SB Friedman was engaged by Mercy Hospital & Medical Center to assist the Hospital in its request for financial assistance from the City of Chicago for capital improvement to its facility.
Established in 1848 and incorporated in 1852, Mercy Hospital is distinguished as Chicago’s first hospital, and as a not-for-profit institution, it provides medical services to all patients, including the economically disadvantaged and those without health insurance. By 2005, approximately half of the hospital campus was no longer needed and had become vacant.
In its effort to facilitate the redevelopment of the underutilized portion of the campus and to address its capital improvement needs, Mercy Hospital engaged SB Friedman to assess the potential of establishing a Tax Increment Financing (TIF) district to include the entire hospital campus, and to prepare an application for TIF assistance and assist in negotiations with the City. The planned improvements totaling over $260 million over 24 years included demolition, environmental remediation, and site preparation of the underutilized/vacant portion of the site for redevelopment, and interior and exterior improvements to the main hospital building, including façade repair/renovation; roof, cooling tower, and window replacements; sprinkler installation; electrical and HVAC improvements; clinical equipment upgrades; and improvements to patient care, maternity, surgery rooms and nursing stations.
SB Friedman conducted the TIF eligibility analysis and determined that the area qualified for TIF designation under Illinois law. In addition, the firm estimated that over $64 million in TIF increment that could potentially be generated by the proposed sale and redevelopment of the underutilized portion of the campus for residential development over the twenty-three year life of the TIF district. The redevelopment plan for the vacant portion of the site consisted of the development of a residential neighborhood to include over 400 for-sale housing units consisting of townhomes, flats, and mid-rise condos, as well as a 180-unit senior rental housing project.
SB Friedman then reviewed Mercy Hospital's capital improvement budget to identify TIF eligible costs, and reviewed its projected capital and operating cash flows to determine the amount of TIF increment needed over the life of the TIF district for both planned and future capital expenditures. A TIF application was prepared and submitted to the City for the full amount of the increment estimated to be generated less a required City administration fee. The firm then assisted the Hospital in its negotiations with the City.
Results: The 26th & King Drive Redevelopment Project Area was approved by City Council in February 2006. The Redevelopment Agreement (RDA) between the City and Mercy Hospital was approved by the City in August 2006 allowing for up to $60 million in TIF assistance to Mercy.
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