Enterprise Zone - Request for District 150 to Join

The City and the Devonshire Group are requesting School District 150 to rejoin the Enterprise Zone. The Enterprise Zone is a valuable Economic Development tool that provides incentives for developers to invest in certain types of development in selected areas of the City.

Taxes Received by District 150 over the next four years

Development proceeds $850,809

Doesn't proceed $78,840

* Projections have increased. The original plan just replaced the old Walgreen's. The newer plan brings in a number of additional properties. The cost of the project increased from $10,000,000 to an estimated $24,000,000, with a resulting increase in projected taxes.

Devonshire hopes to build a 5 story new urban building on Main Street on the site of the abandoned Walgreen's building. There would be retail facing the street on the first floor, and residential above the retail. They also plan an additional 3 story building on the back of the property.

Taxing bodies join the Enterprise Zone and provide a five year abatement for the additional property tax paid by new development (Only 4 years is left in our Enterprise Zone unless the State reauthorizes Enterprise Zones Statewide).

The reason they participate is that they believe this incentive will get more developers to invest in the older parts of the city, and that they would not invest here but for the incentive.

All the taxing bodies in the Heart of Peoria participate except District 150. The State of Illinois picks up the cost of the Enterprise Zone incentives for school districts with high poverty. District 150 qualifies.

It does not cost the District to join the Enterprise Zone, although there is a time delay in getting the money. The taxes are very low on the closed the empty Building and adjacent property. If this development goes through, taxes will be much higher. District 150 gets the increase soon.

It takes five years for the rest of the taxing bodies to get the increase. The question is, should we do nothing? That is the safest thing to do. But I believe that it is the wrong thing to do. By helping this development go through we get an increase in numbers of people living in the Heart of Peoria, increases in property, sales, and utility taxes, and another step in revitalizing the Heart of Peoria.


Question and Answers:

Question - Why do the developers need the EZ incentive (with D150 involvement, to boot) to develop the property on Main Street?

Answer - Any development is risky. The safest developments are on undeveloped land (green grass sites). It is easier to buy a large tract of land. Less likely to have costly environmental problems hidden underground. Urban redevelopment is always more difficult. It is harder to assemble the land - usually multiple owners. Older areas have more poverty and crime.

I think you can see that this is true by comparing the level of development in the suburban areas of Peoria versus the older areas. More development takes place in new areas. It is always a struggle to get investment in older areas. We try to equalize the difference between new and old with incentives.

Question - The reason I ask is:

(1) Their spokesman is reported to have said that there’s such a big market for college housing that they will be full virtually overnight; why would such a surefire business plan need additional incentive?

There is a good market. We hired the premier market research firm, Tracy Cross, to assess the market for new close into downtown housing. They said the market was strong, for creative class young professionals, but that renters lead the urban renaissance, and that the rents had to be about $1.00 a square foot. It is hard to build a quality brick building that will rent for that rate without incentives.

Peoria Housing Market Research Study


(2) Since their market is Bradley students, they pretty much have to develop near Bradley—it’s not like other projects where the developer can threaten to move to a greenfield site or across the river.

True. But they are not limiting their clientel to students. They rely on par on the Market Research, which says keep the rents at $1.00 per foot.

Part of the effort of getting developers to come to the Heart of Peoria is to show them that they can get developments approved with incentives without getting beat up by the media and angry citizens. Lots of developers won't put up with the aggravation, and simply take a pass on redeveloping older areas.

(3) They didn’t need EZ or TIF status in Champaign when they developed the Jacobs’ Landing subdivision; it sounds like this Peoria project would have a quicker ROI than that.

I don't know their project in Champaign, but it appears to me that there is a great deal of successful redevelopment downtown near the University. The U of I is an incredible large economic engine, with lots of well paid professors, staff, and some affluent students. I don't know if they are using a lot of incentives there.

But I do know that most successful older central cities that have successfully redeveloped used a lot of incentives. Certainly Chicago and St Louis did. And most older cities like Elgin and Aurora use incentives to help their older neighborhoods redevelop. They don't have to help their suburban areas, which are growing very rapidly.

I recognize how complicated all this. The newspaper article did not explain how District 150 gets all the revenue back from the State.

I think that older cities that don't use a lot of incentives to help redevelop their core end up in pretty bad shape.

Question - But what is the limit of these incentives? We can’t just give them to every developer that comes to town, can we? Or is that the plan? Why not just declare the whole city (the older part, at least) an Enterprise Zone or TIF?

To me, it’s just like taking on debt. Existing taxpayers are picking up the tab for these developers for 5 (EZ) or 23 (TIF) or however many years in the hopes that we’ll see a profit when the EZ/TIF incentives expire.

Answer - No, we can't give incentives everywhere. If you take a look at the Enterprise Zone and TIF maps on my blog at http://peoria.blog.com/ you will see that a fairly small part of the entire city is in a TIF or Enterprise Zone. And not all development is incented. The Enterprise Zone spells out what types of development get incentives. Most residential and commercial development do not get property tax abatement, for example.

Question - Wouldn’t a better incentive be to fix up our streets and sidewalks and streetlights; reduce crime through good town planning, code enforcement, and police intervention; and improving our school system? It seems like we’re throwing money at these developers to get them to locate in places that are not profitable instead of working on the root issue—creating places that people want to live and work so that it will be profitable to invest there. Does that make sense?

Answer - We have to take care of basic services. That is common sense, good government, and good economic development. But we also have to bring investment back into the central city.

Some parts of the city have been in decline for 40 years or more. Some cities write off those neighborhoods. But that is not responsible thinking. We can and will redevelop our inner city neighborhoods. And you have to have private sector investment to do that. And to get that investment, you have to equalize the differential between inner city sites and green grass sites. You have to have incentives.

Question – The property tax estimates are higher now then before.

Answer - Initial estimates of the development were for a $10 million dollar building. The development has gotten larger, and is now estimated at $24 million. That is good news. It substantially increases taxes over time.

The taxes that District 150 will get over the next four years if the development does not proceed is much lower then if the development goes forward. In year 6, all the other taxing bodies get an increase. Sounds like a good thing to me.

The Peoria Journal Star wrote an editorial opposing District 150 joining the Enterprise Zone. Rule number 1 in local government is don't get in fights with people who buy ink by the barrel, so I won't, but I will once again point out that tax revenues for District 150 go up substantially if the development goes through. They stay low if if doesn't.

Words of Wisdom for Economic Development City Planners

Socrates was a famous Greek philosopher. Like many Economic Development City Planners, he was always telling people what to do.

They poisoned him

More Wise Advice for Eonomic Development Planners
When you took this job, you were issued a jar full of marbles. Each time you advocate for an incentive for a development, whether it is a good idea or not, one marble is taken away. No new marbles are ever added for any reason.

After a while, you lose your marbles.

The information below can be summarized by the acronym MEGO (Mine Eyes Glaze Over)