Geneva committee recommends $2M TIF redevelopment deal for East State Street

Geneva alderpersons acting as the Committee of the Whole on July 1 recommended approval of a $2 million tax increment finance deal in an 8-2 split vote.

Great Western Flooring plans to redevelop 122-130 E. State St., an .87-acre site at the southwest corner of East State Street and Crissey Avenue.

It would be a 7,300-square-foot mixed use commercial building with a design center for the flooring business and a second area for retail space, both on the first floor. It would have 14 apartments – up from 12 in the original proposal in 2022 – adding two studio units on the second and third floors.

A tax increment finance district is a development tool local governments use to encourage development or redevelopment in blighted areas that would be too expensive to improve with private dollars alone.

The district then dedicates sales tax and additional property tax revenues generated within the TIF for improvements within the district.

Great Western Flooring, as Emerald RE Holding LLC, the contract purchaser of the site, proposes to invest just under $8.7 million into the project. The city’s support would provide 25% of the project cost.

“If accomplished, it will be the first newly constructed building in TIF 2 and TIF 3 since Aldi was constructed in 2008,” Economic Development Director Cathleen Tymoszenko said. “The project is within TIF 3. That was established in 2016.”

TIF 3 encompasses land both east and west of the Fox River, mainly fronting State Street, Tymoszenko said.

“The proposed development meets five of the six redevelopment plan objectives,” Tymoszenko said. “The only one it doesn’t meet is to rehab or preserve existing buildings.”

The redevelopment plan objectives are:

• To redevelop vacant or underutilized properties

• Enhance streetscape and landscape to improve the image and accessibility

• Replace or repair public infrastructure

• Support goals and objectives of overlapping plans

• Provide opportunities for locally owned and minority owned businesses, job training and increased employment

The initial request in 2022 was for a public-private partnership through the tax increment finance district to close a $1.4 million cost gap.

Joshua Voit, part of the Emerald RE Holdings redevelopment team, said the reason for the increase in the request is the increase in the site cost.

“Stormwater, the building footprint a little bigger, the site grade and some of the engineering behind that, that’s where the biggest expense is,” Voit said.

Fifth Ward Alderperson Robert Swanson questioned how the cost could have gone up so much.

“The cost of the entire construction of the project substantially increased from what we originally thought,” Voit said. “So land cost was fixed. Everything else went up.”

Tymoszenko said the building footprint changed because the city pushed to have attainable or affordable rental units, which the company added as studio apartments.

Tymoszenko said as a project progresses other items come forward that add to the cost.

“When you actually dig down and actually do the engineering, there’s more that you find and more that’s revealed and costs go up,” Tymoszenko said.

An independent third party validated the developer’s operational assumptions according to state law, she said.

According to the redevelopment agreement, the $2 million would come from a mix of sources:

• $350,000 grant from American Rescue Plan Act funds

• $350,000 in an interfund loan to TIF 3 from TIF 2

• $250,000 sales tax rebate

• $1.05 million pay-as-you-go note

Help for East State Street area

“I think it’s important to note that East State Street is definitely a priority,” Tymoszenko said. “A lot of the purpose of that project is the hopes of bringing development forward. And sometimes we’ve got to figure out how to do that in concert because we don’t want to lose a great opportunity because we can’t figure it out in advance.”

The pay-as-you-go note would be provided at the final certificate of occupancy, Tymoszenko said.

Emerald RE Holdings also agreed to create a special service area as a backup if the TIF funds come in less than projected, Tymoszenko said.

A special service area is created to levy a property tax in a specific area to finance certain services or improvements only to that area.

The sales tax rebate would be paid back within seven years, she said.

Second Ward Alderperson Bradley Kosirog said he thought the proposal “really lines up with our redevelopment plan for East State Street and it seems like something that really could spur development.”

“I don’t see any reason not to support it at this time,” Kosirog said.

First Ward Alderperson Michael Bruno said the area was a difficult property to put together for redevelopment.

“I think it will go a long way to connecting the river to the east side to the west side,” Bruno said. “It checks off a lot of our boxes.”

First Ward Alderperson Anais Bowring agreed.

“I think it does further a number of our established goals,” Bowring said. “I hope to see this come to fruition.”

Fourth Ward Alderperson Amy Mayer said she supported the development, but said calling a studio apartment affordable “rubs me the wrong way.”

“It’s just small housing,” Mayer said. “It’s still at the same market rent that you would charge for a regular unit. Attainable maybe, but it’s really just small housing. With this amount of TIF, I wish there was a way to find a means to discount the rent on two units for qualified users, if possible. But I know there’s not really legislation or a way to executive that, which is really unfortunate.”

Swanson and 3rd Ward Alderperson Becky Hruby both voted not to recommend the TIF proposal.

The City Council will take final action.