Economic & Community Development Committee

Village Hall Village of Lombard 255 East Wilson Ave. Lombard, IL 60148 villageoflombard.org Minutes Economic & Community Development Committee Bill Johnston, Chairperson Reid Foltyniewicz, Alternate Chairperson Dennis McNicholas, Garrick Nielsen, Matthew Pike, Brian LaVaque, Markus Pitchford, Christopher Carter and Paula Dillon Advisory Members: Alan Bennett and Larry Kelly Staff Liaison: William Heniff Wednesday, May 4, 2016 7:00 PM Village Hall - Community Room SPECIAL MEETING 1.0 Call to Order and Pledge of Allegiance The meeting was called to order by Trustee Johnston at 7:00 p.m. The Pledge of Allegiance was recited. 2.0 Roll Call Present 9 - Bill Johnston, Dennis McNicholas, Brian LaVaque, Garrick Nielsen, Markus Pitchford, Christopher Carter, Paula Dillon, Alan Bennett, and Larry Kelly Absent 1 - Matthew Pike Also present: William Heniff, Director of Community Development; Jennifer Ganser, Assistant Director of Community Development; and Chad Jones, Bradford Real Estate Group. 3.0 Public Participation 4.0 Approval of Minutes A motion was made by Mr. McNicholas, seconded by Ms. Dillon, to approve the April 11, 2016 minutes. The motion passed by an unanimous vote. 5.0 Unfinished Business 6.0 New Business Village of Lombard Page 1 Economic & Community Minutes May 4, 2016 Development Committee 160192 Bradford Real Estate (Mariano’s) Economic Incentive Agreement Recommendation for an economic incentive agreement for Bradford Real Estate to construct a new 74,000 square foot Mariano’s grocery store and ancillary gas station for the property at 345 W. Roosevelt Road. (DISTRICT #2) Mr. Heniff introduced the topic and the staff memo. He noted this project has been occurring quickly and thanked the ECDC for their time tonight. The development petition will go before the Plan Commission on May 16th and IDOT will review the roadway improvements. Mr. Heniff reviewed the existing Kmart site and said it became vacant in January 2013 but was underperforming for many years prior to closing. He said Bradford Real Estate Group is purchasing the entire property, including the Mobil gas station. They propose to demolish the 100,000 square foot building and replace it with an approximately 74,000 square foot Mariano’s, re-engineer the parking lot, and accommodate the grades. The northeast side is proposed for a future gas station. Mr. Heniff noted the numbers are for illustrative purposes. A Trust owns the land and Sears has a lease thru 2045, with options to renew. Mr. Heniff said the “ask” is $3 million in net present value (NPV) to address costs related to the property acquisition, engineering, and the traffic light. Staff used an estimation of $37.5 million in total store sales and accounted for a 1.5% growth rate. Mr. Heniff noted the existing Mobil site may be proposed as an outlet, possibly a restaurant, and those numbers start to occur in 2022. Mr. Heniff said over the nineteen (19) year agreement sales tax is totaled at $7.5 million, however other existing grocery stores may lose sales, therefore a twenty percent (20%) cannibalization factor was accounted for. Next, a fifty/fifty revenue sharing program was set up. Ms. Dillon asked how the estimated $37.5 million sales number compared to other Mariano’s. Mr. Jones said Mariano’s typically does $42 to $72 million in sales with the average store between $40 and $50 million. Mr. Heniff then explained the places for eating (PFE) tax and noted that staff estimates Mariano’s to generate approximately $3 million in PFE. Staff followed the methodology above and took into account a cannibalization factor and a fifty/fifty split. No revenue from the proposed gas station is included in the incentive. Mr. Heniff noted the numbers are conservative and since the incentive is for over ten (10) years a supermajority of the Board of Trustees will need to approve it. Mr. McNicholas asked why the outlot is listed twice and Mr. Heniff said it’s listed under sales tax and PFE. Mr. Nielsen asked when the lease runs out for Mobil and Mr. Jones said the end of 2021. Mr. Nielsen said it’s an assumption that the outlot is developed and open by 2022. Mr. Heniff said the data shows the numbers at play and therefore incentivizes Bradford to find a tenant quickly. Mr. Nielsen clarified the length is 19 years and Mr. Heniff said yes, as Village of Lombard Page 2 Economic & Community Minutes May 4, 2016 Development Committee there are carrying costs in 2016 and 2017. He added that if Mariano’s performs better the incentive will be paid off earlier. Mr. Nielsen asked what the total amount would be at the end of 19 years and Mr. Heniff said $5.36 million. He said when NPV is hit, the incentive is done. Mr. Nielsen asked if NPV is calculated each year. Mr. Heniff said yes, similar to Sam’s Club and each year it is drawn down. Mr. Bennett asked if the total project cost is $25 million and if that includes the purchase of land, the lease buyout, and the construction. Mr. Heniff said yes and noted that the property is currently assessed as fully improved and due to the proposed new smaller building the project has extraordinary costs. Mr. Kelly asked if there will