Government incentives are great when they enable building and other projects that improve communities. It's when they put government in a position of picking market winners and losers that they become problematic.
The DeKalb City Council finds itself in such a situation with the most recent request for tax increment financing incentives.
On Monday, aldermen heard a developer's plan to convert a nearly century-old, vacant building into a boutique hotel.
Developer Nicholas Cronauer told the council his company is planning a $6.25 million renovation of the former District 428 administrative building, a 24,000-square-foot structure on a 1.4-acre lot at 145 Fisk Ave. The building has been vacant for 25 years, and its interior is gutted. Cronauer's company is seeking $2 million in TIF assistance to make it happen.
The building has been empty for 25 years, so it certainly qualifies as blighted, and if successful, the renovation would add to the value of the property – which currently pays less in property tax than many houses – and could bring in other revenue to the city from sales and hotel-occupancy taxes.
But a local nonprofit agency wants the building, too.
Mary Ellen Schaid, executive director of Safe Passage, says her organization long has eyed the building as a new location to provide services to battered women and children.
Safe Passage needs more space; officials say the domestic violence shelter has to turn away 10 to 15 would-be clients most months.
Safe Passage is willing to buy the building, which is listed for $325,000, without any incentives. They would need to launch a fundraising campaign to amass the $4 million or so they estimate they’d need for renovations. It would likely years if not longer before the project was completed.
Unlike a hotelier, a nonprofit shelter would not be subject to property or sales tax. It does provide a valuable and necessary community service, however.
Council members were noncommittal about the building’s future on Monday, with some saying they weren’t ruling either proposal and Mayor Jerry Smith calling it “an opportunity for some dialogue.”
Dialogue must beget a decision, however. Council members will have to decide if a hotel use fits in the neighborhood, which is a few blocks from downtown and a little more than a half-mile from Northern Illinois University. They'll also have to decide whether it has enough chance of success there to invest $2 million in public funds in the venture.
It would be better if the market, rather than government incentives, determined who ultimately bought the building.
Since that might not be possible here, council members must carefully weigh the competing interests of two would-be buyers, as well as the wishes of neighbors and the public's concern their money is spent wisely.