Palatine housing project reps say facility makes financial sense

  • Catherine Alice Gardens is a permanent supportive housing facility being proposed in Palatine for people with disabilities. Critics have questioned some of the financial figures cited by its developers.

    Catherine Alice Gardens is a permanent supportive housing facility being proposed in Palatine for people with disabilities. Critics have questioned some of the financial figures cited by its developers. Courtesy of NAMI

Updated 7/2/2013 5:26 AM

Although the majority people against the permanent supportive housing facility proposal in Palatine point to concerns over safety and property values, another recurring argument focuses on its price tag.

Some opponents of Catherine Alice Gardens, a 33-unit affordable apartment building coupled with supportive services for people with disabilities, say the project doesn't make financial sense or spend tax dollars appropriately.


The most common calculation brought up is the one showing the average unit costs north of $300,000 when taking into account the total project cost of $10.5 million. Larger condominiums a block east of the proposed site at 345 N. Eric Drive currently are listed for less than half that.

But that figure, Catherine Alice Gardens representatives maintain, is extremely misleading.

"Right, $318,000 in construction costs to develop a unit would be high, but that's very far from the complete picture," project manager Jessica Berzac of UP Development said Monday during a meeting with the Daily Herald Editorial Board. "We have extraordinary costs that go way above and beyond what a standard, market-rate developer would do."

Berzac, whose for-profit company is working with the Kenneth Young Center, Alexian Brothers and the North/Northwest Suburban Task Force on Supportive Housing for Individuals with Mental Illness, said construction will cost $172 per square foot, in-line with new construction in the area.

But there also are legal, architectural and consultant fees, as well as costs associated with syndicating tax credits to raise capital. The facility comes furnished, adding about $6,000 per unit. And there will be nearly $700,000 in cash reserves available for 15 years to help with any potential hiccups, Berzac said.

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"In year five, we can't just double our rent to deal with a huge tax increase or if the electricity bill goes way up," Berzac said. "We don't have that ability to put that pressure on our residents."

Berzac said that because of the added layers of security and regulation that the government and private investors require, the company's profit margin is far below that of a standard developer.

In breaking down the financing, Berzac said about $8.5 million is eligible for tax credits under a program created in the 1980s to spark more affordable housing. At a 9 percent rate, which is the tax credit allocated to states on a per capita basis, that totals $769,000 in federal tax credit. It can be taken each year for 10 years.

The partnership then sells those credits to private investors such as United Healthcare, which invested in the new Myers Place permanent supportive housing facility in Mount Prospect. Berzac anticipates getting 94 cents on the dollar, creating tax credit equity of $7.1 million to be received at closing.


Project representatives say taxpayers ultimately will come out ahead because it costs more to house people with disabilities in more intensive housing than they need.

Hugh Brady, president of the National Alliance on Mental Illness Illinois affiliate, said the cost of housing someone in a facility such as Catherine Alice Gardens is about $20,000 a year, compared to $40,000 annually in a nursing home or institution for mental disease. He also cited a 2009 study by the Heartland Alliance that showed a 39 percent reduction in the total cost of services used by Illinois residents who entered supportive housing.

Plus, the hope is that residents will benefit from the supportive services to the extent they eventually can attain employment, further lessening the burden on taxpayers.

Another important point, Brady said, is that the federal government already allocates monies for these types of projects.

"If the Palatine project isn't built, those tax dollars will be spent somewhere else," Brady said.

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