Winnetka Village Council SPECIAL STUDY SESSION Village Hall 510 Green Bay Road July 24, :00 PM AGENDA

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1 Winnetka Village Council SPECIAL STUDY SESSION Village Hall 510 Green Bay Road July 24, :00 PM s regarding any agenda item are welcomed. Please and your will be relayed to the Council. s for a Tuesday Council meeting must be received by Monday at 4 p.m. Any may be subject to disclosure under the Freedom of Information Act. AGENDA 1) Call to Order 2) Public Comment 1) Discussion of Downtown Financing Options...2 2) Use of the Public Sidewalks - Private Art Structures ) Closed Session 4) Adjournment NOTICE All agenda materials are available at villageofwinnetka.org (Government > Council Information > Agenda Packets & Minutes); the Reference Desk at the Winnetka Library; or in the Manager s Office at Village Hall (2 nd floor). Webcasts of the meeting may be viewed on the Internet via a link on the Village s web site: The Village of Winnetka, in compliance with the Americans with Disabilities Act, requests that all persons with disabilities who require certain accommodations to allow them to observe and/or participate in this meeting or have questions about the accessibility of the meeting or facilities, contact the Village ADA Coordinator Megan Pierce, at 510 Green Bay Road, Winnetka, Illinois 60093, ; T.D.D Agenda Packet P. 1

2 Title: Agenda Item Executive Summary Presenter: Tim Sloth, Finance Director Agenda Date: 07/24/2018 Ordinance Resolution Bid Authorization/Award Consent: YES NO Policy Direction Informational Only Item History: During December of 2017, the Village Council identified $11,645,000 of TIF eligible expenses for inclusion in a potential Downtown TIF District. Of this amount, $8,965,000 was for infrastructure related projects. On June 19, 2018 the Village Council approved the Downtown Streetscape and Signage Master Plan identifying $8,992,800 in improvements. With these cost estimates identified, attention turns towards evaluating funding options for these projects. Executive Summary: Recommendation: Staff is seeking policy direction at this time. Discussion of Downtown Financing Options Utilizing $11.7 million as our target estimate, the Finance Department identified and analyzed six revenue options that provide additional annual funding that could be directed toward Downtown revitalization. Those options, and the annual funding capacity they provide are: - Home Rule Sales Tax - $187,500 -$1,500,000 - Property Tax Increase - $73,500 - $735,000 - Vehicle Sticker Increase - $15,000 - $127,500 - Real Estate Transfer Tax - $305,000 - $1,525,000 - Food and Beverage Tax - $75,000 - $375,000 - Special Service Area Tax - Up to $11,700,000 In addition to the six revenue sources identified above, the Village could pursue additional options such as transfering funds into the Downtown Redevelopment Fund from the General Fund that were previously transfered to the Refuse Fund, establish additional Refuse fees and re-dedicate property taxes towards downtown revitalization, and finally the Village could increase fees within the General Fund to generate additional revenue. Regardless of the funding mechanism, the Village will need to determine whether to pursue projects over an extended time horizon on a pay-as -you-go basis or issue bonds upfront and utilize the identified funding source to pay the annual debt service. Attachments: Agenda Report Agenda Packet P. 2

3 V I L L A G E O F W I N N E T K A MEMORANDUM TO: ROBERT BAHAN, VILLAGE MANAGER FROM: TIMOTHY J. SLOTH, FINANCE DIRECTOR NICHOLAS MOSTARDO, ASSISTANT FINANCE DIRECTOR DATE: JULY 19, 2018 SUBJECT: DOWNTOWN FINANCING OPTIONS Background: As the Village Council has accepted the Downtown Streetscape and Signage Master Plan, the focus has returned toward evaluating financing strategies and revenue options that may be available should the Council wish to pursue them. Therefore, the Finance Department was tasked with analyzing available revenue sources to provide funding for future downtown infrastructure and revitalization projects. The Council reviewed and selected TIF eligible expenses during the December 12 Council meeting. A summary of those selected expenses is shown below: Eligible Expenses Decription Budget Infrastructure Projects Streeetscape, lighting, watermain, electric undergrounding, gateway and wayfinding signage 8,965,000 Future Planning Watermain extension - sprinklers 750,000 Economic Development Programing Sprinkler sharing cost, post office site-assembly 1,800,000 Consulting Services TIF - legal and consulting 130,000 Total $ 11,645,000 For consistency in our analysis, we have rounded the above amount and selected $11.7 million in projects that were identified as eligible expenses in the TIF report. It should be noted that the $8,965,000 in TIF infrastructure roughly correlates to the $8,992,800 identified in the recently approved Downtown Streetscape and Signage Master Plan. Agenda Packet P. 3

