Scales Mound Redevelopment Project Area Tax Increment Financing District Eligibility Study, Redevelopment Plan and Project

Scales Mound Redevelopment Project Area Tax Increment Financing District Eligibility Study, Redevelopment Plan and Project Village of Scales Mound, Illinois DRAFT SUBMITTED: October 2012

Table of Contents SECTION PAGE NUMBER 1. Executive Summary 1 2. Introduction 5 3. Eligibility Analysis 10 4. Redevelopment Plan and Project 26 5. Financial Plan 32 6. Required Findings and Tests 40 7. Provisions for Amending Action Plan 43 8. Commitment to Fair Employment Practices and Affirmative Action Plan 44 Appendix 1: Boundary Legal Description 45 Appendix 2: Summary of EAV (by PIN) 49 LIST OF MAPS Map 1: Regional Context... 6 Map 2: Study Area Boundary... 7 Map 3: Existing Land Use... 9 Map 4: Improved and Vacant Land... 11 Maps 5A to 5E: Summary of Improved Eligibility Factors Present to a Major Extent... 17-21 Map 6: Summary of Vacant Land Factor - Flooding... 25 Map 7: Proposed Future Land Use... 30 S. B. Friedman & Company 221 North LaSalle Street, Suite 820 Chicago, Illinois 60601-1317 T: (312) 424-4250 F: (312) 424-4262 E: info@sbfriedman.com www.sbfriedman.com SB FRIEDMAN DEVELOPMENT ADVISORS ii www.sbfriedman.com

1. Executive Summary In July of 2007, S. B. Friedman & Company was engaged by the Village of Scales Mound ( the Village ) to conduct a Tax Increment Financing (TIF) Eligibility Study and prepare a Redevelopment Plan and Project (the Redevelopment Plan ), which was updated in August of 2012. This report details the eligibility factors found within the Scales Mound Redevelopment Project Area (the Scales Mound RPA or the RPA ) in support of its TIF designation as a mixed designation that includes a combined conservation area designation for the improved portions of the RPA and a blighted area designation for the vacant portions of the RPA, within the definitions set forth in the Illinois Tax Increment Allocation Redevelopment Act, 65 ILCS 5/11-74.4-1 et seq., as amended (the Act ). This report also contains the Redevelopment Plan and Project for the Scales Mound RPA. The Scales Mound RPA consists of approximately 80 tax parcels (of which 71 are improved and 9 are vacant) and 76 buildings. This parcel count reflects annexations/subdivisions that result in new PINs that are counted in this report. The RPA comprises approximately 305 acres of land, of which approximately 59 acres are improved, 232 acres are vacant, and 14 acres are dedicated rights-of-way, excluding the railroad. The boundary of the RPA includes properties near downtown Scales Mound and extends to farmland south and north of the downtown. The boundaries of the RPA on the east, west and south are coterminous with the east, west and south boundaries of the Village. The main thoroughfares through downtown Scales Mound and the RPA are Franklin and Main Streets and North Avenue. Determination of Eligibility This report concludes that the Scales Mound RPA is eligible for TIF designation as a mixed designation that includes a combined conservation area designation for improved parcels and a blighted area designation for vacant parcels. The improved portion of the RPA was found to be a conservation area because more than 50 percent of the buildings located within the RPA are 35 years old or greater, and four (4) eligibility factors for improved land have been found to be present to a meaningful extent and reasonably distributed throughout the improved portions of the RPA: 1. Lack of Growth in Equalized Assessed Value 2. Deterioration 3. Inadequate Utilities 4. Lack of Community Planning In addition, vacant parcels within the RPA were found to be blighted because runoff from the vacant portions of the RPA contributes to flooding in the watershed. The eligibility factors are defined under the Act at 65 ILCS 5/11-74.4-3 (a) and (b), and are more fully described herein. Redevelopment Plan Goal, Objectives and Strategies GOAL. The overall goal of this TIF Eligibility Study and Redevelopment Plan is to reduce or eliminate conditions that qualify the Scales Mound RPA as a blighted and conservation area, and to provide the direction and mechanisms necessary to establish the RPA as a vibrant mixed-use area. This could occur through new commercial and residential development, stimulating the redevelopment of vacant and underutilized parcels, and providing new or improved public facilities and utilities. Redevelopment of SB FRIEDMAN DEVELOPMENT ADVISORS 1 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan the RPA will strengthen the economic base and enhance the quality of life of the Village as a whole while maintaining the area s unique character and community heritage that are valued by Village residents. Rehabilitation and redevelopment of the RPA is to be achieved through an integrated and comprehensive strategy that leverages