By Stuart R. Wahlin
ROCKTON, Ill.—At Rockton Village Hall Feb. 18, joint review boards related to the village’s two tax increment financing (TIF) districts convened for annual reviews. Rockton’s Wagon Wheel and BeloitCorp TIFs, which lured Fat Wallet and Chemtool, respectively, are meeting expectations, village officials said.
TIF districts are an economic tool intended to encourage investment and development, through incentives, in blighted areas businesses might otherwise overlook. Assessed values within the TIF are essentially frozen, typically for 23 years, while development within the TIF causes the property values to increase. The additional property taxes, or increment, generated as a result are diverted from the taxing bodies that would normally receive those dollars, and placed into a special fund for improvement projects within the TIF.
Rockton’s TIF joint review boards consist of representatives from each of the affected taxing bodies, including the village, Rock Valley College, Winnebago County, Hononegah School District, Rockton School District, Talcott Library and Rockton Township.
Wagon Wheel TIF District
When it left Machesney Park in 2007 to break ground in Rockton, online bargain-hunting destination FatWallet.com employed 42 people. According to Village President Dale Adams, Fat Wallet added 11 employees in 2008 and 15 in 2009. The company is ultimately expected to employ as many as 100.
“In this economy, I think that really speaks well for that organization,” Adams said. “In this economy, it’s hard to attract people to any place in the state of Illinois but, certainly, we’re doing our best to get people interested in this TIF site.”
Adams noted Fat Wallet CEO Tim Storm has also footed the bill to run fiber optic lines to the facility, which Adams said could bode well for additional commercial investment.
“With Fat Wallet getting fiber optics in on the east side of Wagon Wheel Road, I think that’s going to open up some opportunities for his site, too,” he asserted. “He still has control of 20 acres there, and I think that there might be some future growth potential there. And I think that there’s a good chance that Fat Wallet will be expanding into other areas of operation on that site.”
Adams reported there is also retail interest in the former Gunderson Chiropractic building, which has been vacant since Gunderson built a larger facility in the TIF.
“We’re still trying to attract investors to that region,” Adams added, noting there is also interest in the former Sand Trap Bar & Restaurant property on Blackhawk Boulevard.
During the review, Rockton Township Supervisor Tom Jencius brought attention to what he described as “excessive legal expenditures” contained in the report.
“When you’re talking in excess of $200,000 in legal—I mean, at $200 an hour, that’s over a thousand hours,” he said. “What in the world was all of that involved in? I realize you have to write the contracts for the roads, and you have to write the contracts for the sewers and stuff like that, but that seemed to be a fairly large fraction of the capital. If you’re talking $600,000 for the capital improvements, and you’re talking $240,000 for legal, that’s quite a ratio.”
Village Attorney Gino Galluzzo, of Nicolosi & Associates, argued the legal expenditures are less than $200,000, and that the numbers provided are cumulative, including the TIF’s creation, developer negotiations, foreclosure proceedings and other related expenses.
“This included from A to Z, really,” Galluzzo explained. “It included much more than just the TIF creation and development agreement. Each of these deals stands on their own. They’re all based on hours and time put in to file.”
Galluzzo said the main objective of the TIF was to clean up the former site of the Wagon Wheel Resort, which posed a number of problems as a fire-prone ruin.
“The TIF is not only paying for that,” he said, “but also is paying for the improvements to Wagon Wheel Road. So, the good news is, even with the little development that we’ve gotten out there…it’s paying for itself and we’re bringing in $143,000 of increased taxes that we weren’t before. We’ve stopped the EAV from going down and there’s a lot of upside potential. There’s a lot of acreage out there.”
According to 2008 tax records, Fat Wallet property taxes contributed $84,076.62 to the TIF fund, and Gunderson’s property taxes accounted for $15,479.56 into the TIF.
“I believe the TIF will continue to remain successful, and if we get one or two more properties, we’ll have more dollars in the TIF,” Galluzzo added. “If there are no other capital expenditures, other than a small sewer line, then we can accelerate payback on our notes, and then distribute surplus.”
Even if more investment is lured into the TIF district, Galluzzo indicated he doesn’t foresee a distribution of surplus for at least three or four years, however, because of the lag in the taxing cycle.
“That’s why it’s important that we get out now from ‘covering itself,’ which is what the TIF’s doing, to getting to an area where now we have surplus,” he said.
BeloitCorp TIF District
The former home of BeloitCorp, an Environmental Protection Agency (EPA) Superfund cleanup site, posed challenges to the village for years. Rockton officials said creating a TIF district on the site was critical to luring industrial lubricant manufacturer Chemtool to Rockton from its headquarters in Crystal Lake.
“It’s been a slow process, but it’s certainly a worthwhile process,” Adams said.
He reported Chemtool presently has 60 employees on the site, and that 40 additional employees will be relocating from the Crystal Lake facility at the beginning of March.
