In my last Reick Report I discussed the outline of House Bill 910, the so-called “Megaproject” bill. While all the Sturm und Drang over the bill focuses on the travails of the Chicago Bears as they rattle their tin cup for a new stadium, the bill has implications statewide.
For instance, did you know that there’s a potential megaproject perking along in McHenry County? Regular readers of the Reick Report know that there’s a proposal by a company called Eolian Energy to install a 600Mw battery storage facility on 52 acres off Behan Road in Nunda Township. If you haven’t heard about it, click here, here and here.
If this project qualifies as a megaproject, it will be able to negotiate a “Payment in Lieu of Taxes”, (PILOT) agreement with local taxing bodies that fixes the project’s property taxes at a level generally equal to at least 10% of the pre-development property tax. Eolian’s most recent project in Texas would provide 350Mw of storage at a development cost of $463 million. Given that the Behan Road project is slated to be 600Mw, it’s a good bet that the project will fall into the second tier of investment (over $500 million), which could lock in fixed property tax payments for up to 25 years.
Eolian has published a glossy web page describing all the wonderful things this project will do for the community, including contributing $5 million in property taxes in the first year(!). But since the pre-development property taxes on the Behan Road property are calculated on land zoned as farmland, if the megaproject bill passes and Eolian goes for megaproject certification with a PILOT agreement, there goes a big chunk of that $5 million, right into Eolian’s pocket.
There’s also nothing in the bill prohibiting local taxing bodies from being able to assess megaprojects at fair market value for purposes of borrowing or similar financing measures, which means that a $500 million assessment on the battery facility would boost the borrowing authority of any taxing district whose boundaries intersect with the project. However, payments on the bond issue would fall disproportionally on those property owners outside the megaproject because the taxes within the megaproject are fixed under the PILOT agreement. See where we’re going here? A strict prohibition of such action must be written into whatever amended version comes back from the Senate.
Moving on, the Bears have been banging their spoon on their highchair for some time about the need for $855 million in state money for infrastructure improvements around the Arlington Heights property (roads, exit ramps, train stations, water and sewer lines and the like), in addition to the gimmes granted under HB 910.
So let’s talk about infrastructure. In 1997, the Illinois School Construction Grant Program was passed by the Illinois General Assembly. Beginning in 1998, districts could apply for funding and if they met the requirements they would be placed on a list for that year. The grant was based on need and the particular district’s finances. If a district was placed on a list and could meet its share of the funding (generally between 40 to 60%) it would then be awarded funds for its particular project. From 1998 through 2002 many districts received assistance from the program administered by the Illinois State Board of Education and the Capital Development Board to complete projects that they otherwise could not afford. Funding stopped in 2002 and wasn’t restored until 2010.
While the legislature recognized that schools on lists covering 2004, 2005 and 2006 had a reasonable expectation of funding, no money was available. While a number of districts couldn’t wait and funded their entire projects, other districts didn’t have the ability to do so. A number of districts started projects and fulfilled their obligation for funding, then waited in vain for funds from a state program that had no money. They either stopped construction midstream or borrowed the money to finish the project with the cost falling on local taxpayers.
Some McHenry County schools found themselves on the 2004-2006 list. One school on the list is McHenry CUSD 15, which called me today to confirm that they are still waiting for nearly $10 million from the 2005 program that has yet to be funded. Also on the list of schools from 2004 through 2006 are Alden-Hebron District 19 (2004) and Prairie Grove CSD 46 (2004 & 2005), the same Prairie Grove school district that has Eolian’s proposed battery storage facility within its boundaries.
So here’s a suggestion for anyone with a project who’s asking for State money for infrastructure: “Get in Line”. If the State of Illinois still owes school construction grants from 2004, they have no business funding the Bears’ infrastructure demands. They already have a stadium, maybe they should stay where they are.
And if Eolian wants to show that it’s being a good neighbor, it can start by finding out which McHenry County school districts have been stiffed by the State and write a check.