Loading...
HomeMy WebLinkAbout08-72 Resolution No. 08-72 RESOLUTION DETERMINING THAT CERTAIN REAL ESTATE LOCATED AT 1320 SPAULDING ROAD IS APPROPRIATE FOR CLASS 6B COOK COUNTY REAL PROPERTY ASSESSMENT CLASSIFICATION (Midwest Compost, L.L.C.) WHEREAS,Midwest Compost,L.L.C. is the owner of certain real estate located within the city of Elgin and intends to seek Class 6b Cook County Real Property Assessment Classification; and WHEREAS, the property is unimproved and will be used for a recycling collection center; and WHEREAS, the City Council of the City of Elgin has determined that the Class 6b Cook County Real Property Assessment Classification for the property consisting of Permanent Index No. 06-29-300-035-0000 is necessary for the development to occur on the subject property. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that is hereby finds and determines that the subject property located at 1320 Spaulding Road, Cook County, Illinois, consisting of Permanent Index Number 06-29-300- 035-0000 is appropriate for classification 6b under the Cook County Real Property Assessment Classification Ordinance. BE IT FURTHER RESOLVED that the city of Elgin supports and consents to the Class 6b Cook County Real Property Assessment Classification and specifically finds that said Class 6b Classification is necessary for development to occur on the real property located at 1320 Spaulding Road, and assigned Permanent Index Number 06-29-300-035-0000. BE IT FURTHER RESOLVED THAT THE City Clerk be and is hereby authorized and directed to furnish the Office of the Cook County Assessor with two certified copies of this resolution. s/ Ed Schock Ed Schock, Mayor Presented: March 12, 2008 Adopted: March 12, 2008 Omnibus Vote: Yeas: 7 Nays: 0 Attest: s/ Diane Robertson Diane Robertson, City Clerk *4 ,+a4 3. February 22, 2008 NORTHWEST TO: Mayor and Members of the City Council FROM: Olufemi Folarin, City Manager Raymond H. Moller, Director of Economic Development & Business Services SUBJECT: Cook County Class 6b Real Estate Tax Incentive, Midwest Compost LLC, 1320 Spaulding Road PURPOSE The purpose of this memorandum is to provide the Mayor and members of the City Council with information regarding a request from Midwest Compost LLC for a Cook County Class 6b Real Estate Tax Incentive for the property located at 1320 Spaulding Road. RECOMMENDATION It is recommended that the City Council adopt a resolution supporting the application of Midwest Compost LLC to the Cook County Assessor's Office for participation in the 6b Real Estate Tax Incentive Program for the property located at 1320 Spaulding Road, Elgin, Illinois. BACKGROUND In May, 1986, the Cook County Board of Commissioners approved an ordinance amending the Real Property Assessment Classification Ordinance to provide for real estate tax incentives for various types of nonresidential developments. The amended ordinance provides for three separate incentive classes that apply to industrial and commercial development. These are: Class 6, which applies to industrial properties; Class 7, which applies to commercial developments; and Class 8, which applies to both commercial and industrial properties under limited conditions. The Class 6b classification is designed to encourage industrial development throughout Cook County by offering a real estate tax incentive for the development of new industrial facilities, the rehabilitation of existing industrial structures, and the industrial reutilization of abandoned buildings. The goal of Class 6b is to attract new industry, stimulate expansion and retention of existing industry and increase employment opportunities. Under the incentive provided by Class 6b, qualifying industrial real estate would be eligible for the Class 6b level of assessment from the date that new construction or substantial rehabilitation is completed and initially assessed or, in the case of abandoned property, from the date of Cook County Class 6b Real estate Tax Incentive—Midwest Compost February 22, 2008 Page 2 substantial re-occupancy. Properties receiving Class 6b will be assessed at 16% of market value for the first 10 years, 23% in the 11th year and 30% in the 12th year. This constitutes a substantial reduction in the level of assessment and results in significant tax savings. In the absence of this incentive, industrial real estate would normally be assessed at 36% of its market value. Where buildings or other structures qualify for the incentive as new construction or as abandoned property as defined below, the reduced level of assessment under Class 6b will apply to those structures in their entirety as well as to the land upon which they are situated. Eligibility Requirements Real estate is eligible for Class 6b status under the following conditions: 1. The real estate is used primarily for"industrial purposes". 2. There is either (a) new construction, (b) substantial rehabilitation, or (c) substantial re- occupancy of"abandoned" property. 3. An Eligibility Application and supporting documents have been timely filed with the Office of the Assessor according to deadlines as set forth. 