4 While tax increment financing exists as a mechanism to fund and support infrastructure improvements and economic development initiatives, this report identifies other revenue options available to the Village of Winnetka. The scope of the analysis is limited to identifying the available revenue sources and projecting annual funding capacity from those sources. However, the Finance Department is not recommending a specific option or options at this time. There are several revenue options that have been identified and currently available to the Village that would provide the funding capacity necessary to implement the improvements. Listed below is a summary of those options. Option 1 Home Rule Sales Tax Annual Funding Capacity: $187,500 - $1,500,000 All municipalities (home rule or non-home rule) are entitled to receive a base 1.0% sales tax. This is a tax imposed on a seller s receipts from sales of tangible personal property for use or consumption. This tax is collected and distributed by the Illinois Department of Revenue and includes most items such as qualifying food, drugs, and medical appliances; items required to be titled or registered (ex. vehicles); and general merchandise. The tax does not apply to paper assets representing an interest such as real estate, stocks or bonds. The Village of Winnetka collects about $1.2 million per year in sales tax. The corporate authorities of a home rule unit of local government (municipality or county) may impose a tax upon all persons who are engaged in the business of selling tangible personal property at retail in their jurisdiction. This tax is referred to as home rule sales tax. The Illinois Department of Revenue is responsible for administering home rule sales tax for the unit of local government. The home rule sales tax can be imposed in ¼ percent increments. There is no maximum rate limit, although most communities have not exceeded 1%. An ordinance or resolution is required to establish the tax, change the tax rate, or discontinue the tax. Once an ordinance has been adopted, and a certified copy has been filed with the Illinois Department of Revenue, the Department will administer and enforce the rate that is imposed or changed. If the local government has filed a certified copy of the ordinance with the Department of Revenue on or before April 1, the tax rate will take effect July 1 of the same year. If filed by October 1, the tax rate will take effect January 1 of the following year. 2 Agenda Packet P. 4

5 Items to be Taxed Home rule sales tax does not apply to the sales of: Tangible personal property that is titled or registered with an agency of this state s government, (e.g., cars, trucks, boats, motorcycles, trailers, snowmobiles, aircraft), and; Food for human consumption that is to be consumed off the premises (groceries) where it is sold (other than alcoholic beverages, soft drinks, and food which has been prepared for immediate consumption) and prescription and non-prescription medicines, drugs, medical appliances, and insulin, urine testing materials, syringes, and needles used by diabetics. Many of our neighboring communities have a home rule sales tax in place: Village of Winnetka Area Comparables - Sales Tax Total Sales Municipality Tax Rate Base Municipal Rate Base Municipal Revenue Home Rule Rate Home Rule Revenue Deerfield* 8.00% 1.00% $5,804, % $4,843,930 Glencoe** 9.00% 1.00% $1,962,832 N/A N/A Glenview 9.75% 1.00% $17,493, % $8,526,037 Highland Park 8.00% 1.00% $9,175, % $4,025,567 Kenilworth** 9.00% 1.00% $47,178 N/A N/A Lake Forest 7.50% 1.00% $1,920, % $614,427 Morton Grove 10.25% 1.00% $4,550, % $3,247,096 Niles 10.25% 1.00% $15,438, % $11,551,457 Northbrook 10.00% 1.00% $9,545, % $5,305,711 Northfield 10.00% 1.00% $2,576, % $799,025 Wilmette 10.25% 1.00% $2,988, % $2,039,818 Winnetka 9.00% 1.00% $1,138,648 N/A N/A Source: Illinois Department of Revenue Website, amounts shown are for the most recent 12 months ending June 30, 2018 * The Deerfield rate shown is for Lake Cook County, a significant portion of Deerfield is located in Cook County which has a 10% Total Sales Tax Rate. ** Glencoe and Kenilworth are non-home rule communities. 3 Agenda Packet P. 5

6 Realizing that a Home Rule Sales Tax doesn t apply to certain types of sales, the projection below estimates how much annual revenue would be added for each additional.25% increase in the home rule sales tax rate. HR Tax Rate Revenue.25% $187,500.50% $375,000.75% $562, % $750, % $937, % $1,125, % $1,312, % $1,500,000 Scenario: The average Home Rule Sales Tax Rate of area comparables is roughly 1%. At 1%, the Village can expect to generate $750,000 in annual revenue. This is enough annual revenue to support up to a $12,450,000 Bond Issuance (30-Year General Obligation), see chart below: Scenario: Home Rule Sales 1% 10-Year 20-Year 30-Year Annual Revenue of $750,000 $6,450,000 $10,200,000 $12,450,000 Option 2 Property Tax Increase Annual Funding Capacity: $73,500 - $735,000 Using additional property tax revenue to fund downtown revitalization is administratively the easiest of all options. The Village became home rule in 2005, but pledged to maintain property tax increases in line or below the limits set by PTELL (tax cap laws). For the most recent levy year, the Village s tax levy is $1,359,273 below the maximum levy that would have been permitted under PTELL. Since becoming home rule in 2005, the aggregate difference between what the Village could have levied and what the Village actually levied is $6,683,077 below the maximum levy permitted under PTELL. To capture additional funds to finance downtown revitalization, the Village would include such requests as part of its annual tax levy ordinance. This ordinance is prepared as part of the annual budget process each fall and filed with the Cook County Clerk no later than the fourth Tuesday in December. The Village could increase its corporate levy or create an entirely new levy category for business district revitalization. This is similar to how refuse and the public safety pension levies are handled. Even if broken out into a separate levy item, residents 4 Agenda Packet P. 6

