The developers of an apartment complex in an up-and-coming Chicago suburb are being sued by three subcontractors after the project allegedly stalled due to a lag in the permit process.
The project is being funded partly by TIF (tax increment financing) district money, which has not only caused problems for Spancrete, Creative Erectors, and Ozinga Ready Mix Concrete but also the neighbors of the 100-unit complex.
TIF is a popular method of financing projects involving the revitalization of urban areas. This method uses projected increases in tax revenue to secure the means to develop such projects.
This apartment complex is part of the first phase of the overall redevelopment that’ll be constructed in four phases. Around 500 apartments will be constructed in this initial phase, which will cost $60 million. The village board approved this project back in 2015 to include a hotel/marina, housing for empty nesters and seniors, as well as commercial space that would take up 100,000 square feet. The expected cost of the entire downtown redevelopment is $250 million.
Currently, the project has been stalled due to complications in acquiring a full building permit meant to address aspects of handling stormwater.
Spancrete’s mechanics lien against the defendant, Grove Residences LLC, is for $1.5 million for unpaid work on the construction of the foundation of the first two floors. Their job on this project was to take materials provided by the other subcontractors and have them installed into the foundation. Creative Erectors was in charge of creating precast concrete structures on the housing project while Ozinga Ready Mix provided the materials.
Spancrete and the other developers have filed a mechanics lien in order to make sure they’ll get paid according to the laws that protect subcontractors like themselves. Because a lien is on the property, their property title will include this claim for the foreseeable future, which could be a hindrance to Grove Residences if they decide to sell the property.
A subcontractor in this situation can protect themselves by sending regular notices to the developer or general contractor. This will allow the developer to stay aware of any and all costs to the project as well as prepare ahead of time in case any issue — like obtaining permits — comes up.
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Public project funding through tax increment financing
Many public construction jobs are secured using a payment bond, but this project is partially financed by TIF financing. The court documents make no mention of a payment bond though it’s required by law on every project involving a government entity.
A tax increment financing district (TIF) was created by the village board to overlay the area. This agreement was made to help Grove Residences pay for the land, and so that the local government could be reimbursed for costs of the project related to various infrastructure needs. These agreements are regularly made to secure funds in anticipation of increased tax revenues.
The big advantage of using TIF money is that it helps a local government avoid using other forms of financing that could be more difficult to secure.
The construction plans for the redeveloped local district involve at least three other housing units as well as retail space, multiple duplexes and townhomes, and an upscale banquet facility. These projects are also currently limbo due to similar permit problems.
Not only does this pause in work create difficulties for subcontractors on the projects, but the town itself is expecting $8.7 million a year in new tax revenue once the project is completed.
“We are working on it, just like we were before,” said Kirk Rustman, a representative for Grove Residences. “Nothing has really changed. We are working getting permits to go forward and pay everybody.”