A private developer looking to build a hotel, movie theater and shopping complex around a Navy-themed museum in North Chicago might not have to pay any property taxes for more than a decade under a proposed economic incentive agreement, a city official said.
The city of North Chicago has long hoped to develop the 33-acre property at the corner of Martin Luther King Jr. Drive and Sheridan Road, acquiring the property more than a decade ago, demolishing the structures there, remediating the property and establishing a tax-increment financing district aimed at bringing in potential developers, said Victor Barrera, North Chicago’s economic development director.
The TIF district, though, isn’t enough to close the deal currently being worked on, Barrera said.
The issue is that the hotel and movie theater in negotiations for the project couldn’t make the numbers work without some sort of financial benefit, said Ken Tucker, a partner with Chicago-based Structures Developments, the real estate company behind the project.
Because North Chicago is a lower-income community, the movie theater in particular had to assume fewer visits and lower ticket prices, he said. To make it work, the theater had pushed for upfront dollars, something the city would have had to fund through debt.
Instead, the city is now working with area taxing bodies to abate 90 percent of the real estate taxes to be paid on the property through 2031, which is when the TIF would have expired, Barrera said. That means the parcel’s taxing bodies would still receive the other 10 percent of the taxes.
The city would also potentially reimburse the developer for that 10 percent using the hotel and sales tax dollars generated by the site, he said. If the property doesn’t generate enough revenue to cover its remaining property tax bill, the city would not have to cover the shortfall.
Over the next five years, starting in 2032, the property owner would pay a larger share each year of its property taxes — 20 percent in 2032, 40 percent in 2033, 60 percent in 2034 and 80 percent in 2035, according to the agreement.
Over those years, the city would continue to reimburse 10 percent of the tax bill, according to a copy of the agreement.
Based on projections prepared on behalf of the city, North Chicago would pay out nearly $1.7 million through 2031 to the property owner to cover the taxes levied by the other seven taxing bodies.
“(The TIF) did its job, but now we need a different tool to make this work for everybody,” Barrera said.
According to Barrera, the city has already received a go-ahead from most of the entities and is just waiting on the College of Lake County, North Shore Water Reclamation District and the Lake County Forest Preserve.
The goal is to have all of the approvals by the end of this month so that the developers can break ground this year, Barrera said.
For North Chicago School District 187’s governing boards, its members wanted to be supportive of the project, but the main question centered on the abatement’s temporary nature and when taxing bodies would see the full taxing value return, Superintendent John Price said. They ultimately approved it in an unanimous vote.
The alternative is no development and no new dollars, Barrera said. He added that the city has built steps into the process to ensure that the land isn’t turned over to the developer unless they hit performance-based milestones along the way.
According to Tucker, the city is planning on selling the land to Structures Developments for a dollar. He also said that because the incentive is built around property taxes, it’s not worth as much if the development doesn’t occur.
“It’s only big, and it only has that bang if the development is a successful,” Barrera said. “If there’s no development, there’s nothing to abate.”
He emphasized that the site has been a difficult one to develop, and that the economic incentives are not something the city takes lightly.
When the city took over the former industrial site, the area was plagued by crime and prostitution, he said.
The goal is to use the proposed development as a catalyst for other development and redevelopment in the area, creating a “domino effect” on adjacent properties and leading to a stronger tax base, more jobs and a more vibrant economy in the long run, he said.
The project as envisioned would include a 107-room hotel, a 10-screen, first-class movie theater and a shopping complex to accommodate local consumers from within North Chicago, area colleges and hospitals, as well as the 50,000 annual visitors that attend cadet graduations at the Naval Station Great Lakes, Tucker said.
Five acres of the property would eventually be donated — once fundraising goals are met — to the National Museum of the American Sailor Foundation so that a museum can be built there, said Tucker, who is also the foundation’s president.
The hope is to raise about $25 million over the next three years to build the museum and design the displays, so that it would be up and running five years from now, he said, pointing potential donors to www.nmasf.org.
A preliminary economic impact analysis completed by Lake County Partners, a nonprofit aimed at bringing in and developing business locally, estimated that regionally, the construction of the museum will have a one-time economic impact of more than $83.5 million, and that the commercial development will have an annual economic impact of $45.5 million.
The development will be a “game-changer for Lake County, city of North Chicago, the city, the park district, you name it,” Tucker said.
“It’s going to happen,” he added. “It’s a lot of hard work, but it’s going to happen.”