Funding questions remain for Wheaton apartment proposal

A Chicago-based developer wants Wheaton to pay $2.7 million to support a luxury apartment complex downtown, but some city officials are expressing possible concerns.

The city council Monday unanimously directed staff members to continue negotiating Morningside Group’s request for tax increment financing district funds for the construction of a 306-unit, six-story apartment complex on the corner of Front and Cross streets.

Tax increment financing districts collect increased property tax revenues from redevelopment. The funds can be used for improvements within the district instead of going to taxing bodies such as schools and parks. The districts aim to encourage development that would not otherwise occur.

Under Morningside’s request, $1.8 million in TIF money would be used to pay costs of improvements to the site, including public sidewalks, burial of power lines and landscaping. Almost $900,000 in TIF funds would go to interest costs for financing the project.

The interest costs sparked concerns among several council members.

“That just strikes me as totally disproportionate and unreasonable in the context of the TIF,” Councilman Phil Suess said. “My suggestion is we come up with a different type of structure through which to fund these public improvements.”

Nancy Hill, of Ehlers Inc., the city’s financial adviser, presented an analysis to council members, showing that the TIF money makes the project economically feasible.

Ehlers based the analysis on the developer’s goal of generating an 8.5 percent return on costs in the first year the project maintains 95 percent occupancy — projected to be in 2016. Monthly rent at the complex is expected to range from $1,000 to $2,300 a month.

On Monday, the council also approved the developer’s zoning application for the site near the Wheaton Public Library against the planning and zoning board’s recommendation. In June 2011, the city ended an agreement with Norwood-Wheaton LLC to develop the vacant site after the company failed to meet deadlines for a 198-unit condominium development and defaulted on a bank loan.

Mayor Michael Gresk said there are no deal-breakers in the Morningside project, but he wants negotiations to consider improvements that the city would typically finance.

“We’ve had other experiences which we’ve learned from,” Gresk said. “The idea was that if it’s going to be TIF, it’s going to be something we would do anyway.”