By Stuart R. Wahlin
Winnebago County Board Chairman Scott Christiansen (R) has a plan he thinks could raise $75 million for reinvestment in downtown Rockford. Meantime, however, Rockford Mayor Larry Morrissey (I) is distancing himself from the proposal that could directly benefit his beloved downtown, at least for the time being.
Morrissey has said he’ll withhold any endorsement of the plan, unless it is received favorably by downtown business owners, some of whom are among his most significant contributors, noting, “This is one where I think the leadership’s gotta come from the private sector. It’s gotta be a tool for them.
“I’m hearing some pros, some cons, but I think there’s still a real need for more information and more scenarios,” Morrissey said. “Certain people would be for it, and certain people not. I want to make sure we’re all talking apples-to-apples comparisons.”
While the mayor’s apprehension is understandable, it is unfortunate he’s not taking a more active role in exploring the initiative. He’s noted his plate is awfully full right now, and it is, but it seems self-defeating to take such a passive position in a proposal that could bring millions of much-needed dollars to the city. I would think the policemen, firefighters, public works employees and taxpayers of Rockford might have something to say about that. Perhaps things would be different if the mayor had thought of it first, but Christiansen presently stands alone in sticking his neck out with this idea.
Rather than rushing to Christiansen’s side, Morrissey points to the city’s own efforts at reviving its core, adding, “We’ve got plenty of other work to keep us busy.
“There’s so many initiatives right now that are very positive, very good, moving forward. I certainly appreciate the opportunity of dialogue on this, but there’s a ton of really exciting things we’re working on,” he said. “The city’s leading on a number of different initiatives downtown, whether it’s been work on the MetroCentre, moving towards our RAVE [Rockford Area Venues and Entertainment] model, or it’s been our riverwalk efforts, or it’s been the Main Street mall.”
The chairman, instead of the mayor, is taking the lead in testing the waters for a proposed tax on commercial properties in a potential special service area (SSA) in an effort to increase the downtown’s real value through reinvestment of those additional tax dollars, and without having to resort to huge general fund expenditures to do it.
That is not to say, however, that the chairman endorses his own plan without the blessings of stakeholders. Still, it appears that only Christiansen has the courage to investigate the possibility while city leaders, who should be more directly involved and who would have to take action to implement the plan, have put themselves in the back seat, leaving Christiansen to take any flak the proposal may generate. But in the end, it’s praise they may be estranging themselves from.
The top county exec, not city officials, is diligently taking the pulse of the downtown business community, and Chairman Christiansen is to be applauded for developing a potentially-viable plan, even if downtown stakeholders ultimately take a pass on the idea. At least he’s trying, and it’s comforting to know someone is, even if it’s not necessarily the ones who were specifically elected to take a keen interest in the well-being of the city.
In the days to come, it will become clear enough whether a majority of affected taxpayers—the SSA requires approval by 51 percent of the commercial property owners in the proposed taxing district—will warm up to the plan. If they do, rest assured the backseat drivers will be calling “shotgun” for the accolades.
This wouldn’t be the first SSA downtown has tried, but it is the most ambitious. In the 1990s, a short-lived SSA was abolished by business owners after performing poorly, but Christiansen thinks his idea will work better.
For months, city and county officials have been contemplating ways to encourage further investment downtown. Christiansen has a concrete proposition, not a feel-good dream, which is more than can be said for most other elected officials who could be leading the charge.
“Clearly, the extremely low property values of downtown causes the rest of us to pay a larger percentage of property taxes,” Christiansen explained. “This needs to change.”
He noted our area is crippled by the highest property taxes in Illinois—about 3 percent of a home’s market value paid each year—and that taxpayers simply can’t count on state or federal assistance to turn things around. Instead, Christiansen asserted we should be “creative in leveraging the dollars we do have.”
The chairman’s draft recommendation suggests a $20 million bond issuance, the debt obligation for which would be paid from the increased property tax revenues—40 cents per square foot of building space—in the proposed downtown SSA. Mind you, those who’d be paying the tax would have to sign off on the idea first, but they’d also have the discretion to dissolve the SSA if it doesn’t meet expectations.
The SSA’s approximate, tentative boundaries are Morgan Street on the south, Avon Street on the west, Longwood Street on the East, and Whitman Street on the north.
For a new SSA to work, Morrissey said: “It would have to be something that the private sector says, ‘It’s a good deal.’ Otherwise, why would you do it? I mean, this is trying to encourage private sector folks, and why would they voluntarily raise their own taxes? Well, there’d have to be a significant upside to it.”