7 property tax bills would still show a single Village of Winnetka line as they do now. If included in the general levy, the funds would be booked to the General Fund and then transferred to the Business District Revitalization (BDR) Fund. If made its own separate levy item, the levied funds would be booked directly to the BDR fund. Our current levy practice over the last four years has been to hold the line on the annual tax levy and only capture new growth. No other increases for identified projects or general inflationary (CPI) increases have been added to the levy in recent years. The projection below shows how much annual revenue would be added for each additional.25% increase in the property tax levy that could be fully dedicated to downtown revitalization. Resident Impact $750,000 Home Resident Impact $1,000,000 Home Resident Impact $1,500,000 Home Resident Impact $2,000,000 Home P-Tax Increase Revenue.50% $73,500 $4 $5 $7 $10 1.0% $147,000 $7 $10 $15 $20 1.5% $220,500 $11 $15 $22 $30 2.0% $294,000 $15 $20 $30 $40 2.5% $367,500 $19 $25 $37 $50 3.0% $441,000 $22 $30 $45 $60 3.5% $514,500 $26 $35 $52 $70 4.0% $588,000 $30 $40 $60 $80 4.5% $661,500 $34 $45 $67 $89 5.0% $735,000 $37 $50 $75 $99 It should be noted to achieve this annual revenue the tax levy would only have to be increased one time and funding would then be built-in to the existing levy for future years. Scenario: A property tax increase of 3.5% will generate approximately $500,000 in annual revenue. This is enough annual revenue to support up to a $8,300,000 Bond Issuance (30-Year General Obligation), see chart below: Scenario: Property Tax Increase of 3.5% 10-Year 20-Year 30-Year Annual Revenue of $500,000 $4,300,000 $6,800,000 $8,300,000 5 Agenda Packet P. 7

8 Option 3 Vehicle Sticker Increase Annual Funding Capacity: $15,000 - $127,500 The Village has long utilized a vehicle license program to supplement other General Fund revenue sources such as the property tax levy. According to Village Code, each resident or person operating a principal place of business in Winnetka needs to display a vehicle license on any vehicle operated on Village streets. Since 2006, the vehicle license has cost $40 annually per vehicle. In an average year, approximately 7,500 licenses are sold producing about $300,000 in revenue. Licenses are valid for one calendar year. Our current pricing structure includes only the base $40 per vehicle fee. Residents who purchase their licenses after July 1 each calendar year receive a 50% proration of the vehicle license price. We currently do not have a late purchase penalty in place and rely strictly on police enforcement to ensure that each resident purchases a license. Many of our neighboring communities require vehicle licenses comparable communities are listed below: Municipality License Late Fee Deerfield $30 $15 Glencoe $50 $50 Glenview None None Highland Park $55 $10 Kenilworth $80 $15-$40 Lake Forest $85 $42.50 Morton Grove $55 $10 Niles $40 $0 Northbrook $30 $8 Northfield $50 $25 Wilmette $80 $80 Winnetka $40 $0 The average license cost amongst the communities that require them (including Winnetka) is $54. The average penalty for municipalities that impose them at a flat rate is $30. 6 Agenda Packet P. 8

9 The Village s charge for a vehicle license is below the area average with our neighboring communities. Assuming that any change in vehicle license pricing would still require $300,000 of revenue to support General Fund expenses, the following additional revenue projections can be expected at the following vehicle license pricing levels (assumes 7,500 sold annually with 10% late): Pricing Base Late Total General BDR Fund (Base/Late) Revenue Revenue Revenue Fund $40/$20 $300,000 $15,000 $315,000 $300,000 $15,000 $40/$40 $300,000 $30,000 $330,000 $300,000 $30,000 $50/$20 $375,000 $15,000 $390,000 $300,000 $90,000 $50/$30 $375,000 $22,500 $397,500 $300,000 $97,500 $55/$20 $412,500 $15,000 $427,500 $300,000 $127,500 According to the projections, an increase in the base license price and the addition of a late fee that still keeps the Village below average versus its neighbors would likely yield less than $100,000 toward the Business District Revitalization Fund. If the average base fee and average late fee is implemented, the result would be approximately $100,000 in revenue for downtown revitalization. Increasing the base license price over the average of $50-$55 will yield additional revenue, but puts Winnetka higher than neighboring communities. A change in vehicle license pricing could be effectuated by Council vote at any time of the year, though it would make the most sense to implement prior to the beginning of sales for a new year. License sales for a subsequent year begin on October 1 of the current year, so the timeframe for increasing license prices would be slightly advanced versus the annual budget timeline. While it would be easiest to include pricing changes within the budget rate resolutions, the asynchronous timeline of the two activities would result in a situation where residents are paying different prices for the same license year. Therefore, if pricing changes were desired for fiscal year 2019, the Council could pass an amended rate resolution no later than early-september to allow for resident communication and software updates prior to the October 1, 2018 start date for sales of 2019 licenses. Scenario: Raising the price of a vehicle sticker to $50 and implementing a $20 late fee will generate about $90,000 in annual revenue. This option on its own will not generate sufficient annual revenue to support a Bond Issuance. 7 Agenda Packet P. 9

10 Option 4 Real Estate Transfer Tax Annual Funding Capacity: $305,000 - $1,525,000 Home rule municipalities in Illinois have an option to raise revenue in the form of a real estate transfer tax. This tax is levied on a buyer or seller of real property during the closing of a sale for transferring a benefit interest in real estate. Up until 1997, a home rule municipality could implement this tax relatively easily. However, in a law advanced by the real estate lobby and signed by then governor Jim Edgar, the ability for home rule municipalities to implement this tax became more difficult. Specifically, referendum approval is required for new or increased home rule real estate transfer taxes implemented after the law went into effect. Currently, 65 ILCS 5/ governs the implementation of a new home rule real estate transfer tax and the increase of existing real estate transfer taxes. According to the Act, a home rule municipality wishing to implement a real estate transfer tax must adhere to the following: Corporate authorities required to give public notice and conduct a public hearing prior to placing a ballot referendum. The public hearing can be part of a regular scheduled Council meeting. Legal notice must be placed in newspaper of general circulation within the municipality not more than 30 or less than 10 days prior to the scheduled hearing. Format of legal notice is specified in the statute. A proposed ordinance implementing the real estate transfer tax must be drafted and posted for public inspection prior to the hearing. Corporate authorities must publically state the reason for the real estate transfer tax at the public hearing and allow any person desired to be heard reasonable time to present testimony. After holding a hearing, the corporate authorities must pass a resolution providing submission of proposition to the voters in accordance with the general election statutes. The referendum question format is dictated by statute. If a majority of the electors voting on the proposition vote in favor of the initiative, the municipality may impose the real estate transfer tax. 8 Agenda Packet P. 10

