ECONOMIC DEVELOPMENT COMMITTEE MEETING

Wednesday, February 25, 2015

Council Chambers – Countryside City Hall

Ald. Sean McDermott, Chairman, called the meeting to order at 6:30 p.m. He called the Roll of those physically present:

PRESENT: Ald. Sean McDermott, Chairman, City Admin. Gail Paul, Ald. Robert Pondelicek, Ald. James Jasinski

Also Present: Mayor Krzeminski, Clerk Sweeney, Ald. Michalczyk, Ald. Musillami, Ald. Von Drasek, City Atty. Peck, Atty. Yehl, Asst. Admin. Peterson, Police Bd. Member Burdett.

Approval of Minutes – January 28, 2015

Ald. Von Drasek stated that the Mayor’s response to Mr. Arneson was omitted from the Public Comment portion on page 2, re: Indian Victory Motorcycles. It has been included. The Mayor stated that he had a discussion with Gina Fisher who stated that Autobarn did not execute the lease due to uncertainty about IDOT construction at LaGrange Road. Ald. Von Drasek stated for the record, Gina Fisher stated that that conversation did not occur. The Mayor stated it did occur. Ald. Von Drasek stated that Carm Scarpace was present and the conversation was not on that topic. He asked if the Mayor is calling Gina Fisher a liar – the Mayor contends if she states the conversation was not on that topic then yes, she is a liar. Both parties asked to have those comments included in the minutes. Ald. Jasinski moved to approve the minutes of January 28, 2015 as corrected, seconded by Ald. Pondelicek and carried by unanimous voice vote.

Public Comment

Al Arneson, 121 Constance Lane, followed up re: Indian Victory Motorcycles – Ald. McDermott stated that from his understanding, there is no agreement on the lease at this time – having nothing to do with intersection improvements. The City is still interested in having the Indian franchise in town; other ideas may come to fruition.

Presentation by Joseph Kroc, First National Bank of LaGrange

Re: Facade Loan Program

In attendance tonight with Joe Kroc, VP and Loan Officer, are Bill Iacula, Chief Lending Officer and Kevin McLaughlin, a long-tenured lender who will explain the Fa̤ade Loan Program applicable to City businesses – as an economic development tool for the bank to partner with the City of Countryside. FNBC does not have a branch bank within the borders of Countryside, but they actively lend to individual property owners and businesses in the Community Reinvestment Act (CRA) area.

Mr. Kroc discussed the document entitled Fa̤ade Loan Program Proposal and noted it is a very effective and low cost program. Examples of eligible uses include — to address blight, beautify properties and make repairs to buildings including fa̤ade improvements, awnings and canopies, signage, windows and tuck pointing. This is a smaller product not used to refinance existing debt but to perform rehab to an existing commercial property within City borders. Proposed Phase I Funding Allocation of $300,000 is made available to businesses for a 12-month period; the maximum loan amount would be $50,000, with certain exceptions. Terms are up to five years with fixed interest of 3.45% or lower, and a $250 application fee. Rather than using City funds, the City will provide a guaranty for bank loans funded under the program.

Mr. McLaughlin stated that this program was very successfully implemented 15-20 years ago with economic development funds set aside by the Village of LaGrange. The bank services the loans and did most of the underwriting; all loans were repaid. Today the City is asked to allow the bank to be the primary lender with a guaranty by the City. They believe that Countryside is a good target for this program.

Chairman McDermott likes the idea and can picture some of the locations along LaGrange Road that could use dressing up. Mayor Krzeminski stated that the City had a program very similar to this many years ago and it was very successful; he is in total agreement. He does not recall the particulars but it was a fa̤ade loan program as well. Ald. Von Drasek asked how would businesses become aware of this program. He suggested announcing it in the Newsletter and perhaps coordinating with the CBA. The bank is anxious to co-market with the City. Ald. McDermott stated that great progress has been made on the south end of LaGrange Road, now it could move to the north end. Ald. Jasinski questioned the previous program’s compliance and due diligence exhibited by the bank. The bank uses stringent loan criteria; the loans are collateralized by the underlying real estate. The City will have final approval for the loan issuance. Ald. Musillami asked whether a long-term renter would be eligible for the loan program. The property owner would have to sign off on the mortgage; further financial information would be required. The bank will share the risk with the City and would like City support. Collection activities would be the bank’s responsibility. Chairman McDermott thanked the gentlemen for their presentation. Committee members are in agreement with the proposal. He sought consideration for Attorney Peck to contact Mr. Kroc re: a proposed agreement.

