Owner of ‘The 102’ requests city increase reimbursement

PAXTON — Next Tuesday, Paxton aldermen will consider amending the city’s redevelopment agreement with Scaggs Properties LLC to ensure the company is fully reimbursed for the renovations it has been making to the former 102 Lounge building it owns downtown.

The building at 102 S. Market St. is expected to soon become the site of Paxton resident Ben Grice’s newest restaurant, the Harvest Ale House. Grice also operates The Humble Hog restaurant in the same block of South Market Street.

The owner of 102 S. Market St. — Dr. Thomas R. Scaggs of Champaign — initially entered into a redevelopment agreement with the city in July 2013, requiring the city to reimburse Scaggs’ company about $250,000 for work completed on the building. Due to cost over-runs, the council then amended the agreement last September to raise the reimbursable amount to $372,931.

However, Mayor Bill Ingold informed the council during its April 11 meeting that Scaggs now wants more money — $382,931 — to go along with a “higher level of reimbursement” through Paxton’s tax-increment financing (TIF) district.

Under a proposed amended redevelopment agreement presented to aldermen at last week’s meeting, Scaggs would be reimbursed 75 percent of the gross incremental real estate taxes generated through improvements to the property through Dec. 31, 2019. After that date, the amount would be determined each year based on the amount still owed to Scaggs compared with the years remaining in the TIF district’s 23-year life span. All reimbursement must be made to Scaggs prior to the TIF district ending.

Ingold said that after 2019, it is possible that Scaggs would be reimbursed more than 100 percent of the real estate taxes paid on the property each year. But no funds other than tax-increment proceeds from the city’s TIF district would be used to do so, Ingold stressed.

“These amendments formalize a higher level of reimbursement from the incremental revenue (the city receives from the property),” Ingold told aldermen. “However, they do not obligate the city to make payments from any other source except the incremental revenue, which is the TIF fund.”

Ingold said that originally, the city had agreed to give back Scaggs 75 percent of the tax increment generated by the property each year. Scaggs, however, eventually realized through the course of renovations that “the amount that we’d agreed on wouldn’t get paid over the life of the TIF (district),” Ingold said. That prompted Scaggs to propose the amended agreement currently being considered by the council, Ingold said.

“From the date of execution (of the agreement) through Dec. 31, 2019, it will remain at 75 percent, and then going forward it may be resulting in an amount greater than 100 percent of the gross incremental real estate taxes,” Ingold said. “So, basically, what that says is we may have to take some other money out of other TIF funds to get that done, in order for him to receive $382,931. ... The difference will come from tax increment from other properties being developed in the TIF district.”

Alderman Rob Pacey asked Ingold whether the changes being requested by Scaggs are due to a change in his costs and the possibility he would not be fully reimbursed by the end of the TIF district’s life span.

Ingold said that is indeed the case.

“It just didn’t pencil out,” Ingold said.

Meanwhile, Pacey said he had concerns with the new proposal, specifically about reimbursing Scaggs more than 100 percent of the taxes he pays on the property while also relying on the future development of other properties to make that happen.

“We’re projecting out income that we don’t know yet,” Pacey said.

City Attorney Marc Miller clarified that if not enough money is generated through development in the TIF district to fully reimburse Scaggs as requested, then the city would not be obligated to use other funds to do so.

“Normally, these agreements are saying that you’re going to get your reimbursement from your revenue generated off of your property, and if there’s not enough revenue in the TIF at all, you don’t have to come up with the money from other funds,” Miller told the council. “What this sounds like is when you normally tie your revenue to just your one property that’s in the TIF, you’re tying it to the whole TIF (in this case) to make sure that it’s going to get paid back.

“But there would be no exposure to the city beyond whatever that TIF (amount is).”

“Correct,” Pacey responded, “but in using all of the TIF money to pay off Scaggs first, this is kind of like Social Security: We’re paying him off first, and that could have a domino effect on future agreements (with developers of other properties in the TIF district), where we may not have the money in a time frame to reimburse those people according to schedule, and we’d put ourselves further and further behind. I’m not suggesting that’s going to happen ... but I don’t know we can sit here and safely project that, yes, we’ll have enough to cover it and it won’t put us in a bind on other properties.”

Alderman Rob Steiger said it is important to note that under the proposed amended agreement, only the real estate taxes generated by improvements made specifically to 102 S. Market St. would be reimbursed at a rate of up to 75 percent through 2019. And only after that period expires — and only if needed “to make Scaggs whole” — would tax increment from other properties in the TIF district be used to reimburse Scaggs, Steiger noted.

“It sounds extreme, but the whole idea is to get people to invest the money to be able to get their money back,” Steiger said. “And as far as projecting out to the future, that’s part of what a TIF is — we don’t know everything going on in the future, but we are making bets that we are going to have that development.”

Before making any decision, Pacey suggested the council speak further about the matter with the city’s TIF attorney, Dan Schuering, at an adjourned meeting scheduled for 7 p.m. Tuesday, April 25, at City Hall, 145 S. Market St. Ingold said he would invite Schuering to that meeting so the council’s questions could be answered.

The amended redevelopment agreement will be listed on the meeting’s agenda for potential approval. Also on the agenda will be a resolution authorizing a partial payment of eligible redevelopment costs to Scaggs Properties LLC.

No date has been set yet for the opening of the Harvest Ale House, but it appears the restaurant should be open sometime soon. Grice posted on the Harvest Ale House’s Facebook page on April 14 that “we’ll be making some hiring announcements in the coming week.”

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