Local Business

Crystal Lake touts economic development efforts

CRYSTAL LAKE – In July 2009, as the depth of the economic recession began to sink in, a man proposed opening a mobile kitchen to sell hot dogs, Polish sausages and chili in front of a vacant car dealership on Route 14 in Crystal Lake.

Four years later, the vacant dealership has been demolished and a Volkswagen dealership is being built in its place.

Due in part to the city's economic development efforts, which have included millions of dollars' worth of incentives and grants, new businesses are coming to Route 14 and the downtown district. Some manufacturing businesses also are adding new jobs.

The incentives have kept some big, sales-tax-generating businesses from leaving and attracted others to McHenry County's commercial hub. The city's grant programs have helped entrepreneurs start new businesses. Established businesses have used the city's economic development programs to expand. Crystal Lake's programs have gotten the attention of some of the country's largest chains, such as Starbucks, which got a $10,000 grant to open a store on Route 14. Other businesses – the state's largest 3-D printing company, a boutique florist and a power tool retailer – also have taken advantage of the city's incentives.

With the national economy growing slowly in the wake of the recession, the city's grants and sales-tax rebate programs have been a boon for nearly all of the businesses that have used them.

The city's infrastructure investments also have boosted the local economy. At a time when many towns were cutting budgets, the Crystal Lake City Council spent more than $15 million to turn a former gravel pit into Three Oaks Recreation Area. It has invested in other infrastructure improvements, such as the Virginia Street corridor project, and started the I Shop Crystal Lake program to encourage more people to shop locally.

City officials said the results of these development programs have been significant.

"We're seeing tremendous velocity," said Michelle Rentzsch, the city's director of planning and economic development. "There's a lot of activity going on. The city would like to take credit for its incentive programs, but the economy is also turning around. And Crystal Lake – with our downtown, our housing stock, McHenry County College – is positioned correctly. Businesses are taking notice and see it as the right place to expand and invest."

However, Crystal Lake still faces challenges attracting businesses, particularly manufacturers, which account for about a quarter of the county's total economy. It also has struggled to fill large, vacant retail spaces, such as the former Walmart building in the Crystal Court Shopping Center.

The state's tax policies and unfunded pension obligations have sent some manufacturers packing.

Food Warming Equipment, which makes commercial food service equipment, took 106 jobs, $4.8 million in annual payroll and $7.5 million in direct spending with vendors with it when it left Crystal Lake for Tennessee in 2012, said Deron Lichte, the company's president.

"With the need to expand, FWE sought to stay local," he said. "However, on a local and state level, the deafening silence or lack of a wish, want or impotent power or available resources of our political leaders without direction or serious purpose was frustrating."

He added: "[The state] has an overall attitude that punishes businesses."

In contrast, Tennessee made it easy for FWE to move and expand by offering economic incentives and other advantages, Lichte said.

City officials said they understand businesses' concerns about the state.

"We're a little disadvantaged being in the state of Illinois right now," Rentzsch said. "But when it comes down to it, businesses make decisions on where to locate based on other factors. The state of Illinois is in a terrible situation right now, but [businesses] look for educated laborers, housing stock for employees, good education systems, parks, transportation, that's what they want – and we have that."

Others manufacturers in Crystal Lake have expanded locally and added jobs here. Covidien, which makes sharps safety products at a nearly 500,000-square-foot facility across Route 31 from the former FWE facility, recently expanded production adding 100 new jobs. Eisenmann Corp., a provider of environmental technologies for biogas, air pollution control and paint finishing technologies, plans to add 20 engineers over the next year and half at its U.S. headquarters in Crystal Lake, said James Richter, Crystal Lake's assistant director of economic development.

In the past three years, 1 million square feet of commercial space in the city has been filled. In the first seven months of this year, an additional 250,000 square feet of commercial space was occupied, Richter said.

Some City Council members and others have questioned whether the city's economic development spending has been worth the cost. In 2009-10, the city spent more than $500,000 on various economic development programs, including $189,740 on grants to local businesses. Since then, it has spent about $80,000 a year on grants.

"How do you measure this? It's hard. We can't go back and say, where would we be today if we hadn't done this?" Rentzsch said. "But obviously this has had some effect."

Businesses of all sizes have used the city's economic development programs.