11 Whether or not the tax is paid by the buyer or seller, or combination thereof, it would be specified in the ordinance and the referendum ballot question. The statute does not restrict exclusions on the tax, such as exempting in-town moves, which many municipalities with RETT s allow. A home rule real estate transfer tax would be in addition to the State of Illinois real estate transfer tax, currently $0.50/$500 of selling price and the Cook County real estate transfer tax, currently $0.25/$500 of selling price. Several of Winnetka s neighboring communities have a real estate transfer tax. Information about each community is listed below: Municipality Tax Amount of Tax Paying Party Implemented Revenue (FY17) Deerfield No Glencoe No Glenview No Highland Park Yes $5/$1,000 Seller 07/01/1988 $2,003,188 Kenilworth No Lake Forest Yes $4/$1,000 Buyer 03/21/2006 $1,398,160 Morton Grove Yes $3/$1,000 Seller 02/01/1988 $442,597 ( 16) Niles Yes $3/$1,000 Buyer 06/14/1993 $632,051 Northbrook No Northfield No Wilmette Yes $3/$1,000 Buyer 02/22/1988 $1,303,787 Winnetka No Since the 1997 legislation was put into place, the number of communities in the State implementing a real estate transfer tax with a tax amount greater than $0 (compliance only) is quite limited. Most active home rule real estate transfer taxes were put into place before the 1997 change that required a voter referendum. In the Village s immediate area, Lake Forest is the exception, having gone to referendum and successfully implemented their home rule real estate transfer tax in One of the sweeteners offered to Lake Forest residents is a refund of up to $2,000 of transfer taxes previously paid for an in-town move within a one year period. Were the Village of Winnetka to implement a home rule real estate transfer tax structured in the $3-$5/$1,000 range, we could expect revenue similar to other North Shore communities that impose the tax given our high home prices. Reasonably, this would likely be between $750,000 to $1,000,000 or more based on a transfer tax such as $3/$1, Agenda Packet P. 11

12 According to records from Zillow, approximately 271 homes were sold in Winnetka in the last twelve months. Sale prices ranged from $125,000 for a small condo unit to $12,000,000 for a large estate. While individual sale level data in an analysis-ready format is unavailable without a paid subscription, if we take the average home valuation of $1,131,200 and multiply it by 271 homes, the result is a sales figure of $306,555,200 for the last twelve months. The following table lists anticipated revenue based on those sales figures: Tax Amount Revenue $1/$1,000 $305,000 $2/$1,000 $610,000 $3/$1,000 $915,000 $4/$1,000 $1,220,000 $5/$1,000 $1,525,000 A home rule real estate transfer tax would provide substantial revenue for downtown revitalization and could potentially even reduce the reliance on other non-property tax revenue sources for operations. Scenario: A Real Estate Transfer tax of $3 / $1,000 of property value will generate roughly $915,000 in annual revenue. This is enough annual revenue to support up to a $15,189,000 Bond Issuance (30-Year General Obligation), see chart below: Scenario: Real Estate Transfer Tax of $3/$1, Year 20-Year 30-Year Annual Revenue of $915,000 $7,869,000 $12,444,000 $15,189, Agenda Packet P. 12

13 Option 5 Food and Beverage Tax Annual Funding Capacity: $75,000 - $375,000 Home rule municipalities in Illinois have an option to raise revenue by levying a tax on the purchase price of prepared food, alcoholic, and non-alcoholic drinks that are prepared for immediate consumption (i.e. food sold in restaurants). Examples of typical taxable sales include: All products served in restaurants, carry out orders, delivery orders All restaurant style products sold by a grocery store or other places of eating, such as prepared chicken, ice cream cones or hot soup. All restaurant style products at convenience stores, such as food items selected under a heat lamp. A can or bottle of beer, a mixed drink, or a dispensed soft drink served to a diner in a restaurant or to a patron in a bar/tavern. Brewed coffee, fountain drinks or other beverages prepared This tax is not imposed on the following: Vending machines Daycare centers and nursing homes providing food and beverages in a contractual agreement. Other facilities of not-for-profit associations or corporations. Complimentary food and beverage with a service. Neighboring communities that have a food and beverage tax in place include: Municipality Rate Revenue Deerfield 1.00% $500,000 Glencoe N/A N/A Glenview N/A N/A Highland Park 1.00% $939,500 Kenilworth N/A N/A Lake Forest N/A N/A Morton Grove 1.00% $410,000 Niles 1.00% $1,300,000 Northbrook N/A N/A Northfield N/A N/A Wilmette N/A N/A Winnetka N/A N/A 11 Agenda Packet P. 13