public resources to stimulate additional private investment. The underlying strategy is to use Tax Increment Financing, as well as other funding sources, to reinforce and encourage new private investment. OBJECTIVES. The following seven objectives support the overall goal of area-wide revitalization of the Scales Mound RPA: 1. Foster the replacement, repair, construction and/or improvement of the public infrastructure, where needed, including public utilities, sidewalks, streets, curbs, gutters, underground water and sanitary systems and physical plants, and stormwater detention of adequate capacity to create an environment conducive to private investment and mitigate flooding; 2. Facilitate the rehabilitation of existing properties within the RPA, and encourage the construction of new commercial, industrial, residential, civic/cultural and recreational development, where appropriate; 3. Facilitate the provision of new public facilities and the improvement of existing facilities that provide recreational and educational opportunities for Village residents and visitors; 4. Provide resources for streetscaping, landscaping and signage to improve the image, attractiveness and accessibility of the RPA, create a cohesive identity for the RPA and surrounding area, and provide, where appropriate, for buffering between different land uses and screening of unattractive service facilities, such as parking lots and loading areas; 5. Facilitate the physical improvement and/or rehabilitation of existing building structures and façades in the RPA, as well as the preservation of architecturally or historically significant buildings; 6. Facilitate the assembly, preparation and marketing of available sites in the RPA for new commercial, residential, civic/cultural, governmental (as allowed by the Act) and recreational development, including corrective actions to address environmental and flooding problems to permit development and redevelopment, as needed or appropriate; and 7. Support the goals and objectives of other overlapping plans, and coordinate available federal, state and local resources to further the goals of this Redevelopment Plan. STRATEGIES. These objectives will be implemented through four specific and integrated strategies. These include: 1. Implement Public Improvements. A series of public improvements throughout the Scales Mound RPA may be designed and implemented to help define and create an identity for the area and sub-areas, prepare sites for anticipated private investment and create a more conducive environment for new development. Public improvements which are implemented SB FRIEDMAN DEVELOPMENT ADVISORS 2 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan with TIF assistance are intended to complement and not replace existing funding sources for public improvements in the RPA. These improvements may include streetscaping, improved street and sidewalk lighting, resurfacing of alleys, sidewalks, streets and other paved surfaces, improvement of underground infrastructure and physical plants, stormwater detention of adequate capacity, the creation of parks, trails and open space, and other public improvements and utilities consistent with this Redevelopment Plan. These public improvements may be completed pursuant to redevelopment agreements with private entities or intergovernmental agreements with other public entities, and may include the construction, rehabilitation, renovation or restoration of public improvements on one or more parcels. 2. Facilitate Property Assembly, Demolition and Site Preparation. Sites may be acquired and assembled for use by the Village or by the Village to attract future private investment and development. The consolidated ownership of these sites will make them easier to market to potential developers and will streamline the redevelopment process. In addition, financial assistance may be provided to private developers seeking to acquire land and assemble sites for projects supportive of this Redevelopment Plan. To meet the goals, policies or objectives of this Redevelopment Plan, the Village may acquire and assemble other property throughout the RPA. Land assemblage by the Village may be done by purchase, exchange, donation, lease or eminent domain, and may be for the purposes of (a) public use, (b) sale, lease or conveyance to private developers, or (c) sale, lease, conveyance or dedication for the construction of public improvements or facilities. Site preparation may include such preparatory work as demolition of existing improvements and environmental remediation, where appropriate. Furthermore, the Village may require written development agreements with developers before acquiring any properties. As appropriate, the Village may devote acquired property to temporary uses until such property is scheduled for disposition and development. 