CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Pass the ordinance proposing the establishment of Special Service Area No. 36 (Downtown Maintenance Expenses and Marketing Costs) in the City of Naperville and providing for a public hearing
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DEPARTMENT: Finance Department
SUBMITTED BY: Raymond Munch, Director
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
In 1970, the Illinois Constitution Convention granted municipalities and counties the authority:
“to levy or impose additional taxes upon areas within their boundaries in the manner provided by law for the provision of special services to those areas and for the payment of debt incurred in order to provide those special services.”
The establishment of a Special Service Area (SSA) is controlled by a statute referred to as the Special Service Area Tax Law. 35 ILCS 200-27-5 et seq. An SSA is defined as “a contiguous area within a municipality in which special governmental services are provided in addition to those services provided generally throughout the municipality, the cost of the special services to be paid from revenues collected from taxes levied or imposed upon property within that area.”
Naperville has utilized SSAs since 1976 to pay for a variety of functions including the provision of free parking in the downtown (SSA No. 1), the payment of debt service (SSA No. 21 - Van Buren Parking Garage), and the maintenance and marketing of the downtown (SSA No. 17; 20; 22; 24; 26 and 33). Currently, SSA No. 33 pays for the maintenance and marketing of the Central Business District. Services are paid for using a funding formula developed in 2000 whereby the maintenance services are 2/3 funded by the City through the General Fund and 1/3 funded by the property owners through the special assessment. In addition to the 1/3 maintenance cost, the City levies a marketing component for the Downtown Naperville Alliance (DNA) funded 100% by the property owners. SSA No. 33 was created in 2020 and will expire in 2025.
DISCUSSION:
Staff recommends the creation of a new SSA for the maintenance and marketing of the downtown as a replacement to the existing SSA No. 33.
Staff further recommends the same maintenance service level provision, a slight increase in marketing expenses, the same five-year term as SSA No. 33, the same cost sharing formula for maintenance and marketing, and the same maximum tax rate of 2.5% per annum of Equalized Assessed Valuation (EAV). An area map of the proposed SSA is included. If approved, the new SSA would start in 2026 and expire in 2030.
Special Service Area No. 36 will provide special municipal services to the designated area that include parking lot operations and maintenance, maintenance of the public parking garages, custodial services, sidewalk and parking lot snow removal, maintenance of landscaping, streetscape, and street lighting, holiday lighting on parkway trees and buildings, sidewalk maintenance including brick paver repair, special directional signage, and capital improvements. The City has proposed an average annual maintenance expense of $2,542,411 over the five years of the SSA, of which property owners cover 1/3 of the expense and the City covers 2/3 of the expense.
In addition to the maintenance efforts, the DNA markets the downtown through print, radio, direct mail, internet, and social media to expand the downtown customer base. The DNA also provides administration of the gift card program, training, and merchant meetings, along with other services that promote business expansion and retention. The DNA has increased its annual marketing request to $510,000 plus a 3% annual increase to keep regional marketing efforts competitive. The property owners cover 100% of the marketing expenses.
City staff have been meeting with members of the DNA over the last several months to discuss expenditures, revenues, assessed valuations, and marketing of the downtown. The DNA, in conjunction with staff, developed a presentation outlining the history, purpose, goals, and financial information of the proposed SSA that was available during open house meetings for property owners held on May 7 and 14.
Establishing an SSA
Illinois state statute sets forth the procedures that a municipality must follow to establish an SSA. Proposed SSA No. 36 will come before the City Council at least three times. At this first meeting, we recommend that the City Council take the following action:
Ø Pass the Ordinance Proposing the Establishment of Special Service Area No. 36 (Downtown Maintenance Expenses and Marketing Costs) in the City of Naperville and Providing for a Public Hearing for its Establishment
Staff will then notify affected property owners through direct mail and notice in the newspaper of the public hearing for the establishment of the SSA to be conducted at the August 19 City Council meeting. This will also be the start of the required 60-day objection period. If the 60-day period passes and an objection petition signed by at least 51% of the owners of record of the land included within the Special Service Area is not filed with the City Clerk, then the City Council will be requested to take final action on the establishment of the SSA at its October 21 City Council meeting. The new special service area must be in place before November 2025 to allow enough time to levy the required 2025 taxes payable in 2026.
Central Park Place
Please note that the residential units in the Central Park Place structure at 110 S. Washington are not included in the proposed SSA No. 36 though the commercial units within the building will remain part of the SSA. The owners of the residential units submitted a letter to the City, attached to this memo, asking to be excluded from the replacement downtown SSA on the basis that they are owner-occupied residential units that don’t align with the downtown SSA’s commercial focus. While these units were appropriately included within SSA 33, staff recommends that, going forward, the City refine its policy as to owner-occupied residential properties within the downtown SSA and concur with the residents’ request.
FISCAL IMPACT:
The City would be responsible for 2/3 of the maintenance costs for the downtown from 2026 through 2030. Those costs are evaluated and approved through the annual budget process.