A development in Wheeling's new downtown district will receive nearly $7 million in tax incentives under an agreement to build apartments and retail space at the northwest corner of Dundee Road and Northgate Parkway.

Village board members approved the preliminary agreement Monday with DAC Developments and Atlas Residential, the developers of Uptown 500 at 500 W. Dundee Road. The proposed development includes 321 apartments and 10,000 square feet of retail space targeted for restaurants.

Under the agreement, the village will provide $6.5 million in tax increment financing for the project. Uptown 500 is in the village's Town Center II TIF.

Increased tax revenues generated by new developments in TIF districts are diverted to a fund used to pay for projects within the area. For this development, $6.5 million in TIF funds will go to the developer as the property creates new tax revenue.

Additionally, the village won't make the developer pay for an estimated $475,000 in water detention and compensatory storage.

Developments usually are required to either build infrastructure for water drainage and storage or pay the cost for using space in infrastructure such as lakes or detention ponds already used within the village. In this case, the village won't make the developers pay that cost as part of the incentive package.

The village also is entering a three-way partnership to build additional right-hand turn lanes on southbound Northgate Parkway at the busy intersection with Dundee Road. The village and developers of Uptown 500 and the Wheeling Town Center -- which is located at the southeast corner of the same intersection -- will share in the cost.

Under this agreement, the village will contribute up to $225,000 for the road project.

Initially, the Uptown 500 developers asked the village for $10.7 million in TIF incentives. Officials negotiated down the figure, but as a part of those discussions, the village allowed the developer to build a sixth floor on the project. That will add 59 apartments to the building, potentially making the project more lucrative, Economic Development Director John Melaniphy said.

Developers also decreased the amount of retail space from 12,000 square feet to 10,000 square feet.

With the Northgate Crossing apartments and townhouses completed to the north and the Wheeling Town Center under construction across the street, Uptown 500 is another significant part of the village's first downtown. The three developments will bring a combined 900 apartments to the area.

A formal agreement will be drafted over the next month and brought to the village board for approval.