14 In terms of projected revenue for the Village, we used the Standard Industrialized Classification reports on the Illinois Department of Revenue s website and analyzed the general sales tax information by classification for Winnetka. Utilizing this data we can reasonably estimate the Village could generate the following revenue: F&B Tax Rate Revenue.50% $75, % $150, % $225, % $300, % $375,000 A food and beverage tax can be implemented by the passage of an ordinance. The Village of Vernon Hills recently passed such an ordinance establishing a 1% tax rate on April 17, The Food and Beverage tax could be in addition to the Home Rule Sales Tax if desired. Scenario: Implementing a 1% Food and Beverage Tax will generate about $150,000 in annual revenue. This option on its own will not generate sufficient annual revenue to support a Bond Issuance. Option 6 Special Service Area Tax Annual Funding Capacity: Up to $11,700,000 Special Service Area (SSA) financing is a mechanism to fund special services or infrastructure improvements through a localized property tax levy. An area is defined where property owners will specially benefit from a proposed improvement. Based on the actual cost of the improvement, a tax rate is then established and applied against the assessed value of each property in the defined area. That amount appears on the property tax bill and funds the improvement over a predetermined period of years. The SSA tax levy is the responsibility of the property owners because the improvement specially benefits those that own property within the SSA, not the property owners outside the SSA area. Therefore, the cost for the improvement is only distributed among those properties within the defined SSA. In basic terms, the Illinois Constitution allows a municipality to levy an additional real estate tax in an area within its boundaries for the purpose of providing special services or improvements to that area that are not available to the entire municipality. 12 Agenda Packet P. 14

15 Special Service Area projects include those improvements permissible under Article 9 of the Illinois Municipal Code including but not limited to, streets, storm drain sewers, water mains, sanitary sewer improvements, sidewalks, walkways, bicycle paths, landscaping, lighting improvements, signage improvements, vehicular parking improvements, any additional improvements necessary to provide access to the public improvements, and all necessary appurtenances. Additionally, Special Service Area s have been enacted to provide additional services such as snow plowing or maintenance within the special service area taxing district. Property Taxes, Rates, and Debt Limits Property Taxes may be levied or imposed in the special service area at a rate or amount sufficient to produce revenues required to provide the special services / improvements. 35 ILCS 200/27-45 provides that special service area bonds shall not be regarded as indebtedness of the municipality or county for the purpose of any limitation provided by law. General Procedures and Ordinance Calling for Hearing on Proposed Service Area A special service tax or bond issue must be for a public purpose. After determining that a proposed project is for a public purpose, the next step is to ascertain a reasonable boundary for the special service area. This boundary could be based on existing uses, existing zoning classifications, or simply the extent of the benefits received from the special service. Next, a determination must be made that the services to be rendered are special, which means that the services to be rendered are different in quality or quantity from services generally rendered in the municipality. Public Hearing/Objections In order to establish a Special Service Area a Public Hearing must be held. This hearing provides an opportunity for members of the public who own property within the proposed SSA boundaries to address the Council. Notice of the Public Hearing must be published in a newspaper at least 15 days prior to the public hearing and a Certified Notice must be mailed to property owners at least 10 days prior to the public hearing. Property owners within the proposed Special Service Area may object to the establishment of an SSA and stop it from proceeding. If at least 51% of the property owners and 51% of the electors (registered voters) within the proposed SSA file a protest with the Village Clerk within a 60-Day protest period, then the SSA shall not be established. The 60-Day protest period commences following the adjournment of the Public Hearing. If a proposed SSA is vetoed by 13 Agenda Packet P. 15

16 the property owners and electors, then the subject matter may not be re-proposed by the municipality relative to any of the signatories for two years. Supplemental Ordinances Although there is no specific statutory requirement, it is suggested that an appropriation ordinance be adopted for those items to be financed out of the SSA s annual tax levy. It is necessary to adopt a separate tax levy ordinance for the special service area if a tax levy has been authorized. A certified copy of this ordinance must be filed with the County Clerk s office by the last Tuesday in December. If bonds are to be issued, then it is necessary to adopt a bond ordinance. A certified copy of this ordinance must be filed with the County Clerk s office by December 31 st. 35 ILCS 200/ Special Service Area Process STEP 1: Determine the nature of the special services/improvements needed/requested, the area that will benefit, and the cost for providing the special services/improvements. The costs should include construction costs, engineering costs, legal fees, bond issuance costs, in-house services, capitalized interest, and other costs uniquely attributable to the special services being provided. STEP 2: Adopt Ordinance calling for a public hearing on the establishment of the special service area. The Ordinance must set forth: a. The boundaries by legal description and, when possible, street location; b. The permanent tax index number of each parcel located within the area; c. The proposed tax rate limits, if any; d. The proposed limit on the amount of bonds to be issued, if any; e. The maximum number of years for the special service area; f. The form of the notice to the property owners; g. The nature of the proposed special services to be provided within the special service area; h. A statement as to whether the proposed special services are for new construction, maintenance, or other purposes; i. The hearing time, date and location; and 14 Agenda Packet P. 16