Consideration of an Economic Incentive Agreement between the City of Countryside and Pearlshire Countryside Hotel, LLC, for the remodeling of the Holiday Inn

Chairman McDermott and Ms. Paul met with Mr. Rehan Zaid last week to discuss the outstanding issues. Ms. Paul discussed the status of current negotiations. An offer was extended for $1M for a five-year period with an automatic extension of another five- year period in the event that action was taken to redo the West Wing. Mr. Zaid did not accept that offer. At a second meeting Mr. Zaid stated they are close to finalizing estimates of the property improvement plan required by Holiday Inn. The original estimate for renovation was $3.5-4M; at present the costs have escalated to $7-8M; there is a $4M overage and Mr. Zaid is seeking 50% of the overage or $2M – the city believes that is excessive. Mr. Zaid also made changes to the agreement which Attorney Peck will discuss. Ms. Paul provided a document showing estimated tax and other possible options with either accelerated payment or an increased amount if the committee is receptive to considering more than $1M.

Attorney Peck discussed the Draft Agreement with changes highlighted.

Section 6-Incentives from the City

1. Tax Incentive was $1M and he is proposing $2M in total.

2. Originally it was a 5-year agreement with a 50-50 split; he wants a continuous economic incentive to continue until he reaches the $2M; goal he doesn’t propose a limit to it. His investors need to know they will get reimbursed. He wants it to continue even if he sells the property to a third party.

3. Pearlshire may not assign its right to receive payments without the City’s prior written consent-added by Mr. Peck. Mr. Zaid wants to have the right to assign it to somebody-obviously enhancing his ability to sell the property. He wants the $2M and he wants the ability to assign it.

Conditions for Incentive

He struck out (3) in its entirety and tied in the West Wing redevelopment claiming that the first five years this incentive would proceed 50/50 split and would continue another five years so long as he began reconstruction of the West Wing. He does not want the West Wing tied into this economic incentive agreement at all; that is not a viable option for the City, but that is his request. He wants to deal only with the main portion of the hotel and return at a later time re: the West Wing.

Section 8-Defaults

He changed the default period from 30 to 60 days time to cure defaults. He must comply with health and safety issues by April 9. A section could be added to this agreement stating that if he doesn’t comply with that aspect, he would be in default in this agreement as well.

Section 10-General Provisions

There is indemnification in here for the City – that if this document is found to be illegal, the money must be returned to the City. He added that he wants an indemnification as well. Mr. Peck is not really sure what he is talking about. There is a second portion with regard to prevailing wage. Use of public funds demands payment of the prevailing wage for public construction or rehabilitation of the building.

General Discussion

Ald. McDermott stated that the City does not have inexhaustible funds. He asked for comments or questions from the committee and suggested to leave the offer as it stands. Ald. Pondelicek agreed but stated that it may lead to loss of the Holiday Inn brand name and going to a Tier 2 hotel like Windham or Comfort Suites. Ald. Jasinski wondered whether the Tier 2 status would affect the Hotel/Motel Fund. Could the amount be increased to $1.25M? Ald. McDermott suggested leaving the offer as is and eliminating the permit fees, which amount to $140,000. Committee members are amenable to that suggestion. Ms. Paul stated that there should be additional sales tax after improvements are completed. The incentive is limited to the current owners and cannot be transferred-but that’s not what he wants. Committee members question whether he has ulterior motives. His actions are suspect; does he plan to get the money and then get rid of the property.