3. Encourage Private-Sector Activities. Through the creation and support of public-private partnerships or through written agreements, the Village may provide financial and other assistance to encourage the private sector, including local property owners and businesses, to undertake rehabilitation, redevelopment projects and other improvements that are consistent with the goals of this Redevelopment Plan. 4. Assist Existing Businesses and Property Owners. The Village may provide assistance to support existing businesses and property owners in the RPA. This may include financial and other assistance for building rehabilitation, façade improvements, leasehold improvements, and construction of private and public facilities, such as plazas and other pedestrian amenities that are consistent with the goals of this Redevelopment Plan. Required Findings and Tests The required conditions for the adoption of this Redevelopment Plan and Project are found to be present within the Scales Mound RPA. SB FRIEDMAN DEVELOPMENT ADVISORS 3 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan First, the Village is required to evaluate whether or not the RPA has been subject to growth and private investment, and must substantiate a finding of lack of such investment prior to establishing a Tax Increment Financing (TIF) district. Minimal investment has occurred in the Scales Mound RPA in the past five years. Taken as a whole, the RPA has not been subject to widespread growth and development through investment by private enterprise. To examine the scope of new investment in the RPA, S. B. Friedman & Company conducted interviews with Village officials, reviewed building permit records and confirmed that minimal investment has occurred in the past five years. According to Village officials, only two new buildings, one residential and one industrial, were constructed during that period. The residential building, however, was constructed only after the original building was demolished due to significant fire damage. The one new industrial building is a manufacturing facility for artisanal snack foods Gramp s Gourmet Foods. This investment has not stimulated widespread new private investment in the RPA as a whole. The impact on property surrounding the new buildings has been negligible as evidenced by a lack of growth in EAV in the RPA described in more detail in section 3. Second, the Village is required to find that, but for the designation of the TIF district and the use of Tax Increment Financing, it is unlikely that significant investment will occur in the Scales Mound RPA. Without the support of public resources, the redevelopment objectives for the RPA would most likely not be realized. The area-wide improvements and development assistance resources needed to redevelop and revitalize the Scales Mound RPA as a vibrant mixed-use area are extensive and costly, and the private market, on its own, has shown little ability to absorb all these costs. In addition to stormwater management expenses that are not economically viable for the private sector to support, public resources to assist with public infrastructure improvements and site preparation are needed to leverage private investment and facilitate area-wide redevelopment. We understand that the Village does not have the financial capacity to make these improvements. TIF funds can be used to fund infrastructure improvements, environmental remediation, site assembly and preparation, building rehabilitation and other related costs. Accordingly, but for the designation of a TIF district, these projects, which would contribute substantially to area-wide redevelopment, are unlikely to occur. Third, no redevelopment project area can be designated unless a plan and project are approved prior to the designation of the area; and the area can only include those contiguous parcels that are to be substantially benefited by the proposed redevelopment project improvements. The Scales Mound RPA includes only those contiguous parcels of real property that are expected to benefit substantially from the proposed Redevelopment Plan improvements as described in section 4. Finally, the Village of Scales Mound has no comprehensive plan. However, the proposed land uses described in this Redevelopment Plan shall be in accordance with land use goals articulated by Village officials and in accordance with the Village s zoning code. SB FRIEDMAN DEVELOPMENT ADVISORS 4 www.sbfriedman.com