be two gas stations until 2021. Mr. Jones said possibly, and said Bradford could buyout the Mobil lease. Mr. Kelly asked if other Mariano’s have outlots and Mr. Jones said some do. He noted that Kroger recently bought Mariano’s and the new concepts have a gas station in the front as a requirement. Mr. McNicholas asked if a phase II environmental study will need to be completed and Mr. Jones said it already has. Mr. Bennett asked if the Am Vets donation center will stay on the property and Mr. Heniff said that has not been decided yet. Ms. Dillon asked if the terms change if Kroger gets bought. Mr. Jones said that Kroger is a very large retailer and if bought, would be considered a stronger tenant. He said this is a long term lease agreement. Mr. McNicholas said this is good timing with the vacant Dominick’s in Glen Ellyn. Mr. LaVaque asked if Mariano’s will function independently of Kroger and Mr. Jones said yes. Mr. Pitchford asked what the 1.5% of PFE is and Mr. Heniff said it’s the increase over time. He noted that all the improvements occur first and the incentive is on Bradford and Mariano’s to perform. Next, Mr. Heniff discussed the property taxes and said this agreement would bring in the Park District and School Districts 87 and 44. He said a TIF could have been created, but instead an agreement has been proposed to help make the project a reality. Mr. Heniff directed the ECDC to the property taxes received and the net difference. He said the development won’t generate students, but will increase EAV. The agreement shows a fifty/fifty split of the difference to the developer and taxing districts. He referred to page 4 and the percent of taxes to the district. This will be discussed with the taxing districts over the next few weeks. Mr. McNicholas clarified that the Village would receive 50% of the difference, or money we don’t currently receive. Mr. Heniff said yes. Mr. McNicholas asked if the other taxing districts have to sign off and Mr. Heniff said yes. He noted that the other three taxing districts are capped, per State statue, at a ten (10) year incentive, whereas the Village can extend it to 19 years. Mr. Kelly asked if it can be renewed and Mr. Heniff said no. Mr. Nielsen asked how the property tax is handled, if the sales tax revenue is higher. Mr. Heniff said the two are tied together and when the NPV is reached, the incentive is done. Mr. Bennett asked what Village of Lombard Page 3 Economic & Community Minutes May 4, 2016 Development Committee the cap is and Mr. Heniff said $3 million in NPV. Mr. Bennett noted that accounts for 19% of the project costs, over time. Mr. Nielsen said one could make an argument that the numbers are too conservative and the benefit to the Village could be greater. Mr. Heniff said we always to stay conservative. Mr. McNicholas asked about the funding source for the infrastructure improvements. Mr. Heniff said that is from the 1% non-home rule sales tax. He noted that it would be fronted from the Capital Improvements Program (CIP). Mr. LaVaque asked if there would be pedestrian improvements. Mr. Heniff said that has not been discussed yet. Mr. Carter asked if the deal would not move forward without the traffic light. Mr. Heniff said that is a question for Mariano’s or Kroger. Mr. Carter asked if the Village could help and Mr. Heniff said staff and elected officials met with IDOT and that our traffic engineers, KLOA, did a traffic study and modelling of the area. He noted the issue is the distance to the other traffic lights. Mr. McNicholas asked if another chain takes over is the revenue sharing agreement done and Mr. Heniff said that Mariano’s is entering into a ground lease with Bradford. The incentive agreement can be written to take into account a possible sale or new lease. Mr. Heniff said that Kane McKenna & Associates reviewed the materials and believes the incentive and the amount are warranted. He also noted compliance with the incentive policy. Mr. Jones gave an overview on Bradford Real Estate and said they are strictly a retail developer in the Chicago area. Mr. Heniff said they did the Walgreen’s development in downtown Lombard. Ms. Dillon asked if there were any lessons learned from the Wheaton project and Mr. Jones said that site is very different from the Lombard site. On a motion by Mr. LaVaque, with a second by Mr. Pitchford, the ECDC unanimously recommended approval (6-0) for staff to work with Village Counsel, Bradford and any relevant taxing bodies to finalize the terms of an incentive agreements based upon the parameters noted within the staff report. The motion carried by the following vote: Aye: 6- Dennis McNicholas, Brian LaVaque, Garrick Nielsen, Markus Pitchford, Christopher Carter, and Paula Dillon Absent: 1- Matthew Pike 7.0 Other Business Ms. Ganser said Lombard Town Centre has hired a new Executive Director who will introduce herself at the June ECDC meeting. 8.0 Information Only 9.0 Adjournment Village of Lombard Page 4 Economic & Community Minutes May 4, 2016 Development Committee A motion was made by Mr. Carter, seconded by Ms. Dillon, to adjourn the meeting at 8:13 p.m. The motion passed by an unanimous vote. Village of Lombard Page 5