Special Report: Teetering on the Edge

Tax credits for development under the knife in budget showdown

By Shane Nicholson
Managing Editor

A state program that has provided crucial funds to redevelopment projects in Rockford is set to be a casualty of the ongoing budget showdown in Springfield.

The River Edge Redevelopment Zone (RERZ), legislation providing tax credits for historical redevelopment in five Illinois cities including Rockford, is caught up in the mix as Governor Bruce Rauner (R) and Speaker of the House Mike Madigan (D, Chicago) drive the state closer to a shutdown with fiscal year 2016 less than a week away.

Landmarks Illinois says RERZ projects have brought over $120 million in private investment to projects in Rockford since 2006. Currently, the Condon-Shumway Building on Cedar Street and expansions of the East Rockford Historic District have projects in works that plan to utilize the RERZ program.

“This is a tool that doesn’t cost the state any money,” State Senator Steve Stadelman (D, Rockford) told The Rock River Times Tuesday. “It’s been the one economic development tool we’ve had in this area and it’s important to have it on the table moving forward.”

Dan Hohl, Government Relations Director for the American Institute of Architects Illinois (AIAIL) agrees, but says the RERZ has been placed on the back burner due to the pressing need for an operating budget to keep the state open for business.

The Condon-Shumway Building at the corner of Cedar and Rockton is a target for planned historical redevelopment projects. The River Edge Redevelopment Zone program that would provide tax credits for work on the structure iscurrently set to be allowed to expire at the end of 2016, causing problems for developers across the state. Provided
The Condon-Shumway Building at the corner of Cedar and Rockton is a target for planned historical redevelopment projects. The River Edge Redevelopment Zone program that would provide tax credits for work on the structure is currently set to be allowed to expire at the end of 2016, causing problems for developers across the state. Provided

“We’re at a crossroads with the budget and a lot of times credits aren’t awarded until an operating budget is decided on,” he said.

“Even in the past years when this extension has occurred they’ve passed an operating budget and credit items are implemented after the fact.”

Sources told The Rock River Times over the weekend that the credit extension for Rockford had been placed in jeopardy due to Mayor Larry Morrissey’s backing of Rauner’s right-to-work programs and his larger Turnaround Agenda.

Speaker Madigan was reportedly upset at the leader of one of Illinois’ largest cities stumping for the governor as his caucus fights to keep key components of the GOP leader’s legislative agenda from being passed.

But sources close to Madigan’s office say that time line doesn’t add up. One person with close ties to the speaker said that the RERZ was simply another item that the governor and his allies have targeted to effectively hold hostage as they try to wrangle a budget deal in Springfield.

“The governor has already gone after budget items that are used to attract business to Illinois,” they said, “and I’m sure the RERZ bill would be something he would target.”

State Rep. Litesa Wallace (D, Rockford) says that legislators’ focus has been on passing a working budget but that programs like RERZ are still high priorities as discussions continue.

“It’s my goal to have legislation benefit Rockford and the surrounding community,” she said Monday. “(RERZ) has obviously made a big impact on our area and has attracted investors to the area.”

Marge Bevers of B & B Properties says developers are concerned as the Dec. 31, 2016 deadline for the program leaves little time for new projects to be completed.

“It will be hard to put more buildings in line for these benefits unless the new projects are on smaller buildings and plan to start this summer,” she said via email.  “To receive the funds the developer or owner must complete the project and have a Certificate of Occupancy by the deadline.”

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The Rockford Brewing Company’s Prairie Street complex was the first project in Rockford to take advantage of RERZ credits. Photo, Jon McGinty

Gary Anderson, President of the River District Association and noted historical architect, says, “This continues to create economic pull we need here in Rockford. It’s going to put people to work.”

Anderson says RERZ is in line with Rauner’s pro-business platform and should be a priority for the governor.

“This is about as pro-business as you can get in terms of creating jobs, creating opportunities for people, growing business, retaining business. These are all things it’s about.”

He points out the success of projects such as the Rockford Brewing Company’s Prairie Street complex as well as Urban Equity Properties’ use of the program as results of its economic potential.

Scott Christiansen, Winnebago County Board Chairman, says that frustrations over the lack of a resolution are holding up plans from moving forward.

He described the situation as tense although it appears all parties agree that RERZ is a crucial element of the redevelopment of Rockford and the rest of Winnebago County.

“The RERZ is a tool we really need,” he said. “It’d be extremely unfortunate if this program was allowed to lapse. We need every tool in the box we can get.”

County board member John Guevara (R, District 19) echoed Christiansen’s stance. “Tax credits help, I don’t care where they are. They help this region. The spending is incumbent on there being development and if there’s development you increase tax revenue.”

He said it’s critical for all local entities to get on board and work to make sure RERZ is extended beyond its current sunset date.

“If we don’t have everyone on board saying this has to happen that could be trouble. This area is one that’s standing on the point of a pin.”

Hohl said that while he doesn’t feel Madigan would hold up a key project like RERZ for an area such as Rockford, historical tax credits can be a touchy subject in the state legislature.

“The Senate has held some hearings and has been accepting of the (RERZ), but historic preservation in the past has hit a roadblock in the House.”

Wallace says that any perceived roadblocks in the House shouldn’t be a problem to re-certifying the program.

“I’m not pessimistic that we will lose it,” she said, “but we’ve been focused on a budget for the state that addresses key operational and social services that we need.”

“I hope we can incorporate it into any final budget agreement,” said Stadelman. “It’s a difficult process but right now I think we can do that.”

He stressed the growth that RERZ has encouraged in the region. “This tax credit brings in more money, period. It will generate business and revenue that wouldn’t be there in the first place. It’s a net benefit to the state that doesn’t cost money.”

And sources say that Madigan would have a political interest in extending the credits for Rockford, as well as the zones in Peoria, East St. Louis, Elgin and Aurora.

“He’s got to protect seats in those cities,” one source close to the speaker said Tuesday. “The move of the (Department of Commerce and Economic Opportunity) toward privatization is impacting on the RERZ extension.”

“We need to continue to put pressure on the state to show just how important this is to our community and the other communities that are jumping on the bandwagon,” said Anderson.

“There has been a strong push by the other cities to help get the extension so they can utilize it better. It’s taken a few years to catch on but (Rockford) has been more proactive than the rest.”

Stadelman agrees that moving on RERZ should be a bigger priority, and one members on both sides of the aisle should back.

“In the downtown area there had not been a lot of interest from the private sector. This has been one tool that’s really driving private development in Rockford and I would argue we need to get (the extension) in place sooner rather than later.”

“I’d rather have us look like a little Madison than a little Detroit,” said Guevara.

“Everybody knows what’s at stake, but in this particular case (developers) need  assurance to be able to spend the money because you’re going to get it back ten-fold for the area.”

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