also has backed out of building a five-story condominium building along a stretch of Main Street across from the lakefront promenade, citing a housing market slump and problems getting a bank loan for the project.
"We are both trying to work out how we can separate from each other," Tolomei said. "We have each declared the other in breach (of contract) right now. We have a big unknown right now as to how we settle with McCaffery."
Village officials are also anticipating a roughly $750,000 revenue shortfall in 2008-2009 from the special taxing district that was established for redevelopment over the downtown area.
The TIF district allows the village to capture taxes from increased property values into a 23-year fund to be used for redevelopment purposes. Those funds also pay for tuition costs for students generated from the TIF area.
Tolomei tried to reassure the review board the village will meet its financial obligations to Lake Zurich Unit District 95 until revenues increase.
Village officials plan to transfer money from the village's water and sewer fund to pay the roughly $500,000 it would owe the school district next year.
"That isn't the only alternative and there's other ways this obligation will be met," Tolomei said.
School district officials were primarily concerned Wednesday about how much revenue the TIF will generate down the road.
"It was a red flag for us when they had to make a one-time transfer from the water and sewer fund to cover TIF obligations and included in that is our tuition payment," District 95 school board member John Kropf said.
The school district is working on a $67 million operating budget for next year.
"A half-million shortfall in revenue would be a significant event for us," Kropf said. Over the past couple of years in particular, we've been trying very hard to manage our own house better. We've been squeezing the sponge a lot trying to drive out waste and be more efficient with the dollars that we have to use to educate our kids."