Naperville City Council approved tax incentives for the downtown Water Street development Tuesday, which gives the development a multi-million dollar tax rebate over the course of two decades.
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Under the incentive, the developer, Marquette Companies, receives up to $7.5 million in sales and hotel tax rebates over the course of 20 years. The 2.4 acre, multi-use development, which will sit south of the Riverwalk between Main and Webster streets, is projected to cost $85 million, according to the developer.
The development must "actually generate the sales tax revenue before the city rebates to the developer," according to the city.
The incentive was approved by a 7-2 vote Tuesday, with Councilmen Grant Wehrli and Doug Krause dissenting.
Along with a few other council members, Paul Hinterlong was not in favor of any type of tax incentive for the development in the past, but in this case, "the numbers play out," he said Tuesday.
"With a 341 percent return on our money on that $7.5 million, I don't know how we can deny this, given the facts," Hinterlong said.
Previously, concerns have been raised regarding the TIF district, which is located within an area where the hotel would be built. Since the district was created in 2007, it has generated about $500,000 and is projected to reach a total of $9.5 million in the next 18 years, according to the city.
City Manager Doug Krieger said the TIF revenue will not be paid to the developer, but will instead be used for city improvements.
"None of the TIF dollars are envisioned going back to the developer," he said. "They are restricted to city assets and the developer is limiting their incentive request simply to incremental hotel and incremental sales tax."
However, TIF dollars will go toward Rivewalk improvements and a 524-space parking deck that will sit east of the development.
Marquette Companies plans to donate the property where the Riverwalk improvements and extension will take place. As far as the parking deck, the city said it will purchase a share of the land where the garage will be built for $100 per square foot, but not until it is constructed.
The city's share of the cost of the parking deck will be partially financed through downtown food and beverage tax revenues, according to the city.
In terms of financial impact on the community, the development is estimated to contribute an additional five percent in revenue, or $28 million over 23 years. The project will hold a 166-room hotel, retail shops, restaurant as well as office space and is also expected to create an estimated 550 construction jobs and 200 permanent jobs.
Hinterlong added that passing on the development at this point would be a mistake.
"What's going to come in place of it and how long is it going to take?," he said. "Is that going to take 10 years for someone to come bail this out? Is this going to be the next 420 Washington St. that we're going to have to deal with for someone to come redevelop?"
Given the short amount of time that City Council had to review the multifaceted financial terms of the development, Wehrli said he would not support it.
"I don't support this incentive because I think there's a better deal out there to be had (as a taxpayer)," Wehrli said. "One week we've had to look at these numbers. I think they can be flushed out a little better, I think they can be tighter, and I think the taxpayers can fair as well as the developer."
Read more:
- Final Plans Approved for Downtown Naperville Water Street Hotel Project
- City Moves Forward With Downtown Water Street Hotel Development
- Naperville Weighs In on Water Street Hotel Approval: Readers React
- New Revisions for Downtown Water Street Hotel Project
- Changes Made to 'Game-Changing' Naperville Water Street Project