17 j. If the special services are to be maintained other than by the municipality or county after the life of the bonds, then a statement indicating who will be responsible for the maintenance of the special services after the life of the bonds. STEP 3: Provide adequate notice of the public hearing. STEP 4: Hold public hearing to discuss the formation of the special service area, the levy or imposition of taxes, and the issuance of bonds. STEP 5: Finalize boundaries. The original boundaries may be amended at the public hearing or at the first meeting of the Village Board/City Council following the public hearing to delete areas from the special service area, so long as the remaining area is contiguous. STEP 6: After the final adjournment of the public hearing, there is a sixty (60) day window for the filing of objections. If a valid objection petition is filed, the subject matter of the special service area cannot be re-proposed against the signers of the petition for a two (2) year period. STEP 7: Adopt an ordinance establishing the special service area. This ordinance can be adopted at the end of the sixty (60) day objection period, or immediately after the public hearing, but with an effective date after the running of the sixty (60) day objection period. STEP 8: File a certified copy of the ordinance establishing the special service area with the County Clerk and record a certified copy with the Recorder of Deeds. The ordinance must be recorded within sixty (60) days after its adoption or it will be deemed invalid. STEP 9A: If the special service area provides for a tax levy other than in relation to a bond issue, adopt an appropriation ordinance and tax levy ordinance (e.g. an annual levy for the maintenance or street cleaning services). The tax levy ordinance must be filed with the County Clerk on or before the last Tuesday of December. STEP 9B: If the special service area provides for a bond issue, adopt a bond ordinance (e.g. construction of a street scape improvement in a downtown shopping district). This ordinance must be filed with the County Clerk by December 31 st. 15 Agenda Packet P. 17

18 Scenario: Implementing a Special Service Area that generates $790,540 in annual revenue is sufficient to support up to a $11,700,000 Bond Issuance (30-Year SSA). Scenario: Special Service Area* 10-Year 20-Year 30-Year Annual Revenue of $790,540 $6,324,320 $9,802,500 $11,700,000 * SSA Bonds are typically issued at higher interest rates than standard G.O. Bonds. For example, annual revenue of $790,540 sourced over 30 years could generate funding capacity of $13.1 million if G.O. Bonds are issued versus SSA Bonds. Special Service Area Examples Example 1 Pay as you go, financed through SSA. Utilizing the properties identified in the Ehler s TIF report, we can reasonably estimate the annual impact to taxpayers in the affected business district area should the Village spread the total costs over a five-year time period. The two key advantages of this type of SSA are the shorter payback period (five years) and no debt service costs. The disadvantage is that the Village would have to front the annual costs before being paid back by the SSA. Another disadvantage is that the annual SSA tax is higher, though it is collected for a shorter number of years. The chart below provides a snap shot of what a pay-as-you-go SSA would look like: Example 1 - $11,700,000 (pay as you go) 5-Year 10-Year Annual Project Cost $2,340,000 $1,170,000 EAV of project Area $34,246,012 $34,246,012 Commercial Property Value (Market Basis) $1,000,000 $1,000,000 Estimated Annual SSA Tax* $47,885 $23,943 * Estimated Annual SSA Tax on property with a $1 million property value (market basis). 16 Agenda Packet P. 18

19 Example 2 Issue $11,700,000 in Bonds, financed through SSA. Working with Speer Financial, the Village s bond advisor, we have determined the annual debt service cost (principal and interest) for a 10-year, 20-year and 30-year $8,992,800 bond issuance at today s market rates. Utilizing the properties identified in the Ehler s TIF report we can reasonably estimate the annual impact to taxpayers in the subject business district area should the Village issue bonds and finance the annual debt service payment via an SSA. The advantage of this approach is that the project could be completed much quicker with the costs spread over a longer period of time. The disadvantage is the additional debt service costs (interest). The chart below shows the impacts of an $11,700,000 bond issuance financed via SSA: Example 2 - $11,700,000 (bond issuance) 10-Year 20-Year 30-Year Annual Debt Service $1,462,500 $943,550 $790,540 EAV of project Area $34,246,012 $34,246,012 $34,246,012 Commercial Property Value (Market Basis) $1,000,000 $1,000,000 $1,000,000 Estimated Annual SSA Tax* $29,928 $19,309 $16,177 * Estimated Annual SSA Tax on property with a $1 million property value (market basis). Both Special Service Area examples result in an increase in the annual property tax burden imposed on properties located within the SSA district during the time period of the SSA. 17 Agenda Packet P. 19

20 Other Revenue / Funding Options Other revenue and funding options for the Business District Revitalization fund include: Establishing a TIF district Transferring funds from the General Fund that were previously dedicated to the Village s Refuse utility. ($550,000 in 2018). Establish additional Refuse fees and re-dedicate the Refuse property tax levy towards downtown revitalization. ($1,100,000 in 2018) Across the board General Fund service fee and fine increase. A 3%, across the board hike in General Fund service fees and fines would generate approximately $135,000 in additional annual revenue. Each of the revenue sources listed in this memo provide an annual recurring source of revenue that can be utilized to finance improvements in the Downtown area either on a pay-as-you-go basis or by proving the annual funding capacity to pay the debt service on a bond issuance. The matrix below details the total funding capacity provided by incremental levels of annual level debt service. Village of Winnetka Funding Capacity by Amount of Level Debt Service 10-Year G.O. Bond Funding Capacity 20-Year G.O. Bond 30-Year G.O. Bond Annual Payment Amount $500K $4,300,000 $6,800,000 $8,300,000 $750K $6,450,000 $10,200,000 $12,450,000 $1 Mil $8,600,000 $13,600,000 $16,600,000 $1.25 Mil $10,750,000 $17,000,000 $20,750,000 $1.5 Mil $12,900,000 $20,400,000 $24,900,000 For example, if the Village were to implement a 3.5% increase in the property tax levy it would generate approximately $500,000 a year. Utilizing the chart above, $500,000 in additional annual revenue is sufficient to pay the annual debt service on an $8.3 million, 30-Year bond issuance. It should be noted that the funding capacity is reduced if SSA bonds are issued versus G.O. bonds due to SSA bonds typically being issued at higher interest rates. 18 Agenda Packet P. 20