2. Introduction The Study Area This document serves as the Redevelopment Plan and Project (the Redevelopment Plan ) and TIF Eligibility Study for the Scales Mound Redevelopment Project Area (the RPA ). The Scales Mound RPA is located entirely within the Village of Scales Mound in Jo Daviess County. In July of 2007, S. B. Friedman & Company was engaged by the Village to conduct a study of certain properties in the area to determine whether the area containing these properties qualify for status as a blighted area and/or conservation area under the Act. The Redevelopment Plan was updated in August of 2012. The location of the Scales Mound RPA is shown on Map 1 on the following page. The Scales Mound RPA consists of approximately 80 tax parcels (71 improved, 9 vacant) and 70 buildings. The RPA comprises approximately 305 acres of land, of which approximately 59 acres are improved, 232 acres are vacant, and 14 acres are dedicated rights-of-way, excluding railroads. The boundary of the RPA includes properties near downtown Scales Mound and extends to the Village limits. The boundaries of the RPA on the east, west and south are coterminous with the east, west and south boundaries of the Village. Map 2 on page 7 details the boundaries of the Scales Mound RPA, which include only those contiguous parcels of real property that are expected to benefit substantially by the redevelopment improvements discussed herein. The RPA boundaries represent an area that is focused on downtown Scales Mound and adjacent vacant land. The improved portions of the RPA suffers from the presence of aged and deteriorated buildings, inadequate utilities and public infrastructure, an overall lack of community planning, and stagnating or declining property values due to a lack of private investment. The vacant land suffers annually from problems associated with chronic flooding and contributing to flooding in the watershed. These conditions are hindering the potential to redevelop the area and capitalize on its unique attributes. Recognition as a historic district by the National Register of Historic Places, proximity to Galena, and recreational and tourism opportunities related to the nearby Mississippi River are assets, which could be leveraged to create an active and vital Village. At the same time, the opportunity exists to facilitate new residential and commercial development that serves existing and future residents as well as visitors. In order to create a vibrant commercial and residential district, it is critical that the appearance and functionality of the Scales Mound RPA be improved. Without improved streetscaping, vehicular and pedestrian movement, and upgraded public utilities and other infrastructure, including additional stormwater detention capacity, the RPA can fall into further disrepair, and potential development opportunities will not be realized. The Scales Mound RPA will benefit from a strategy that addresses poor infrastructure and building conditions and improves its physical condition. The Eligibility Study covers events and conditions that exist and that were determined to support the designation of the Scales Mound RPA as a mixed designation that includes an improved land conservation area designation and a vacant land blighted area designation under the Act at the completion of our research on August 24, 2012, and not thereafter. These events or conditions include, without limitation, governmental actions and additional developments. SB FRIEDMAN DEVELOPMENT ADVISORS 5 www.sbfriedman.com

Culvert Rd Legend Scales Mound RPA Potosi 61 151 «81 «126 Darlington Sherrill Dickeyville «80 «23 Cuba City «78 Stagecoach Trail Durango «386 Sageville Hazel Green Benton «11 Shullsburg Gratiot Asbury 61 Dubuque «35 East Dubuque 20 52 Menominee «84 WISCONSIN ILLINOIS Scales Mound Apple River Warren Galena 151 151 61 52 ILLINOIS IOWA St. Donatus 20 «78 Stockton 0 12 Miles Zwingle 61 La Motte Bellevue «84 Elizabeth Hanover October 2012 Map 1: Community Context Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

! 15 Legend RPA Boundary! 16 Block Parcels! 14! 13! 12!! 17 11!! 10! 6! 9 8 5! 7! 18! X denotes block number! 4! 1! 2! 3 0 0.25 Miles October 2012 Map 2: RPA Boundary Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan This Eligibility Study and Redevelopment Plan summarize the analysis and findings of the consultant s work, which, unless otherwise noted, is solely the responsibility of S. B. Friedman & Company. The Village is entitled to rely on the findings and conclusions of this Redevelopment Plan in designating the Scales Mound RPA as a Redevelopment Project Area under the Act. S. B. Friedman & Company has prepared this Redevelopment Plan with the understanding that the Village would rely: (1) on the findings and conclusions of this Redevelopment Plan in proceeding with the designation of the Scales Mound RPA and the adoption and implementation of this Redevelopment Plan; and (2) on the fact that S. B. Friedman & Company has obtained the necessary information including, without limitation, information relating to the Equalized Assessed Value ( EAV ) of parcels comprising the Scales Mound RPA, so that this Redevelopment Plan will comply with the Act and that the Scales Mound RPA can be designated as a Redevelopment Project Area in compliance with the Act. Existing Land Use Based upon S. B. Friedman & Company s research, seven primary land uses have been identified within the Scales Mound RPA. These include: Commercial Residential Industrial Institutional (including public facilities, schools and social services) Vacant Land Park/Open Space Right-of-Way The overall pattern of land use in the Scales Mound RPA is shown in Map 3 on the following page. SB FRIEDMAN DEVELOPMENT ADVISORS 8 www.sbfriedman.com

