00-40 Resolution No. 00-40
RESOLUTION
ADOPTING A SPECIAL SERVICE AREA DEVELOPMENT FINANCING POLICY
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,
ILLINOIS, that it hereby adopts a Special Service Area
Development Financing Policy dated February 9, 2000 for the
use of special service area financing as a means of funding
developer driven capital improvements, a copy of which is
attached.
s/ Ed Schock
Ed Schock, Mayor
Presented: February 23 , 2000
Adopted: February 23 , 2000
Omnibus Vote : Yeas 6 Nays 0
Attest :
s/ Dolonna Mecum
Dolonna Mecum, City Clerk
February 9, 2000
CITY OF ELGIN
SPECIAL SERVICE AREA
DEVELOPMENT FINANCING POLICY
INTRODUCTION
The City of Elgin will consider requests to issue limited
obligated public bonds to finance certain eligible public
improvements. The type of bonds that shall be considered are
special service area bonds. The proposed financing must serve a
public purpose, be consistent with these and other development
policies adopted by the City of Elgin and allowed by the
appropriate provisions of state law. The bonds contemplated by
these policies will be non-recourse to the City of Elgin and the
project proponent must provide sufficient collateral to insure a
safe and prudent financing.
1 . The City of Elgin would sell bonds in a predetermined
amount and identify a specific public improvement as the
purpose of the bond sale.
2 . Property owners within the area benefitted by the bond
sale would be assessed an additional property tax, the
proceeds from the tax would go toward the retirement of
( the bonds .
Such a funding mechanism provides a developer with financing at
an advantageous interest rate .
Eligible public improvements may include:
1 . Streets, sidewalks, lighting and traffic signals
2 . Sanitary sewer improvements
3 . Storm drainage and flood control facilities
4 . Water line improvements
Funding preference for the above mentioned improvements shall be
given to external improvements to the proposed project site .
However, consideration will begin to funding internal public
improvements (see list above) if the proposed project is of a
significant magnitude. Each project shall be evaluated on a case
by case basis . In order to receive financial assistance, the
proposed project must exceed typical or routine standards for a
project development . The policies and Criteria for project
evaluation are identified in attachment A. Only a portion of the
funding required to construct the public improvements shall be
provided through the bond mechanism.
SSA funding assistance shall range from 25% to 750 of the total
project costs . The funding level will be determined by a staff
review, with Council approval .
Adherence to the evaluation criteria stated in Exhibit A will
enhance the rating and funding level for a project (location,
jobs, public benefits, expansion potential, tax base
enhancement) .
Costs eligible for financing may include: engineering fees, bond
fees, bond reserves, capitalized interest and administrative
fees .
EXCEPTIONS
An exception to the policies may be granted for projects which
create significant employment opportunities or produce
significant net tax revenues for the City.
CREDIT QUALITY REQUIREMENTS FOR BOND ISSUES
There are six general issues that should be evaluated related to
the credit quality of a proposed conduit financing. These issues
, are (i) the feasibility of the project, (ii) the capability and
credit worthiness of the developer, as determined by the City' s
financial advisor, (iii) the investment in the project subordinate
to the bonds, (iv) the debt service the developer is estimated to
be obligated for prior to the development of the project, (v) the
value of the property compared to the bonded indebtedness
supported by the property, and (vi) the structure of the
financing.
The City may consider exceptions to the credit policies for bond
issues that do not --represent an unusual credit risk, either due
to credit enhancement or other reasons specified by the City.
Satisfaction of these creditworthiness issues does not mandate
issuance by the City of any debt . The City Council reserves the
right to decide on a case-by-case basis.
FEES
The City requires a minimum application fee of $5, 000 to
accompany any written request for financing. Such a fee is non-
refundable and shall be used for the payment of City solicited
financial advice and review by City staff . Any costs incurred by
the City related to the financing of a proposed project in excess
of the application fee shall be the responsibility of the
applicant. Upon passing of any financing package, the developer
shall be required to pay any and all additional fees required by
City ordinance for development projects.
ATTACHMENT A
SPECIAL SERVICE AREA
Funding Policies & Criteria
Policies
The following policies should be applied when development
incentive requests are considered within the City of Elgin:
1. The City will not consider any requests for waiver of the
following fees or charges : construction permit fees, utility
rates, development impact fees, recapture fees, and other
fees as prohibited by City ordinances .
2 . Incentives relating to local share property tax rebate and
sales tax rebate shall only be considered in such instances
where established incentive programs provide for such
relief . (Center City Enterprise Zone benefits and Cook
County Auto Dealership Program. )
3 . The City limits its participation in incentive funding to
significant residential adaptive reuse projects and
industrial/commercial projects .
4 . Any incentive package shall be contained within a
development agreement.
5 . All incentives shall be performance-based with established
performance criteria.
6 . If performance goals are not met, all or a portion of the
incentive funding shall be required to be returned to the
City.
Evaluation Criteria
Assistance Requests shall be evaluated based upon the following
criteria:
1. The potential for receiving economic development incentives
is available to private businesses based upon the following
criteria:
A. Location of development.
B . Types and number of jobs created.