Product packaging maker Aptar, a publicly traded company with about 10,000 employees worldwide and one of the county's largest employers, leased a 91,000-square-foot distribution center on Congress Parkway in Crystal Lake in late 2011. Because it created new jobs, the project qualified under the city's Manufacturer Job Creation and Investment Program, and the building's landlord received $10,000 to make building improvements that Aptar required. It also qualified for the city's Targeted Development Zone program, which cut the building permit fees in half, the company said.

Anderson Motors is spending $6.4 million to build the standalone VW dealership on Route 14. A sales-tax incentive deal of up to $1 million from the city helped make it happen. The city has made an effort to keep car dealers happy. Dealerships account for a large amount of the money the city collects in sales tax revenue. The City Council previously approved nearly identical sale-tax incentive agreements with M’Lady Nissan and Brilliance Honda.

Small businesses and independent retailers have gotten help from the city as well.

Twisted Stem, an independent, family-owned floral design shop known for its "edgy and elegant" creations, opened in 2010, thanks, in part, to a $10,000 city grant for new retailers.

"I'm not sure we could have done it without the grant," part owner and designer John Regan said. "The city gave us the nudge that changed it from a dream to a possibility."

Twisted Stem has continued to grow in the past three years, he said.

Cideas Inc., the state's largest 3-D printing company, wanted to expand when it moved from Cary to Crystal Lake in June 2011. President Mike Littrell used a $10,000 grant from the city to pay for permits.

"It helped offset the cost of the move," he said. "It was nice the town was creating incentives to bring in new businesses."

In the past two and a half years, the 3-D printing company has grown substantially.

"It worked out great," Littrell said.

Art Koch, the owner of Sea Level Diving in Crystal Lake, has benefited from several of the city's economic development efforts, including the construction of Three Oaks Recreation Area, which he uses for scuba training dives.

When he invested about $500,000 to build a 5,000-square-foot scuba training facility and dive shop at 296 Liberty Drive, he qualified for a $5,000 grant from the city. He used the money to buy retail displays and scuba classroom equipment such as desks, chairs, computers, and TVs. Koch, who had waited 27 years to be able to use Three Oaks Recreation Area, now has the only dive shop in the state with classrooms, a training pool, and a place for open water training dives all in one location.

"It's a huge selling feature for us," he said. "We have everything in one place."

Not all of the grant recipients have been as successful. Campana's Café got a grant for about $340 in 2009, but has since closed. Rocks Bar and Grill, on Route 14, got a $10,000 grant from the city the same year. It didn't last long, either. The London Pub later opened in its place. But the city's grants came with strings attached, including a clawback provision that allows the city to recover the money if the business doesn't stay open for at least three years, Richter said. Under, the current program, the business must stay open for four years.

Of the dozens of businesses that have received grants, only those two have closed, he added.

In recent years, the city officials have made an effort to show how effective its economic development programs have been.

For example, companies that used the city's Targeted Development Zone program, which gives a 50 percent fee reduction to businesses that invest at least $250,000 in Crystal Lake properties, have made more than $20 million in property improvements in the city, officials said. The program also is credited with creating or preserving more than 500 jobs, according to the city.

The city expects each of its annual matching grant programs to more than pay for itself over the course of four years by generating additional sales-tax revenue. In fiscal 2012, the city gave out $75,000 in grants to companies that are expected to generate nearly $2.5 million in retail sales a year, netting the city $43,312 in sales-tax revenue. At that rate, the city will more than cover its costs in four years. In the past fiscal year, the city spent $70,000 on grants expected to generate more than $5 million in annual retail sales, giving the city $88,340 a year in sales-tax revenue. Essentially, that year's grant program paid for itself in one year. It also helped create 105 jobs, according to the city's data.

"It's money well spent," Rentzsch said.

Crystal Lake Mayor Aaron Shepley said the city's economic development efforts have prepared it for further growth.

"The city of Crystal Lake has been working very hard to be advocate for business and our efforts are proving successful," he said. "We have positioned ourselves to create an environment that is very attractive for business development."

While its hard to measure just how effective or necessary the city's economic incentives have been, the programs, along with the attitude of city officials, has businesses thinking differently about Crystal Lake, said Jack Minero, a commercial real estate agent with First Prudential in Crystal Lake.

"It all helps bolster the city's image as pro-business," he said. "What they have been doing is a move in the right direction and every little bit helps in this economy."

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