From today's Crain's:
http://www.chicagobusiness.com/cgi-bin/news.pl?id=38190
Panel OKs $96-million TIF subsidy for South Works project
A rendering of the proposed South Works project, which would eventually have 13,575 residential units, 17.5 million square feet of commercial space and a 1,500-slip marina.
By: Alby Gallun May 11, 2010
(Crain’s) — A city panel on Tuesday approved $96 million in tax-increment financing to help pay for a major shopping center and nearly 1,000 homes on the massive South Works property on the south lakefront.
The unanimous vote by the Community Development Commission marks a major step forward for Chicago-based developer McCaffery Interests Inc., which has been planning a development on the vacant steel mill site for more than five years. The TIF grant would help fund the project’s initial phase on the northwest corner of the 530-acre lakefront site, which sits between 79th Street and the Calumet River.
The City Council still must sign off on the request, which would be the largest TIF subsidy ever for a private real estate development in Chicago.
McCaffery, which is developing the site in a joint venture with property owner U.S. Steel Corp., plans to spend about $397 million on the 76-acre first phase, which would comprise 848 residential units and 844,000 square feet of retail and other commercial space, according to a report prepared for the commission.
“It’s really going to be a new downtown for the South Side of Chicago,” says McCaffery Partner Edmund Woodbury.
TIF grants are a controversial development tool because they direct property tax dollars that would normally fund school districts and other public services to pay for private- and public-sector building projects. Critics charge that the city abuses the TIF system by using it to subsidize developments that would go forward anyway.
That’s not the case with South Works, which has no sewers, streets or other infrastructure to support a real estate development, Mr. Woodbury says. The TIF would cover those public costs, he says.
“All that we’re asking for is what it takes to make the site buildable,” he says. “If any place needs it, this is the place. What’s the role of public investment? It’s infrastructure.”
The TIF money would cover nearly a quarter of the project’s costs, a somewhat higher percentage than usual for a private development, says lawyer and TIF consultant Samuel Polsky, a principal at Chicago-based Polsky & Associates Ltd.
“But it could be justified if it’s being used for streets, sewers and infrastructure,” he says.
Mr. Woodbury expects construction to begin in 2013 and the first stores to open in 2014.
Overall, McCaffery and U.S. Steel plan to build 13,575 residential units, 17.5 million square feet of commercial space and a 1,500-slip marina at South Works, a process that could take as many as 45 years to complete and cost more than $4 billion.
McCaffery’s more immediate priority is to find retail tenants for the shopping center, a tough task in the current economy. The firm will be pushing the project “really hard” to retailers at the International Council of Shopping Centers trade show this month in Las Vegas, Mr. Woodbury says.
The reception has been “quite positive” so far, he says, but retailers need to be educated about the neighborhood because they haven’t thought much about expanding there.
“The city’s been so north-centric that it’s exciting to open everyone’s eyes to the South Side of Chicago,” he says.
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