An Oregon property developer has requested $876,992 in financial assistance from the Village to build a 49-unit, three-story apartment building with underground parking at 870 and 880 N. Main St., currently home to a long-time automotive business Erfurth Body Shop.
The application for tax incremental financing was submitted by Adam Coyle on Feb. 28 on behalf of Oregon Apartments, LLC.
The projected cost of the apartment building’s construction is $9,283,141.
Coyle said the financial assistance is needed to attract investors, to cover lender debt coverage requirements and to mitigate the appraisal gap. Also, preparing the land for construction will incur some additional costs including demolition, environmental remediation, upgrading utility connections and adding a fire hydrant, he said.
“We believe this is an excellent opportunity to build a gateway project at the north entry to Oregon that may encourage more development along N. Main Street,” Coyle said in his proposal. “With the current housing shortage and demand, we believe, while small, this is an excellent opportunity to serve the market needs in a location where people can walk to a grocery store and other shopping. We have also included five one-bedroom, one-bath units with a den to offer a floor plan that fits the needs of those working from home.”
The Developer anticipates commencing construction in the fall of 2022 and opening the apartments in the fall of 2023.
The building would have a community room, exercise room and small office. The project includes 45 underground parking stalls. The project also includes 44 surface parking spaces.
The apartment would have a mix of units from efficiency units to one-, two- and three- bedroom units.
The initial asking rent for an efficiency apartment is projected to be $915 per month, while beginning rent for a three-bedroom unit would be $1,545 per month.
There were some concerns raised during the March 7 meeting. Trustee Carlene Bechen asked why they would use TIF funding if the project was not going to provide affordable housing, while trustee Amanda Peterson asked if any retail units had been considered for the building.
Coyle said adding retail is something his company considered, but ultimately eliminated after two meetings with the Plan Commission. Concerns were raised about a commercial-use parking lot in front of the building decreasing the attractiveness of the property.
Director of Planning and Zoning Elise Cruz said she believes the apartments could help to spur other development projects in the neighborhood including retail.
The Planning Commission wanted to see more green space. Coyle plans to install picnic tables, fire pits and do landscaping projects because of the visibility of the property, which along with being an all-brick building – with no vinyl siding – he believes will create an attractive apartment complex.
“The project submitted is compelling in many ways, including the increase in housing units, redevelopment of an underused site that is highly visible along a main Village corridor and would significantly increase the real estate taxes generated on the property,” village administrator Martin Shanks wrote the Village Board on March 7.
The grant would be provided to the developer after the project is complete by returning the property’s real estate taxes to the developer over several years until the total amount of the proposed incentive was satisfied.
“The project would place more residents in the N. Main Street commercial area potentially providing walkable opportunities for employment and patronage of businesses,” Shanks wrote the board. “The financial request is favorable to the Village in that there is no upfront cash incentive. The request would be developer financed so that the project’s own property taxes would be repaid to the developer until the incentive is satisfied after the project is complete.”
The board voted on whether or not to send the TIF proposal to its financial consultant Ehlers, to see if it satisfies the “but for” test required for every TIF project – that the project wouldn’t happen “but for” the funding.
A vote to authorize Village staff and consultants to proceed with negotiation, financial analysis and preparation of a development agreement relating to the provision of the request failed 3-2-1. Trustees Bechen and Peterson voted no. Trustee Mike Wunsch abstained as he said he believes the project won’t pass the “but for” scrutiny.
However, after some further discussion that the “but for” analysis would be paid for by Coyle, who has signed a reimbursement agreement with the Village, Bechen moved, seconded by Peterson to reconsider the motion. The motion then carried 6-0.
A final draft TIF agreement will now come back before the Village Board for review at a later date after Ehlers has done its analysis to see if the rate of return on the project is reasonable.
In January 2020, Coyle received $464,000 in Tax Increment Financing to cover 5.4% of the total cost of the development of the $7 million, 56-unit Rosewood Avenue apartment project – which opened last year.
While that project passed Ehlers’ “but for” test, trustees raised similar concerns at that time as they have with Coyle’s latest project – including that TIF assistance would be best spent if the project had an affordable housing component.