Charles Mound Avenue Legend South Avenue Clark Avenue Burrall Avenue Schulyer Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Existing Land Use Commercial Industrial Mixed-Use Park/Open Space Public/Institutional Railroad/Right of Way Residential Commercial Yard Vacant Land 0 0.25 Miles October 2012 Map 3: Existing Land Use Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

3. Eligibility Analysis Provisions of the Illinois Tax Increment Allocation Redevelopment Act Based upon the conditions found within the Scales Mound RPA at the completion of S. B. Friedman & Company s research, it has been determined that the Scales Mound RPA meets the eligibility requirements of the Act as a mixed designation that includes a combined improved land conservation area designation and a vacant land blighted area designation. The following outlines the provisions of the Act to establish eligibility. Under the Act, two primary avenues exist to establish eligibility for an area to permit the use of Tax Increment Financing for area redevelopment: declaring an area as a blighted area and/or a conservation area. Blighted areas are those improved or vacant areas with blighting influences that are impacting the public safety, health, morals or welfare of the community, and are substantially impairing the growth of the tax base in the area. Conservation areas are those improved areas that are deteriorating and declining and soon may become blighted if the deterioration is not abated. The statutory provisions of the Act specify how a district can be designated as a conservation area and/or blighted area district based upon an evidentiary finding of certain eligibility factors listed in the Act. According to the Act, blighted areas for improved land must have a combination of five or more of these eligibility factors, acting in concert, which threaten the health, safety, morals or welfare of the proposed district. Conservation areas must have a minimum of 50 percent of the total structures within the area aged 35 years or older, plus a combination of three or more additional eligibility factors which are detrimental to the public safety, health, morals or welfare, and which could result in such an area becoming a blighted area. A separate set of factors exists for the designation of vacant land as a blighted area. There is no provision for designating vacant land as a conservation area. Map 4 on the following page describes which parcels within the RPA are improved and which are vacant. Factors for Improved Areas Dilapidation. An advanced state of disrepair or neglect of necessary repairs to the primary structural components of buildings or improvements, in such a combination that a documented building condition analysis determines that major repair is required, or the defects are so serious and so extensive that the buildings must be removed. Obsolescence. The condition or process of falling into disuse. Structures have become ill-suited for the original use. SB FRIEDMAN DEVELOPMENT ADVISORS 10 www.sbfriedman.com

Charles Mound Avenue Legend South Avenue Clark Avenue Burrall Avenue Schulyer Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Improved Land Vacant Land 0 0.25 Miles October 2012 Map 4: Improved and Vacant Land Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan Deterioration. With respect to buildings, defects including, but not limited to, major defects in the secondary building components such as doors, windows, porches, gutters and downspouts, and fascia. With respect to surface improvements, that the condition of roadways, alleys, curbs, gutters, sidewalks, off-street parking and surface storage areas evidence deterioration including, but not limited to, surface cracking, crumbling, potholes, depressions, loose paving material and weeds protruding through paved surfaces. Presence of Structures below Minimum Code Standards. All structures that do not meet the standards of zoning, subdivision, building, fire and other governmental codes applicable to property, but not including housing and property maintenance codes. Illegal Use of Individual Structures. The use of structures in violation of the applicable federal, state or local laws, exclusive of those applicable to the presence of structures below minimum code standards. Excessive Vacancies. The presence of buildings that are unoccupied or under-utilized and that represent an adverse influence on the area because of the frequency, extent