C. Tax benefit to the City.
2 . The development must be something that is of a public
benefit to the City.
3 . The impact of a proposed development on existing businesses
shall be evaluated when considering the use of incentives
for the new development.
4 . The assisted business must have the potential to grow or
expand and should have the potential of attracting other
related positive development .
5 . It is the City' s preference that incentive funding be
directed toward public improvements whenever possible . (See
footnote 2 . )
6 . The development must enhance the tax base.
7 . Well-paying, long-term jobs must be associated with the
proposed project (with a wage rate at least 25o above the
average of wage rate for the community) .
8 . The amount of the incentive must be recaptured within a
reasonable time period based upon the industry. The
recapture period for projects located within the Center City
may exceed the recapture period for assistance provided in
other areas of the City.
L.
`0 OF EtcLmwi
�� � City of Elgin Agenda Item No.
°
February 9, 2000
TO: Mayor and Members of the City Council
FROM: Joyce A. Parker, City Manager
SUBJECT: Special Service Area Economic Development Incentive
PURPOSE
The purpose of this memorandum is to present to the Mayor and City
Council Members a policy recommendation for the use of Special
Service Area Bonds to finance developer driven public improvements.
BACKGROUND
The developers of the Chicago White Metal Casting project which is
located on an 80 acre site at Big Timber Road and Tyrell Road have
requested that they be permitted to use Special Service Area Bond
finances to fund the initial on site capital improvements; sanitary
sewer lines, water mains, streets and sidewalks .
The SSA bond financing program would work as follows :
1 . The City of Elgin would sell bonds in a predetermined
amount and identify a specific public improvement as the
purpose of the bond sale .
2 . Property owners within the area benefitted by the bond
sale would be assessed an additional property tax, the
proceeds from the tax would go toward the retirement of
the bonds .
While the City of Elgin has issued SSA bonds to finance public
improvements, such bonds have never been issued to finance
developer driven public improvements . Numerous other communities
within the Chicago Metropolitan Area do use this mechanism as an
economic development incentive tool .
Aurora, Huntley, and Crystal Lake are examples of communities using
SSA bonds for economic development purposes .
City staff in conjunction with the Greater Elgin Chamber of
Commerce have reviewed the request for use of SSA bonds for funding
development related improvements and are suggesting that the
attached program and incentive policy be initiated. A summary of
the provisions in the proposed policy follows :
Special Service Area
Development Financing Incentive
February 9, 2000
Page 2
I . General Terms
A. The financing must serve a public purpose and be
consistent with other development policies adopted by
the City.
B . Bonds will be non-recourse to the City and the
developer must provide sufficient collateral to insure
safe and prudent funding. The City would not be
responsible for the repayment of the bonds .
II . Facility Financing Priorities
A. Improvement must provide a benefit to the city serving
not only the future beneficiaries of the particular
development, but also current city residents .
B. The improvements are found by the city to provide
sufficient public benefit .
C. The improvements must have a useful life of not less
than 10 years .
D. Eligible public improvements .
1 . Streets, sidewalks, lighting and traffic signals.
2 . Sanitary sewer improvements.
3 . Storm drainage and flood control facilities .
4 . Water line improvements .
E . Funding preferences .
1 . External improvements to the proposed project
site.
2 . Internal improvements if project is of a
significant magnitude .
3 . Case by case review.
F. Funding assistance may range from 25% to 75% of the
project cost .
G. Exceptions granted for projects which create
significant employment opportunities or produce
significant net tax revenue for the city.
III . Bond Credit Quality Requirement Issues
A. Feasibility of the project .
B . Capability and credit worthiness of the developer.
C. Investment in the project in addition to the bonds .
D. Debt service the developer is obligated for prior to
the development of the project .
E . Value of the project compared to bonded indebtedness
supported by the property.
F . Structure of the financing.
IV. Fees
fek A. $5, 000 minimum application fee .
Special Service Area
ra.... Development Financing Incentive
February 9, 2000
Page 3
B. Any city cost related to financing in excess of
application fee such as, (bond counsel fees, financial
information development and review) is the applicants
responsibility.
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
Chamber of Commerce .
( IN• CIAL IMPACT
All costs incurred by the city relating to the review of an
application for SSA financing will be covered by either the $5 , 000
application fees or by additional fees paid by the applicant after
the city has determined that additional payment is required.
The bonds contemplated by this incentive will be non-recourse to
the City of Elgin and the applicant must provide sufficient
collateral (e.g. letter of credit) to ensure principal and interest
are repaid. The issuance of these bonds will not affect the City' s
debt policy.
sciTial /LEGAL IMPACT
None.
ALTERNATIVES
1 . Approve the use of Special Service Area Financing as a
means of funding developer driven site development
capital improvements .
2 . Reject the use of SSA financing for developer driven site
capital improvements .
3 . Modify the incentive that is being proposed.
RECOMMENDATION
Staff recommends that the concept of using Special Service Area
financing as a means of funding developer driven capital
improvements be approved and that the policy being proposed be
accepted and approved.
��ectfully bmi :
4 - ' , ) 4.____
tow J•Irce • . Parker
City Manager
Attachment