Report: East Dundee must create new TIF to assist with Caterpillar development

A consulting firm has determined East Dundee needs to create a new tax increment financing district, rather than expand an existing one, to assist the development of a Caterpillar sales and repair center.

The proposed TIF is expected to include about 23 acres designated for the $15 million facility at Route 72 and Christina Drive, as well as a vacant parcel owned by Plote Property Management, village attorney Gregory Smith said.

Roughly 38 acres were recently annexed into the village to accommodate plans presented by Iowa-based Altorfer Inc., a dealer of Caterpillar parts and equipment. The company intends to vacate its existing Elmhurst location within the next year and move portions of that operation to four towns, including East Dundee.

Last week, the village board unanimously approved rezoning the project site from a single-family residential district to a limited manufacturing district. Additional site changes also were granted.

The village has been working with Wisconsin-based Vandewalle and Associates to help determine the feasibility of incorporating the Caterpillar project into special taxing districts. Though officials initially considered adding the property to an existing TIF, consultants determined the village would need to establish a new TIF due to the existing land use, Village Administrator Jennifer Johnsen said in a memo.

Despite having "excellent visibility" along Route 72, the site poses unique challenges for potential developers, largely because of a lack of infrastructure in the area, according to a draft eligibility report and redevelopment plan posted on the village's website.

"The village board concluded that appropriate development of the area would not occur without the creation of a (TIF)," the document states. The study and plan are expected to be presented at a future meeting.

Once a TIF is established, the village could move forward with a development agreement with Altorfer allowing the company to recapture 60% of incremental property tax revenues generated at the site, capped at $1.52 million, documents show. In a TIF district, property taxes above a certain level are funneled into development rather than to local governments.

The village also would pay back all business development district sales tax dollars generated by the project through 2031 - an estimated $500,000.