Christiansen indicated 75 percent of the bond proceeds would be made available immediately to commercial property owners paying the additional taxes. The SSA would match half of a property owner’s own investment in improvements. Those improvements, Christiansen believes, would generate new increment in Rockford’s lackluster downtown tax increment financing (TIF) districts by way of improved property values.
TIF is a financing tool meant to encourage development in blighted areas where assessed property values are artificially frozen within the district, typically for 23 years. As development occurs during that period, the resulting tax revenues from increased property values go into a special fund for reinvestment within the district. The SSA proposal, Christiansen believes, would help increase downtown property values, thereby providing a more sizable increment for additional redevelopment, and less of a need to rob successful TIF districts to rescue failing ones.
“This formula potentially closes the gap created by undervalued downtown property,” Christiansen added.
Morrissey, however, argued some downtown property owners have already paid their dues.
“I can see how the proposed SSA would be designed to try to spur activity, spur redevelopment, but what if you’re a business that’s already made your investment?” he argued. “I think of my own father, who owns a property [the Morrissey Building] down on Wyman Street that I used to be involved with before I got elected. They’ve already made their investment. It was a significant one. How would this help them, and would they be able to pass on if they’ve got gross leases, as opposed to triple net-style lease that they’re involved with?”
According to Ald. Doug Mark (R-3), who represents a large portion of the downtown area, several businesses already oppose the tax increase.
Referring to a letter he’d received from former Ald. Jeff Holt (D), commercial property manager for Fridh Corporation, the increase might be hard for many downtown property owners to swallow. The Stewart Square building at 308 W. State, according to Holt’s letter, would pay an additional $51,000 per year in property taxes, or more than $1 million over the 20-year life of the SSA.
“The increase created by the SSA would go anywhere from 44 percent up to 92 percent, so there’s certainly some concern as we move forward,” Mark indicated. “I certainly commend the chairman for his desire to become a part of the discussion, because I think that’s important, and some things that we’ve lacked previously.”
The goals of Christiansen’s plan notably include demolitions of downtown buildings, both publically and privately owned.
In April, during his State of the County address, Christiansen outlined the need to eliminate structures that have been vacant too long. The buildings, he believes, are too outdated to feasibly meet the needs of potential buyers.
“It’s critical to the overall success of our region that downtown Rockford be revitalized,” he argued. “Right now, as it’s been said, downtown is not underdeveloped—it’s under-demolished.
“We must quickly outline and execute a plan that includes redevelopment and a whole lot of demolition of the obsolete and dilapidated buildings, most of which are not on the tax rolls anyway,” he foreshadowed during his speech. “The county has joined with Rock River Development Partnership. They are stakeholders and have a vested interest in downtown, and they are the right group to guide and spearhead this effort, especially if we are gathering the necessary financing in order to move quickly. Every funding tool and resource will be considered, including TIFs, landfill host fees, federal stimulus bonds, state grants, selling of assets, and the establishment of a special service area.”
City leaders, however, appear resistant to give up hope that Uncle Moneybags will swoop into town to save the day by purchasing properties like the Tapco and Amerock buildings to magically transform them into a hotel, conference center, or anything else. Despite the city’s consideration of razing these buildings, the eyesores remain standing, impeding progress along the downtown riverfront.
Asked whether he agreed with Christiansen’s eagerness for demolition, the mayor responded: “I think there’s appropriate areas. He and I typically will agree on a lot of the final ends, and sometimes disagree on some of the means to get there, but we work very well together, and that’s the type of discussion we need to be having. What do you do with what some would call eyesores?
“If you can’t find an economic way to redevelop it, then what are you doing?” Morrissey wondered, specifically referring to such buildings. “If you don’t have the ability to redevelop them, are you ever gonna have the ability to redevelop them?”
This is where the hope factor comes into play. Morrissey optimistically pointed to the City of Peoria, for which Gov. Pat Quinn (D) recently signed a bill for a state historic preservation tax credit for the city’s Hotel Pere Marquette.
“The 25 percent, I believe it is, state tax credit, when combined with federal tax credits, that’s the type of gap-filler that may make that project work,” he said, noting he’s exploring the possibility of similar legislation for Rockford in the next legislative session.
“I certainly think we’ve got, like Peoria, a great case to make about our desperate need for economic development incentives,” he asserted.
City officials shown up by county leader?
Asked whether he feels any city toes are being stepped on by the county with the proposed SSA, Morrissey responded: “I love the fact that we finally have a county board chair and a county board that is interested in helping. We may not agree 100 percent. I wouldn’t expect that, but I’m glad that I can say, gone are the days where the county didn’t remember the city was part of the county. So, to that extent, I’m very happy to look at these ideas.”