4. The municipality in which such real estate is located must, by lawful resolution or ordinance, expressly state that it supports and consents to the filing of a Class 6b Application and that it finds Class 6b necessary for development to occur on the subject property. The most recent State equalization factor for Cook County is 2.732. The factor for Kane County is 1.0. Since the equalization factor in Cook County is more than 2 '/2 that of Kane County, the 6b tax program brings the amount of taxes paid by the Cook County business to an equal footing with those paid by Kane County businesses for a period of eight years. Midwest Compost has built a 7,500 square foot single story industrial building for use as a source separated curbside recyclables processing operation at its 5.5 acre facility at 1320 Spaulding Road. The following schedules are provided by the property owner and are intended to demonstrate the real estate tax dollars that will be generated from the property located at 1320 Spaulding Road, Elgin, Illinois (the "subject property"). In order to make the tax projections, the property owner has relied on certain assumptions. These assumptions are as follows: 1. In Cook County property is reassessed every three years. This cycle is commonly referred to as the Triennial Re-assessment. In order to evaluate the impact of the triennial reassessment on the subject property we have reviewed the historical assessments for the property and determined the annualized impact of the triennial assessment is +4.28%. Cook County Class 6b Real estate Tax Incentive—Midwest Compost February 22, 2008 Page 3 2. The Department of Revenue of the State of Illinois is required to equalize assessments among the various counties throughout the State at 33-1/3% of their market value. We have reviewed the annual equalization factors applied to the subject property over the previous 10 years. These factors may increase or decrease annually. The historical equalization factors applied to the subject property indicate an overall average rate of 2.3328. 3. Once the assessments have been equalized, the composite tax rate of all the interested taxing districts is applied to determine the actual tax. We have reviewed the tax rates applied to the subject property over the last 10 years and have concluded an average annual tax rate 10.1736%. 4. The property owner has also assumed that the allocation of the tax dollars among the various interested taxing districts will remain constant throughout the term of the incentive. 5. The schedules are intended to demonstrate the tax currently generated from the subject property, the tax anticipated to be generated if not improved and the tax anticipated if improved. In order to estimate the tax on the improvements the property owner has utilized the cost approach to value based on the actual cost of construction, $510,000. 6. The property owner has assumed that the assessment that will qualify for the incentive is the new structure and the land necessary to support the operation of a 7,500 square foot recycling structure. Accordingly, we have used the $510,000 cost to construct plus 110,000 square feet of land at $.75 per square foot ($82,500) for land value qualified for the incentive program. Based on this information we are estimating the value of the property as improved as follows: CLASS 6b PORTION OF PROPERTY: LAND: $ 82,500 IMPROVEMENTS: $510,000 SUB TOTAL: $592,500 PORTION OF PROPERTY NOT ELIGIBLE FOR CLASS 6b: LAND: $ 92,139 IMPROVEMENTS: $ 47,594 SUB TOTAL: $139,733 OVERALL PROPERTY VALUE AS IMPROVED: $732,233 Cook County Class 6b Real estate Tax Incentive—Midwest Compost February 22, 2008 Page 4 TAX ESTIMATE SUMMARY WITHOUT CLASS 6b INCENTIVE (WITH CONSTRUCTION) - EQUALIZED ASSESSED VALUE * (AVERAGE YEARS 1-10) $747,956 * YEAR 11 $935,061 * YEAR 12 $975,080 - OVERALL TAX RATE 10.176/$100 EAV - ANNUAL TAXES * AVERAGE PER YEAR(YEARS 1 TO 10) $ 76,094 * YEAR 11 $ 95,129 * YEAR 12 $ 99,201 WITH CLASS 6b INCENTIVE - EQUALIZED ASSESSED VALUATION * AVERAGE (YEARS 1 TO 10) $411,721 * YEAR 11 $661,836 * YEAR 12 $843,580 - OVERALL TAX RATE 10.176/$100 EAV - ANNUAL TAXES * AVERAGE PER YEAR(YEARS 1 TO 10) $ 41,887 * YEAR 11 $ 67,333 * YEAR 12 $ 85,822 12 YEAR IMPACT WITHOUT CLASS 6b INCENTIVE - YEARS 1 TO 10 $760,940 - YEAR 11 $ 95,129 - YEAR 12 $ 99,201 TOTAL: $955,270 Cook County Class 6b Real estate Tax Incentive—Midwest Compost February 22, 2008 Page 5 WITH CLASS 6b INCENTIVE - YEARS 1 TO 10 $418,869 - YEAR 11 $ 67,333. - YEAR 12 $ 85,822 TOTAL: $572,024 CURRENT TAX ON PROPERTY CURRENT TAXES PAID WITHOUT PROJECT TOTAL CITY OF ELGIN U-46 OTHERS TAXES (21.83%) (55.34%) (22.5%) CURRENT $18,346 $4,005 $10,153 $4,188 ESTIMATED TAX IMPROVED WITH INCENTIVE TOTAL CITY OF ELGIN U-46 OTHERS TAXES INNITIAL TAX $34,437 $7,517 $19,058 $7,862 IMPACT ON VARIOUS TAXING BODIES OVER THE 12 YEAR INCENTIVE PERIOD TOTAL CITY OF U-46 OTHERS TAXES ELGIN W/O CLASS 6b INCENTIVE $955,271 $208,520 $528,651 $218,100 WITH CLASS 6b INCENTIVE $572,024 $124,863 $316,561 $130,600 VARIANCE $383,247 $83,656 $212,091 $87,500. FIGURES ROUNDED TO NEAREST DOLLAR. Cook County Class 6b Real estate Tax Incentive—Midwest Compost February 22, 2008 Page 6 Midwest Compost is requesting that an ordinance be passed approving the extension of the 6b classification expressly stating that the City of Elgin supports and consents to the Class 6b application and that the City finds the Class 6b necessary for development to remain on the above property. Staff began processing this application in the fall of 2006. Elgin required a detailed breakdown of the current and anticipated property tax proceeds and their distribution prior to bringing the request to the City Council. This application was complicated by the fact that the new building was to be constructed on an already improved site. It took some time to sort through the necessary calculations and arrive at accurate tax calculation numbers. COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED The material has been shared with School District U-46. FINANCIAL IMPACT Without the 6b tax incentive, estimated property taxes for all taxing units of governments over a twelve year period will total $955,270. If the 6b incentive is granted, estimated property taxes over the twelve year period for all taxing units will total $572,023. LEGAL IMPACT None ALTERNATIVES 1. The City Council may choose to approve the extension of the Class 6b Tax Incentive Program. 2. The City Council may choose to deny the request to extend the Class 6b Tax Incentive Program. Respectfully submitted for Council consideration. Attachment