The village's cost of turning keys over to Whiteco: $20M?

Opinion

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A cynical lawyer once said, "The law is only that which can be reasonably argued and plausibly maintained." Under our Planned Unit Development Ordinance that is all it is.

As a citizen, I listened to hours of Whiteco testimony. I spent two weeks on the web, calls to other cities, hours at the Oak Park Library and the Oak Park Historic Society. My goal in all this was to simply find out the total of the village's subsidy to Whiteco, find out the net cash investment of the developer, discover other Whiteco projects that are similar and to discuss the State Supreme court ruling that prevents municipalities from condemning private property for a public purpose and then turning it over to a private developer.

Over the next three weeks, I will try to outline what I have learned.

A developer wears pants, just like all of us. In these pants he has several pockets. No matter into which pocket he stuffs the money we give him or at what time in the process he gets the money, he still receives and has control over all of the different wads of our money in his pants. Please keep in mind that at this late stage in the process no one from Village Hall or Whiteco has provided all the numbers to us in a succinct and easily understandable format. No one from Village Hall has even asked our Township Assessor to review the numbers or ask for his much needed input.

At the end of the day my best guess estimate of what will be in Whiteco's pants is as follows:

Total Cost of Whiteco Project: $47.4 million

Village Pays for Construction of Garage: -$7.2 million

Whiteco's Gross Construction Cost: $40.2 million

Whiteco's loan from Bank: -$30.15 million

Gross Equity that Whiteco needs to provide to obtain loan:  $10.05 million

Village Cash and Property Equity Subsidy provided to Whiteco:  $8.2 million

Gross proceeds from sale of six luxury town homes:  -$2.7 million

Whiteco Net Cash Investment in Project:  $-850,000

It gets worse.
Development fee collected by Whiteco to build garage paid from village funds (8 percent):  $576,000

Development fee collected by Whiteco to build Luxury Apartments paid from construction costs (for some unknown reason only 2-3 percent):  $1.2 million

Net fees earned by Whiteco:  $ 1.776


If we add the cash out scenario above with the net development fees earned by Whiteco it is my best guess estimate that Whiteco walks away with $2.626 million in their various front pockets and title to a $40 million dollar luxury apartment building in their hip one. Yearly gross rent from apartments and stores is $4.2 million.

Additionally, for every $100,000 that Whiteco can save us in garage construction costs they get to pocket $25,000 and the garage construction cost is based on a projected cost of $16,000 per space multiplied by 450 spaces. The total cost will not be known until the project is sent out to bid.

On the village side of things we do not have money to pay for any of this so we have to borrow. We need to take a look at what we have spent and what we need to spend.

The Holley Court parking lot site was originally a large area of Victorian homes. In 1964 when the village acquired the site it appears they had to pay a premium for it and they did it by taking to court the homeowners who wouldn't sell, forcing them out. Initially there were 28 homes on the site, a few were saved and moved, most were demolished. That's an average of $59,000 per parcel. 

Cost to aquire and demolish Victorian homes  $1.65 million

Interest paid on bonds to finance purchase  $1 million

Total cost 1964 dollars  $ 2.65

Long before there was a Downtown TIF District the village took these homes by saying that the taking was for a public purpose, that it would benefit the village. They gave Marshall Field's parking rights on the new lot in an attempt to keep them here. Unfortunately, it appears that no one on our side of things was smart enough to put this agreement on paper and Fields left anyway.

Recently the village acquired, by negotiation, the 16 unit Hoppe building for $1.9 million and previously the village moved, under eminent domain, to remove Field's parking rights and covenants that the Holley Court Retirement Building had acquired during their construction negotiation with the village in the 80's.

So let's add this up:

Cost to acquire lot 1964:  $2.65 million

Cost to acquire covenants: $400,000

Cost of Hoppe Building:  $1.9 million

Cost to demolish Hoppe Building:  $65,000

Cost to construct garage:  $7.2

Actual cash to developer:  $2 million

Total cost:  $14.215

Fortunately for us we already paid $2.65 million so we don't have to borrow as much.

Cost to acquire site and construct garage:  $11.565 million

Cost of issuing 30 year bonds at 4.25 percent:  $8,916,425

Total cost to us to turn over keys to Whiteco:  $20,481,425


So let's summarize: We put up $20 million and Whiteco puts up nothing. Whiteco walks away with $2.626 million in cash and the deed to a luxury 200 unit apartment building with a gross yearly cash flow from rents of $4.2 million.

Oh and one other thing, that cynical lawyer that I mentioned at the beginning, it was Aaron Burr, a sitting vice-president that killed the man that kept track of the numbers for us: Alexander Hamilton.
Paul Hamer
Oak Park

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