Mr. Peck stated that Mr. Zaid believes once the money is put into the building it is there, regardless of who owns the building-it will remain a Holiday Inn. Mr. Peck stated that new owners could come in and ask for the same incentive agreement; Mr. Zaid doesn’t believe they can because the building has been improved and remains a Holiday Inn. His major point is that his investors must be repaid and he needs the $2M; if he doesn’t get it he will begin looking at a Tier 2 hotel. Committee members are not comfortable with the revisions he made.

Ms. Paul provided certain options. By remaining with the original option of $1M he will collect his money in six years. If the City waives permit fees, a general fund revenue, rebates come from the Hotel/Motel Fund-$140,000 less in the general fund. Another option is to increase the amount of the rebates. The City could provide a 75% rebate over the next five years and be done. If the City waives the permit fees-give the equivalent as a rebate so the general fund stays intact. Committee agrees that the contract cannot proceed as revised.

Ald. Pondelicek asked about length of time to get improvements completed – 18-24 months; he must submit plans to the City within 90 days of receipt of the license; he must sign off on the property improvement plan by March 5, 2015. Committee agreed to go with the main building only, $1.140M and rewrite the contract for ten years, not open-ended. Ald. Michalczyk believes it must be tied in with the West Wing or it will never get done. The City is concerned that he doesn’t have the intention to redevelop it or could possibly sell it. Committee feels that scenario is on the horizon; he is not showing a vested interest in the property – too many escape clauses; all are concerned with the red flags being raised.

Committee agreed to increase the maximum rebate to $1.140M to cover the building permits, but not waive permit fees; fees will be collected and rebated over time from the Hotel/Motel Fund. All agreed. Counsel will revise the contract accordingly. Assignment of rights to the incentive applies only to him as long as he owns the building and terminates upon its sale. It will be a five-year agreement with a five year extension if he includes the West Wing. Mr. Peck will speak with Mr. Zaid tomorrow re: indemnification from the City-there is none per Ald. McDermott. Ms. Paul and Mr. Peck have direction.

Consideration of a Request from Heritage Corridor Convention & Visitors Bureau to formally recognize them as our visitor’s bureau and make an Annual Monetary Commitment

Ms. Paul stated that Kimberly Clarke, Zoning Administrator, met with representatives of the Heritage Corridor. The City of Countryside was more active in the past with this organization. The economic downturn of six years ago took its toll on contributions to all organizations. Heritage Corridor is asking to be designated as the City’s convention bureau, which helps with their State funding. Another convention bureau, Chicago Southland, also advertises at conventions, etc. The contribution levels range from $1,500 to $10,000. In the past the City was at the $3,000 level; contributing to advertising in magazines placed at visitor centers in Illinois – seeking assistance to help promote community programs. Ald. Musillami asked whether there is a noticeable difference in visitor attendance without the contribution-there is none. Ald. Michalczyk stated that the City dispensed with most contributions six years ago. Ald. McDermott suggested that the City could designate them and defer the contribution until after budget discussions. Funds would come from the Hotel/Motel Fund. The Mayor stated that the main concern in the past was to boost hotel/motel occupancy, promote tourism, and provide an expressway location for travelers driving on I-55 who stop at visitors centers and read the ad literature provided. Committee agreed to designate Heritage Corridor at present and defer the contribution until a later time.

Recess

There being no further business to discuss, Ald. Michalczyk moved to recess to Executive Session under Section 2(c) 21 of the Open Meetings Act for the purpose of reviewing EDC Executive Session Minutes of January 28, 2015, seconded by Ald. Jasinski and carried by unanimous voice vote.

Chairman McDermott declared the meeting recessed at 7:20 p.m.

* * *

The EDC meeting returned to Open Session with the same members present at

7:23 p.m.

Ald. Pondelicek moved to approve the EDC Executive Session minutes of 1-28-15 as presented, seconded by Ald. Jasinski and carried by Roll Call vote-6/0/0.

Adjournment

There being no further business to discuss, Ald. Jasinski moved to adjourn the meeting, seconded by Ald. Pondelicek and carried by Roll Call vote-6/0/0.

Chairman McDermott declared the meeting adjourned at 7:25 p.m.

ALD. SEAN MC DERMOTT, CHAIRMAN

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