Under Christiansen’s plan, $5 million of the bond issuance, which would then leverage $10 million in state grant funds, would be made available for acquisition and demolition of such roadblocks to downtown investment, or for things like streetscaping, sidewalks and lighting. The remaining $15 million in bond proceeds would go into the matching fund for downtown property owners, compounded in theory by their $30 million in private investment. The $60 million worth of total investments, Christiansen anticipates, would result in $15 million of new TIF revenue, which he says will, in turn, only encourage additional reinvestment.
“Obviously, this greatly enhances the downtown TIF [increment], and does not include other funding possibilities, such as historical and new market tax credits,” he added. “One important issue to resolve is the use of TIF proceeds, given the eight different TIFs in the downtown area.”
Christiansen suggests amending the TIF district boundaries to conform to the proposed SSA’s borders.
“In this way, funds can be used for any project without having to account from one TIF to another, and there will be a full 23 years of TIF life for all property in the targeted area,” he explained.
By law, TIF funds may only be transferred from one TIF district to one adjacent to it, which has resulted in a shell game perpetrated by the city that robs and punishes successful TIF districts to bail out failing ones. Just ask Midtown District President Jim Phelps, who has been witnessing massive extractions from Seventh Street TIF District funds by the city for things completely unrelated to midtown. Meantime, Phelps learned that eventually being granted the group’s $30,000 funding request from the TIF district it made successful was like pulling teeth after months of persistence, while the city is now poised to draw twice that from the Seventh Street TIF District to give to The Element, which has little or no interest whatsoever in midtown.
Simply, this practice is in direct conflict with the spirit of TIF, which aims for revenues to be reinvested in the district that generated them. As has aptly been critiqued in the case of Chicago Mayor Richard Daley’s (D) TIF program, when not used properly, TIF districts aren’t so much a reinvestment tool as they are a personal piggy bank with little oversight by taxpayers.
Rockford’s TIF program is an abysmal failure, and taxpayers should abide no further such nonsense. Former County Board member Pete MacKay would likely call TIF districts “corporate welfare,” and he’d be right, but Christiansen’s proposal is different in that the business owners—not all the other taxpayers—would be taking ownership of their success or failure.
With aldermen facing the likelihood of having to reach into the general fund to liberate the debt-ridden TIF districts they’ve complacently gone along with, one wonders why only a county official has the guts to take the lead in examining the potential of an SSA.
The proposal is based on language in the state’s TIF Act, which states, “If a special service area has been established pursuant to the Special Service Area Tax Act or Special Service Area Tax Law, then any tax increment revenues derived from the tax imposed pursuant to the Special Service Area Tax Act or Special Service Area Tax Law may be used within the redevelopment project area for the purposes permitted by that Act or Law as well as the purposes permitted by this Act.”
Christiansen has recognized that downtown’s underperforming TIF districts simply aren’t meeting the area’s many needs, like demolition, implementation of parking improvements as recommended by a $124,500 study the city commissioned in 2007, public improvements, matching grants for private investment, and encouraging development of vacant or underutilized properties.
“The downtown properties have historically been appraised at much lower values than similar properties located elsewhere in Rockford,” he noted. “In addition, commercial rental rates downtown are estimated to be 26 percent lower than all-in costs for properties not within the downtown area, due in large part to the disparity in property taxes and quality of the facilities.”
Under the plan, Christiansen anticipates occupancy costs will remain 26 percent below comparable spaces in other parts of town, like the sprawling east side. Although property taxes for downtown properties would increase under the SSA proposal—which would have a 20-year life, unless a majority of the stakeholders change their minds along the way—Christiansen does not believe the additional taxes will negatively impact rental revenues.
Not just about downtown
Those who have little or no interest in the health of Rockford’s heart can take comfort in knowing downtown businesses would be footing the bill, instead of spreading it out over the entire city or county. What’s more, Christiansen asserts, there’s a good chance property taxes outside the downtown area will go down as a result, so this plan should be of interest to all property owners who are paying way too much for too little.
It’s difficult to justify any sort of tax increase or issuing new debt, now more than ever, which is why Christiansen has justly left the decision of whether to embrace the plan in the hands of the entrepreneurs who would bear the burden, or reap the most direct benefits. These stakeholders—and not just the big ones, like SupplyCore—should also be the ones who would oversee how the proceeds are allocated, which will ensure that the business community, not government, will determine downtown’s direction and destiny.
This publication isn’t always in agreement with Chairman Christiansen, but he deserves a pat on the back in this instance for the time and energy he’s devoted in the name of prosperity for downtown Rockford, which the entire county has a stake in, even if the downtown stakeholders send him back to the drawing board.
It’s a proposal worthy of consideration, at the very least, and that’s more than city leaders have been offering as of late.
From the Aug. 4-10, 2010 issue