21 Conclusion The revenue options identified within this report could potentially provide the funding capacity towards completing the streetscape-downtown revitalization projects. Included with this memo is a spreadsheet showing a comparison of home rule revenues of area communities as well as a summary of the revenue options described in this report. We look forward to presenting and discussing these options further at the July 27 th Village Council meeting. 19 Agenda Packet P. 21

22 Village of Winnetka Home Rule Revenues of Neighboring Communities Deerfield Glencoe Glenview Kenilworth Niles Northbrook Northfield Wilmette Morton Grove Lake Forest Highland Park Average Excl. Winn Winnetka Vehicle Sticker Cost $30 $50 No $80 $40 $30 $50 $80 $55 $85 $55 $56 $40 Sticker Late Fee $15 $50 No $15-$40 $0 $8 $25 $80 $10 $42.50 $10 $27 $0 Home Rule Sales Tax Rate 1.00% none 0.75% none 1.25% 1.00% 1.00% 1.00% 1.25% 0.50% 1.00% 0.97% none Combined Sales Tax Rate 8.00% 9.00% 9.75% 9.00% 10.25% 10.00% 10.00% 10.25% 10.25% 7.50% 8.00% 9.27% 9.00% Food and Beverage Tax 1.00% none none none 1.00% none none none 1.00% none 1.00% 1.00% none Real Estate Transfer Tax Rate none none none none $3/1,000 none none $3/1,000 $3/1,000 $4/1,000 $5/1,000 $3.60 none Buyer or Seller Pays Buyer Buyer Seller Buyer Seller 3 Year Average Inc. in P-Tax $ $760,492 $400,996 $446,680 $103,573 $218,178 $988,262 $133,888 $628,315 $274,763 $615,476 $287,479 $441,646 $122,476 3 Year Average Inc. in P-Tax % 8.29% 2.96% 2.28% 2.45% 3.73% 4.59% 3.42% 3.89% 2.09% 2.14% 1.76% 3.42% 0.85% Potential Revenue Winnetka Revenue Options Low High Opt. 1 - Home Rule Sales Tax Rate $ 187,500 $ 1,500,000 Opt. 2 - Property Tax $ 73,500 $ 735,000 Opt. 3 - Vehicle Sticker Increase $ 15,000 $ 127,500 Opt. 4 - Real Estate Transfer Tax $ 305,000 $ 1,525,000 Opt. 5 - Food and Beverage Tax $ 75,000 $ 375,000 Opt. 6 - Special Service Areas $ - $ 11,700,000 $ 656,000 $ 15,962,500 Agenda Packet P. 22

23 Title: Agenda Item Executive Summary Presenter: Robert Bahan, Village Manager Agenda Date: 07/24/18 Ordinance Resolution Bid Authorization/Award Consent: YES NO Policy Direction Informational Only Item History: Use of the Public Sidewalks - Private Art Structures During the summer of 2017, Hoffmann Commercial Real Estate Company installed approximately five privately owned art structures in and around the Elm Street Business district, without prior Village approval. After a series of meetings, many of the art structures were relocated to private property. Attachment A identifies the current locations of the privately owned art. In the spring of 2018, the private art structures returned to their previous locations on the public sidewalks. Executive Summary: To protect the Village from liability, the Village requested and received certificates of insurance during 2017 and 2018, naming the Village of Winnetka as an additional insured with $2 million general aggregate liability. This is the same insurance requirement for outdoor seating and dining. This year, upon reviewing the certificate of insurance, the Village Attorney requested that Hoffmann execute hold harmless agreements to further protect the Village from liability. Hoffmann has yet to submit those agreements. At the end of 2017, the Village requested Hoffmann to remove the art structures on the public sidewalk by November 30th. This is consistent with the same requirement for approved outdoor dining tables and chairs that are to be removed prior to winter, to ensure that Public Works can remove snow from the downtown business areas without obstruction. Attachment B is a letter sent to Hoffmann requesting the removal of the art structures. Hoffmann complied with Village requirements in this regard. During the spring of 2018, the art structures were returned to their previous sidewalk locations, and conversations with Hoffmann have continued regarding possible alternative locations. The Village has received varying comments regarding the placement of private art on the public sidewalks. Recently, the Village Council received the attached letter from a resident regarding this issue, and the Council expressed a desire to further review and discuss this matter. This letter is included as Attachment C. Agenda Packet P. 23

24 Executive Summary (continued): The Village has a history of licensing outdoor seating and dining requested by restaurants and coffee shops wishing to place them on the public sidewalks. Section of the Village Code prohibits the use of public sidewalks for business operations without the prior approval of the Village. The duration of the outdoor seating and dining season is April 1 through November 30. Each year, a business wishing to have outdoor seating and dining must complete an application, provide a diagram or table layout sketches for approval of the Director of Public Works, and submit a certificate of insurance showing at least $2 million in general aggregate liability, with the Village named as an additional insured. Staff also continuously works with the businesses throughout the outdoor seating season to ensure the safe passage of pedestrians on the Village's sidewalks. Attachment D has the relevant sections of the Village Code along with a sample outdoor seating permit application. While the Village licenses outdoor seating and dining, it has not historically licensed flower planters and/or minor displays, etc. adjacent to the businesses. The Village has provided notice to those businesses with flower planters, etc. to remove those items by November 30, similar to outdoor seating and dining. Recommendation: Discuss and provide policy direction regarding the placement of items on Village sidewalks. Attachments: Attachment A - Current Locations of Hoffmann Private Art Attachment B - October 31, 2017 Letter to Hoffmann Attachment C - Resident Letter of July 9, 2018 Attachment D - Village Code and Sample Permit Application Agenda Packet P. 24