or duration of the vacancies. Lack of Ventilation, Light or Sanitary Facilities. The absence of adequate ventilation for light or air circulation in spaces or rooms without windows, or that require the removal of dust, odor, gas, smoke or other noxious airborne materials. Inadequate natural light and ventilation means the absence of skylights or windows for interior spaces or rooms, and improper window sizes and amounts by room area to window area ratios. Inadequate sanitary facilities refers to the absence or inadequacy of garbage storage and enclosure, bathroom facilities, hot water and kitchens, and structural inadequacies preventing ingress and egress to and from all rooms and units within a building. Inadequate Utilities. Underground and overhead utilities such as storm sewers and storm drainage, sanitary sewers, water lines, and gas, telephone and electrical services that are shown to be inadequate. Inadequate utilities are those that are: (i) of insufficient capacity to serve the uses in the Redevelopment Project Area, (ii) deteriorated, antiquated, obsolete or in disrepair, or (iii) lacking within the Redevelopment Project Area. Excessive Land Coverage and Overcrowding of Structures and Community Facilities. The over-intensive use of property and the crowding of buildings and accessory facilities onto a site. Examples of problem conditions warranting the designation of an area as one exhibiting excessive land coverage are: (i) the presence of buildings either improperly situated on parcels or located on parcels of inadequate size and shape in relation to present-day standards of development for health and safety, and (ii) the presence of multiple buildings on a single parcel. For there to be a finding of excessive land coverage, these parcels must exhibit one or more of the following conditions: insufficient provision for light and air within or around buildings, increased threat of spread of fire due to the close proximity of buildings, lack of adequate or proper access to a public right-of-way, lack of reasonably required off-street parking, or inadequate provision for loading and service. Deleterious Land Use or Layout. The existence of incompatible land use relationships, buildings occupied by inappropriate mixed-uses, or uses considered to be noxious, offensive or unsuitable for the surrounding area. SB FRIEDMAN DEVELOPMENT ADVISORS 12 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan Environmental Clean-Up. The proposed Redevelopment Project Area has incurred Illinois Environmental Protection Agency or United States Environmental Protection Agency remediation costs for, or a study conducted by an independent consultant recognized as having expertise in environmental remediation has determined a need for, the clean-up of hazardous waste, hazardous substances, or underground storage tanks required by state or federal law, provided that the remediation costs constitute a material impediment to the development or redevelopment of the Redevelopment Project Area. Lack of Community Planning. The proposed Redevelopment Project Area was developed prior to or without the benefit or guidance of a community plan. This means that the development occurred prior to the adoption by the municipality of a comprehensive or other community plan, or that the plan was not followed at the time of the area s development. This factor must be documented by evidence of adverse or incompatible land use relationships, inadequate street layout, improper subdivision, parcels of inadequate shape and size to meet contemporary development standards, or other evidence demonstrating an absence of effective community planning. Lack of Growth in Equalized Assessed Value (EAV). The total equalized assessed value of the proposed Redevelopment Project Area has declined for three of the last five calendar years prior to the year in which the Redevelopment Project Area is designated, or is increasing at an annual rate that is less than the balance of the municipality for three of the last five calendar years for which information is available, or is increasing at an annual rate that is less than the Consumer Price Index for All Urban Consumers published by the United States Department of Labor or successor agency for three of the last five calendar years prior to the year in which the Redevelopment Project Area is designated. As explained, blighted areas must have a combination of five or more of these eligibility factors and conservation areas must have a minimum of 50 percent of the total structures within the area aged 35 years or older, plus a combination of three or more additional eligibility factors. Factors for Vacant Land According to the Act, there are two ways by which vacant land can be designated as blighted. One way is to find that at least two of six factors from the list discussed below under the Two-Factor Test are