Decision time for downtown Urbana

Decision time for downtown Urbana

URBANA — When Allen Strong opened the Courier Cafe in 1980, he says there were 17 empty storefronts in downtown Urbana.

“I thought there was a need for business down there, and I thought it was a time when things would start changing,” Strong said.

He was right. Busey had just opened a new bank, and the city of Urbana was about to launch a new economic development program. In 1981, officials established in the downtown area what’s known as a “tax increment financing district,” which at the time was a promising new program and the premier tool for cities to attract new business.

A parking garage went up. Streets were rebuilt. Businesses started filling in. In 1990, Strong opened a new restaurant: Silvercreek, adjacent to the Boneyard Creek. Then a drainage ditch just about off-limits to the public, the Boneyard is now undergoing a massive facelift to make it more inviting to people.

All of those projects were funded through the city’s tax increment financing, or TIF, district, which captures property tax money to be used for infrastructure and development incentives throughout the downtown area. The goal is to use that money to encourage new business openings or property investment, raise property values and continue capturing more and more property tax revenue to reinvest into the area — a theoretical upward cycle.

But the program has an expiration date in 2016, and there are still some holes to fill. The jury is still out on the success of the program that has spanned four decades, but city officials say their ability to entice new development or infill in downtown Urbana is already limited by the imminent expiration of the program.

“There is a lot of work left to be done to realize the vision that the community’s put forth,” said Brandon Boys, the city’s economic development coordinator. 

That’s why, this week, city council members could approve a contract to examine the downtown area and rethink their business development goals for the next couple decades as they look to retool and relaunch a tax increment financing district. Business leaders say it’s a crucial tool if downtown Urbana is going to move forward.

It could usher in a new era of incentives for the core of town, and what city officials decide over the next two years could establish the direction of downtown Urbana for the next two decades.

“It’s just a long, slow process of trying to bring business back to downtown,” Strong said.


‘Different kind of success’

Tax increment financing districts feed off the growth of property values within their own boundaries — that’s where they get the money to invest in redevelopment. The more those property values inflate, the more money available for further investment.

Downtown Urbana was off to a great start when the program was launched in 1981. The market property value of downtown jumped from roughly $9.7 million in 1980 to nearly $21 million in 1984 — and then $24 million by 1988.

But since then, the numbers have been pretty uninspiring. Some businesses have come and gone. Jumer’s Castle Lodge — later the Lincoln Hotel and now the Urbana Landmark Hotel — has gone through a few owners and nearly the same number of closings. Shops in Lincoln Square Mall, which is just outside of the downtown district borders but within a secondary district that surrounds the immediate core, struggled to stay open. 

Last year, downtown Urbana was assessed at a market value of about $26.1 million, down from its peak of about $29.5 million in 2007. The 2013 value was a sluggish 8.75 percent increase in the quarter-century since 1988.

The property values alone might not be a measure of success, though, Boys said. Bringing a building up to a condition where a business can open — particularly older buildings like those in the downtown area — is expensive, but that doesn’t necessarily help the property value a whole lot.

“The core downtown is a challenge to redevelop economically,” he said. “We are fortunate to see high levels of reinvestment in downtown Champaign. We hope to have a different kind of success in downtown Urbana, but it’s going to continue to require investment.”

That remodeling is happening — downtown Urbana has fewer empty storefronts now than it has had in years.

Take, for example, the Cafeteria and Co. shops — including Pizza M, Flying Machine Coffee and [co][lab] — along Main Street on the west end of the downtown area. Building owner Matt Cho benefited from $70,000 in money through the city’s tax increment financing district for his $750,000 remodeling of those buildings.

Prior to that, Busey Bank had been using them for storage. The question for city officials going forward will be how to build on that marginal success and encourage some major business growth.


‘Things are getting done’

The good news is that, while the property values flattened out in the latter life of the program, the early growth still provided city officials with tax revenue to pump back into downtown Urbana. 

The beautification of Boneyard Creek and reconstruction of the streets around it at about $8 million was paid for largely with that money.

That’s a project Strong had been awaiting for more than two decades, since he opened Silvercreek. Back then, he postulated that if downtown Urbana was going to expand, it would expand north toward his new restaurant. He hoped Silvercreek would open a key corridor between downtown Urbana and the Carle Foundation Hospital campus.

“Unfortunately, that area was really suffering with a lot of old, failing infrastructure, including by the creekway,” Strong said. “I always thought that was an area with real potential and could be developed.”

But now, more than three decades after the tax increment financing district opened, the Boneyard Creek project is nearing completion, and the streets that link Carle with the core downtown have been completely overhauled.

