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Millions in Lathrop Homes Tax Credits Could Be Lost, Park Service Warns

By Paul Biasco | June 7, 2016 9:44am
 Lathrop Homes Plan
Lathrop Homes Plan
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LATHROP HOMES — The developers in charge of overhauling the historic Lathrop Homes site are being accused of pushing the plan forward despite concerns that millions in tax credits could be lost because not enough of the site is being preserved.

The tax credits would cover 20 percent of rehab costs and were repeatedly presented as a key cog to financing the project. If they're lost, taxpayers could be on the hook, with tax increment financing dollars possibly used to fill the gap.

The development team on the project opted to move forward despite receiving notice from the National Parks Service that the tax credit application was put on hold due to concerns over the amount of planned demolition and a lack of project details.

 About 300 people attended a meeting to discuss the Lathrop Homes plan in February.
About 300 people attended a meeting to discuss the Lathrop Homes plan in February.
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DNAinfo/Paul Biasco

Lathrop Homes, one of the city's first public housing complexes, was listed on the National Register of Historic Places in 2012. That designation was needed to apply for the Historic Rehab Tax Credits. 

The current proposal, the same one which the National Parks Service was not satisfied with, passed through the city's Plan Commission in February, where a number of commissioners voiced concern over a lack of details about the the redevelopment.

The plan was later approved by the City Council.

DNAinfo Chicago last week became aware of a letter from the National Parks Service to Jacques Sandberg, a vice president with the lead developer, Related Midwest, dated Dec. 21, 2015 informing Sandberg at the Lathrop Community Partners of the National Park Service's concerns.

The letter from the Park Service states that the application was on hold over issues with the redevelopment plans including the "extent of demolition" being proposed, a lack of details in the plans and "major new construction," specifically two large buildings.

During a major community meeting to discuss the project a little more than a month after the letter was delivered, neither the development team nor Ald. Proco Joe Moreno (1st) mentioned the park service's dissatisfaction with the plan, while informing the audience of hundreds that the project would be eligible for tax credits.

The development team on the project, which is lead by Related Midwest and also includes Bickerdike Redevelopment Corporation and Heartland Housing, had stated its plans to finance the project, in part, with federal historic tax credits, which could cover 20 percent of rehabilitation expenses.

“Because the proposed work for phases 2 and 3 will involve extensive demolition of historic buildings and major new construction, the NPS strongly urges that information describing these phases in more detail be submitted well in advance of completed design plans, especially considering that we have previously identified substantive problems with earlier schematic plans that you have shared with this office," the National Parks Service letter read.

The letter also states that the two large buildings proposed along Diversey Parkway's gateway need to be deleted from the plans in order to be eligible for tax credits.

National Park Service Lathrop Homes Hold Letter Dated 12-17-2015 by PaulBiasco

The overall redevelopment project was announced roughly 15 years ago and has finally now just begun to move forward.

Sandberg said in an emailed response that the situation with tax credit application being in limbo was not uncommon.

"To be clear, the Park Service has not issued any final decision, and, in fact, it’s very common to encounter initial hurdles during the application process before ultimately obtaining approval," Sandberg said in the email.

Other questions about why the team pushed the current proposal through the City Council as-is were not answered.

"At this time, we are continuing conversations with the Park Service to resolve any outstanding issues," Sandberg said.

A spokesman for the National Parks Service said the review remained on hold as of last week and that the service was still waiting on additional information on the project to make any decisions.

Some of the funding for the Lathrop Homes project will come from a newly created tax increment financing district and some from the Chicago Housing Authority, meaning a loss of preservation tax credits could potentially fall into the laps of taxpayers.

The project was expected to use $17.5 million in TIF funds, according to a Reader article.

Ald. Moreno, whose ward represents the majority of the 32-acre site near Diversey Parkway, Clybourn and Damen Avenues, did not respond to multiple requests for comment for this story.

Ald. Scott Waguespack's office did not become aware of the letter from the parks service or the possible issue with tax credits until about a month ago, according to his chief of staff Paul Sajovec.

 Former public housing units on the Lathrop Homes site that are now boarded up.
Former public housing units on the Lathrop Homes site that are now boarded up.
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DNAinfo/Paul Biasco

"Those conditions [raised in the letter] are in direct conflict with what they passed in the City Council," Sajovec said. "There was no mention of this letter in any of those discussions ... you are sitting on a letter that you are not wiling to share with anyone that unequivocally states you aren’t going to get tax credits unless the plan changes."

Waguespack's ward includes a portion of the site. He has been opposed to the current redevelopment proposal.

"They are saying they are going to do this limited TIF district, but based on what's in this letter, it puts the tax credits in jeopardy to say the least," Sajovec, who has been attending planning meetings for the redevelopment project, added.

RELATED: Lathrop Homes Plan Moves Forward; Tensions Flare Between Aldermen

The developer of the historic project, which at one time included 925 housing units, originally pitched a plan to preserving 19 of the 31 existing structures.

The proposal that passed through City Council includes renovating 14 of the structures while constructing two new mixed-use buildings, one that is 13 stories tall, and 50,000 square feet of commercial and retail space.

"It's kind of been this recurring thing. They want their cake and they want to eat it, too," Sajoveic said. "When it's convenient they say things like, 'well the site has all this historic character and we want these historic tax credits,' but they also want to tear about half of the buildings down."

Only about 100 residents still remain in the housing campus, which will eventually become a mix of 1,116 public, affordable and market-rate units once the redevelopment is complete.

That plan passed the Plan Commission by a vote of 11-2-1 on the condition that the developer brings back future development plans to vote on the design of the second and third phases of the project.

The first phase of the redevelopment will include 470 units and would entail large-scale historic preservation on the north side of the property.

At one point during the Plan Commission hearing, Commissioner Linda Searl stated she felt "very uncomfortable" with the lack of details regarding the second and third phases of the plan, the same concerns the Parks Service has.

Similarly Ward Miller, president of Preservation Chicago, stated his concerns that the plan that passed would not meet standards for National Parks Service tax credits.

One area of the proposal that the Park Service was pleased with were improvements the development team made to the preservation of the landscape around the riverfront site.

Landscape architect Michael Van Valkenburgh, who designed Maggie Daley Park as well as the 606, has been hired for the project.

Features include a 2-acre "great lawn" in the center of the development, a half-mile riverwalk with pathways, bridges, a kayak launch and a restoration of the river's edge to its natural state.

The Lathrop Homes development teams faced a similar situation, according to Sandberg, when it applied for affordable housing tax credits with the Illinois Housing Development Authority.

The state agency awarded the Lathrop Community Partners $2.25 million in federal Low Income Housing Tax Credits in April.

"Our initial application was not successful, but was ultimately approved," Sandberg said.

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