As a result of Chemtool owner Jim Athans’ investments, Adams estimated the challenged property is now worth approximately $15 million.
“Two years ago, when we first set this up, it was considerably less than that,” he noted.
According to a Web site promoting the TIF, Adams required a commitment from Athans to build a 75,000-square-foot office building on the site.
That does not appear likely, however, because Athans instead purchased the nearby Woodward Governor building in August—outside of the TIF district—for use as Chemtool’s corporate headquarters.
Adams described Athans’ change of plan as a positive.
“By doing that, it eliminated the need to put a corporate headquarters…in the TIF,” he said.
“In other words, the taxing base for Woodward’s all spread out to be distributed to the taxing bodies,” Adams added. “So, I think that’s good for all of us.”
Galluzzo explained the equalized assessed value (EAV) of the Woodward Governor property was continually decreasing because of underutilization. That trend, he said, would only have grown worse if the building had become completely vacant when Woodward Governor moved its Rockton operations to its Loves Park facility.
“Mr. Athans and his company buying the Woodward property is very positive, because it stems the tide of the EAV continuing to go downhill,” Galluzzo asserted. “He has plans to add on to that facility and renovate the interior, all of which should increase the value to keep it from going down.”
He noted, “Those tax dollars are immediately distributable.”
As part of the original TIF agreement, Athans sought $6.5 million in incentives to build a new corporate office on the former BeloitCorp site, plus about $2 million in infrastructure improvements.
Athans essentially loaned the $2 million to the TIF for the improvements, which Galluzzo expects will be returned in full, although only $1 million was guaranteed by the village.
Dean Mohring, a Rockton Township trustee, questioned the necessity of the TIF in hindsight.
“When you came out with this ‘Chemtool is coming to Rockton,’ [village materials promoting the TIF] you said in there that he would not come unless he had a TIF,” Mohring said. “And that’s fine, but here, all of a sudden, he comes up and he’s the one that’s funding his TIF. He didn’t have the money before, but now…”
Galluzzo interrupted: “I didn’t say he didn’t have the money. That’s a different question, Dean. Whether he had the money or not has nothing to do with whether or not he would come without the TIF.”
The materials Mohring cited states, “ChemTool has made it clear that it cannot proceed with its plans to rehabilitate this property without assistance from the community.”
Mohring also noted that when Chemtool previously considered moving its headquarters to Garden Prairie, no TIF district was requested.
“I know what he said here, and that’s all I can talk to,” Galluzzo responded. “He said here: ‘I want the TIF. I need the TIF.’”
After the meeting, Mohring indicated: “The reality and the promotion bear little resemblance. No matter how they spin it, this hasn’t been a good deal for the village.
“If the village can’t run the TIF districts profitably, how can they spend 48 million to take over a electric and gas utility and run it profitably?” he wondered, referring to the village’s desire to purchase Rock Energy Cooperative’s local distribution systems.
Mohring noted Athans had also promised to donate land for a park. Although that has yet to happen, Adams said Athans has planted more than 600 trees in the community.
Mohring said he’s also waiting for the “hundreds of jobs, salaries and benefits” that were touted before the TIF district was approved.
Chemtool has promised 350-500 jobs in Rockton as the company consolidates operations from its other plants. Adams said he’s confident the job projection will be met.
Because Athans no longer plans to construct the office building in the TIF, the $6.5 million in incentives are unlikely for Chemtool.
“It’s a carrot,” Galluzzo explained. “He only gets it if he creates it. If he doesn’t create it, he doesn’t get it.
“He knew that’s the risk if he didn’t perform, so I think it’s worked out for the benefit of everybody,” he indicated.
“Mr. Athans was fully aware at the time we entered the deal that he most likely, unless he built an office building, was not going to get any of the six-and-a-half-million dollars,” Galluzzo added. “He might get a small portion of six-and-a-half million, but without building any new buildings out there, he’s definitely not gonna get anything substantial of that six-and-a-half-million-dollar note back. It’s revenue-based only. It’s only based to the extent he generates increment.”
Officials say the situation puts pressure on Athans to lure other investment to the site.
Winnebago County Deputy Director of Regional Planning & Economic Development Jim Hughes asserted, “I’m quite sure that if he wants that 6 million, he’ll be doing that.”
Galluzzo added: “We’re very satisfied with Mr. Athans. He’s kind of the envy of the area. He does very well for his company, and if he does bring something else, whether it’s the growth of his company, or bringing other companies here…then there’ll be additional increment there.
“The water and sewer that were extended out there not only benefited his property, but there’s some other properties that could potentially benefit later,” Galluzzo noted, referring to nearby Quonset huts and Paperchine, Inc., both of which also lie within the TIF’s boundaries.
“I think it’s been a success. There isn’t going to be any liabilities in this TIF,” Galluzzo added, noting he expects annual surpluses to be paid out to the taxing bodies.
From the Feb. 24-Mar. 2, 2010 issue