“When I did Silvercreek, I really thought that might become the spark that might ignite new interest in it,” Strong said. “I don’t know if it did or not, but here we are 25 years later and things are getting done.”

‘Not a lot of resources’

Whether that progress will continue depends largely on whether city officials establish a new tax increment financing program when the existing one expires. With only two years left to go on the downtown district program — and eight years left on a separate but similar tax program that forms a ring around the core downtown area — they would have trouble subsidizing projects that come along.

That secondary district includes malls like the Gateway Shoppes and Urbana Crossing, where Schnucks is located. It has been more successful in terms of producing growth in property values.

“I think, at this point, we’re really in a position where the remaining life of the (core downtown TIF district) will be reserved for projects that come to us,” Boys said. “There’s not a lot of resources there to put to use to instigate anything at a large scale.”

A boilerplate example of tax incentives for large projects usually includes 10 years’ worth of tax abatements or project reimbursements, similar to what the developer of the Stratford Apartments (located just within the second district, but adjacent to the boundary of the core downtown district) got in 2004. That deal wouldn’t be available if a similar project came along today, with two years left on the program.

And, because it usually takes at least two or three years before the full value of a redeveloped property shows up on the tax rolls, the city wouldn’t see any benefit until after the program expires.


‘Crucial for downtown’

That doesn’t mean the end of development. City council members have supported paying $35,000 to a consultant to launch a study of how to move forward, and they could finalize that approval Monday.

That likely will include launching a new tax increment financing program in downtown Urbana, and one that might have some retooled boundaries or readjusted goals.

“I think it’s crucial for downtown Urbana,” said Cynthia Chandler, director of the Urbana Business Association. “I think it’s one thing that has certainly helped spur a lot of the growth that we’ve had here in the last year.”

Business-opening grants provided through the program, for example, are hugely important, Chandler said.

The new tax increment financing district would have to start from scratch — city officials can only use money from the growth in property values starting in the year they establish the district.

An agreement between the city and the Champaign-Urbana Mass Transit District could be a big mover, Boys said. The two agencies are looking for a spot for a new transit center near downtown Urbana, and hopefully it will be done with some private investment involved.

“This is certainly a major objective we’re going to look at in the study,” Boys said. “Frankly, to achieve something at that scale, it requires a lot of incentive to make that happen.”

And that will require some kind of economic development tool.

“We want to be prepared to do more with that opportunity,” he said.

It’s “hard to say” how the city should go about retooling its tax increment financing program, Chandler said, but she thinks it should be made available to as many people as possible. Funding is only available to properties within the boundaries of the district, and city officials will consider where to set new boundaries as part of their study.

Whatever the case, the incentives will be crucial, Strong said. Any time you can convince someone who might be on the fence about whether the investment in downtown Urbana is worth it, “it’s going to be a positive thing.”

“In any area where you need development, it takes motivated, inspired people to come in and bring the ideas and the types of businesses that are going to make people want to come there,” he said.

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ROB McCOLLEY wrote on August 03, 2014 at 8:08 am
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It's stunning to me that the words "parks" and "schools" don't appear in this piece, because it's parks and schools that are most grievously injured by TIF.


Moreover, this whole paragraph is a lie:

Whether that progress will continue depends largely on whether city officials establish a new tax increment financing program when the existing one expires. With only two years left to go on the downtown district program — and eight years left on a separate but similar tax program that forms a ring around the core downtown area — they would have trouble subsidizing projects that come along.


Pure propaganda.


You don't need TIF to raise revenue. You don't need TIF to increase receipts. You simply pool the tax increments (if there ARE any increments) in the funds of all the taxing bodies ... including the parks, and the schools, and the MTD, and the library ... and spend wisely.


Put simply, TIF doesn't work. We know it now. The analysis took a few decades because the intitial life-cycle of a TIF district was 26 years, and the concept started in 1952 


But we have the reports now. They tell us what we could have figured out just by looking at Downtown Urbana's struggles over the last three decades:


"TIF doesn't work." Google it for yourself.

pattsi wrote on August 03, 2014 at 11:08 am

I researched and then wrote my urban planning masters thesis on TIF and conclusively showed that TIF did not work, was being misapplied, and caused financial strains on other taxing entities. This was many decades ago. The results can be extrapolated to Enterprise Zones and similar give away incentives. As stated there is now an over abundance of research published in the peer reviewed urban planning journals. Plus the series of articles over the years, authored by Ben Javorsky, and published in the Chicago Reader are must reads to understand TIF and the dilatory effects. Even though the focus is the 176 such in Chicago, there are lessons to learn and apply to any TIF. If you want to delve further, here is the source

Just a reminder that the 176 TIF districts cost the rest of Illinois citizens related to Chicago school funding due to the school funding formula.