Water’s Edge developers seek special 1% sales tax as added incentive from Crystal Lake

The builders of Crystal Lake’s largest development are seeking additional incentives from the city, in this case in the form of a special 1% sales tax.

As construction starts up on the retail side of the Water’s Edge development along Route 14, developers are asking the city a business district to help finance construction of the once blighted area.

The 30-acre project, located at the former Crystal Court shopping center on Route 14 adjacent to Three Oaks Recreation Area, started construction in 2023 and will eventually consist of more than 40,000 square feet of retail and restaurant spaces, open public areas and 260 units of housing.

Described as an “economic development tool‚" a Business District captures a sales tax from a defined area, and those funds can be used to pay for or reimburse eligible expenses within that defined area, according to city documents. Water’s Edge developers are aiming to impose a 1% sales tax in its retail area for a 23-year period. Shoppers in Crystal Lake already pay the highest overall sales tax in McHenry County of 8.5%, including a 1.25% local sales tax.

The city first approved a redevelopment agreement in 2023 that included a component to establish a business district for the commercial area of Water’s Edge. As part of the agreement, Heartland also received a $14 million economic incentive package for reimbursement of eligible expenses: $6 million for residential infrastructure, $6 million for commercial development and $2 million for commercial infrastructure.

Those reimbursements will come from a tax increment financing, or TIF, district established for the area in 2022. A TIF district works by earmarking newly accrued property taxes within a set area for economic development.

The proposed Business District would help finance improvements such as building construction, which is not an eligible reimbursement for TIF funds, according to city documents. Other eligible reimbursements under the Business District include costs for studies and surveys, land acquisition, public site improvements, relocation and financing.

Total estimated cost for the entire Water’s Edge project is set at $23.5 million, according to city documents.

Without discussion, the City Council last week advanced the business district proposal, agreeing to hold a public hearing at 7 p.m. June 3 during a Council meeting at city hall, located at 100 W. Woodstock St. Following the hearing, City Council will consider final ordinances to establish the Water’s Edge Business District, according to city documents.

Developer Heartland Real Estate Partners celebrated its construction progress of 60 completed apartments with a multi-chamber ribbon-cutting ceremony earlier this month.

Contracts with commercial tenants are not yet finalized, so no businesses have been named. Core Acquisitions Vice President of Development Adam Bell said at a previous Crystal Lake planning and zoning meeting that they are looking to bring in “high-class users that are high-volume, national brands that are exciting and new to the community.”

Bell said they are working with a “national breakfast/brunch chain,” a national eyeglass and optometry company and a national quick-service restaurant that will have a pickup window for mobile and online orders. With seven total tenants, developers have contracts pending for the west half of the retail space with “a lot of interest” for the east section, Tim Grogan, managing principal of Heartland, has said.