25 Attachment A Hoffmann Commercial Real Estate Art Locations Artist: Jim Rennert Title: Momentum Edition of 3 Dimensions: 86" x 52" x 48" Approx Location: Plaza of Coldwell Banker Lincoln Ave Winnetka, IL (Private Property) Artist: Jim Rennert Title: Really Edition of 3 Dimensions: 77" x 36" x 36'"' Approx Location: Cafe Aroma 749 Elm St, Winnetka, IL (Public Property) Agenda Packet P. 25

26 Attachment A Hoffmann Commercial Real Estate Art Locations Artist: Ruth Bloch Title: Joy Dimensions: 96" x 26" x 26" Approx Location: Ford & Brady Orthodontics 585 Lincoln Ave Winnetka, IL (Private Property) Artist: Ruth Bloch Title: In Dialogue Edition of 1 Dimensions: 52.5" x 58" x 29" Approx Location: Optique 561 Lincoln Avenue Winnetka, IL (Public Property) Agenda Packet P. 26

27 Attachment A Hoffmann Commercial Real Estate Art Locations Artist: Ruth Bloch Title: Flying Even Higher Edition of 1 Dimensions: 112" x 20" x 19.5" Approx Location: Trifecta 501 Chestnut Winnetka, IL (Public/Private Property) Artist: Bruce Niemi Title: Wind Whisperer VI Approx Location: Mirani s at Home 5617Lincoln Avenue Winnetka, IL (Public/Private Property) Agenda Packet P. 27

28 Attachment B October 31, 2017 Office of the Village Manager Re: Public Art Policy Dear Mr. Burns, Thank you for taking the time to meet with me on September 6, As the Village continues to examine a formal public art policy, I wanted to address requests that came up in that meeting. As discussed at this meeting, we must insist any art on public property be removed no later than November 30, I understand there are costs associated with moving the art, but from a snow removal and maintenance standpoint, we simply cannot allow them to remain in place. Year round placement will involve a more thorough analysis through our policy-making process. An optimum solution may be to move the art (Lincoln Avenue/Elm Street statute and bench statute in front of Optique) onto your private property, such as the courtyard of the Galleria. The artwork at the corner of Chestnut and Oak Streets could potentially be relocated into the outdoor patio, behind the wall, of Trifecta Grill. Our Downtown Master Plan Task Force has begun to meet and they will be tasked with reviewing our Streetscape Plan and how public art may be incorporated. By allowing the Task Force appropriate time to work on this item, I am confident we will have an efficient and comprehensive policy in place in time for the spring of We appreciate the continued investment and creative thinking by Hoffmann Commercial Real Estate to help differentiate Winnetka and make it a highly desirable location for retailers. I look forward to continuing to work together. Sincerely, Michael Martella Economic Development Coordinator Village of Winnetka Cc: Chris Rintz, Village President Robert Bahan, Village Manager 510 Green Bay Road, Winnetka, Illinois Agenda Packet P. 28

29 Attachment C 518 Hawthorn Lane Winnetka, Illinois July 9, 2018 Members of the Winnetka Village Council 510 Green Bay Road Winnetka, IL Dear members of the Winnetka Village Council: Approximately a year ago, I first saw an obstruction of great height, width, and depth on the northeast corner of Elm Street and Lincoln Avenue in the town I have called home for over 35 years. As I have observed, the figure of a man looks like it weighs at least a ton, blocks one s view, gets in the way of walkers, strollers, animals on leashes and bicyclists, and, for my taste, is as ugly as Sin. When I made inquiries as to its existence on the public right-of-way, I was told that it was not erected by any democratically chosen body or representative group within the Village, but that an individual set it there in its spot, and, as I can make out, the Village, as represented by the Winnetka Village Council, has not done a thing to remove it. At the time of this writing the figure still stands on the northeast corner of Elm Street and Lincoln Avenue in Winnetka, Illinois. When I made a personal inquiry in the Village Manager s office, leaving my name, address, and phone number, no one answered my query. What is going on? I know One Winnetka and the 2 nd Annual Music Fest have taken much of your time and attention of late, and you may well accuse me of, straining at a gnat, but I feel there is a principle involved here. Winnetka has a Design Review Board, we have a very active North Shore Art League, and we have a citizenry both active in and supportive of the fine and applied arts who have a long history of volunteering their time and expertise to their home village. Agenda Packet P. 29

30 Attachment C I, for one, am greatly bothered by the gnat and the much larger principle that an individual can claim public space for a structure that is very likely physically harmful and (easily proven) aesthetically displeasing to the community. And I am not alone. I will gladly collect signatures of others who think in like fashion. But is this necessary? Does common sense not apply? And what is the legal precedence for this? Yours respectfully, Mary Jo LaViolette 518 Hawthorn Lane Winnetka, Illinois maryjo.laviolette@gmail.com Agenda Packet P. 30

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