present to a meaningful extent and reasonably distributed throughout the RPA. The second way is to find that at least one of the six factors discussed under the One-Factor Test is present to a meaningful extent and reasonably distributed throughout the RPA. ONE-FACTOR TEST Under the provisions of the blighted area section of the Act, if the land is vacant, an area qualifies as blighted if one or more of the following factors is found to be present to a meaningful extent. Contains unused quarries, strip mines or strip mine ponds Contains unused rail yards, rail track or railroad rights-of-way Is subject to or contributes to chronic flooding Contains unused or illegal dumping sites Was designated as a town center prior to January 1, 1982, is between 50 and 100 acres, and is 75 percent vacant land Qualified as blighted prior to becoming vacant SB FRIEDMAN DEVELOPMENT ADVISORS 13 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan TWO-FACTOR TEST Under the provisions of the blighted area section of the Act, if the land is vacant, an area qualifies as blighted if a combination of two or more of the following factors is identified that impact the sound growth of the Redevelopment Project Area. Obsolete Platting of Vacant Land. Parcels of limited or narrow size or configurations of parcels of irregular size or shape that would be difficult to develop on a planned basis and in a manner compatible with contemporary standards and requirements, or platting that failed to create rights-of-way for streets or alleys or that created inadequate right-of-way widths for streets, alleys or other public rightsof-way, or that omitted easements for public utilities. Diversity of Ownership. Diversity of ownership is when adjacent properties are owned by multiple parties. When diversity of ownership of parcels of vacant land is sufficient in number to retard or impede the ability to assemble the land for development, this factor applies. Tax and Special Assessment Delinquencies. Tax and special assessment delinquencies exist or the property has been the subject of tax sales under the Property Tax Code within the last five years. Deterioration of Structures or Site Improvements in Neighboring Areas Adjacent to the Vacant Land. Evidence of structural deterioration and area disinvestment in blocks adjacent to the vacant land may substantiate why new development had not previously occurred on the vacant parcels. Environmental Contamination. The area has incurred Illinois Environmental Protection Agency or United States Environmental Protection Agency remediation costs for, or a study conducted by an independent consultant recognized as having expertise in environmental remediation has determined a need for, the clean-up of hazardous waste, hazardous substances, or underground storage tanks required by state or federal law, provided that the remediation costs constitute a material impediment to the development or redevelopment of the Redevelopment Project Area. Lack of Growth in Equalized Assessed Value (EAV). The total equalized assessed value of the proposed Redevelopment Project Area has declined for three of the last five calendar years prior to the year in which the Redevelopment Project Area is designated, or is increasing at an annual rate that is less than the balance of the municipality for three of the last five calendar years for which information is available, or is increasing at an annual rate that is less than the Consumer Price Index for All Urban Consumers published by the United States Department of Labor or successor agency for three of the last five calendar years prior to the year in which the Redevelopment Project Area is designated. Methodology Overview and Determination of Eligibility Analysis of the eligibility factors was conducted through research involving an extensive exterior survey of all properties within the Scales Mound RPA, as well as a review of building and property records. Property records included building permit data and assessor information. Our survey of the area established that there are 70 buildings and 80 tax parcels within the Scales Mound RPA. All properties were examined for qualification factors consistent with either blighted area or conservation area requirements of the Act. Based upon these criteria, the properties within the RPA SB FRIEDMAN DEVELOPMENT ADVISORS 14 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan qualify for TIF designation as a conservation area for improved parcels and a blighted area for vacant parcels as defined by the Act. To arrive at this designation, S. B. Friedman & Company calculated the number of eligibility factors present on a building-by-building or parcel-by-parcel basis and analyzed the spatial distribution of the eligibility factors. When appropriate, we calculated the presence of eligibility factors on infrastructure and ancillary properties associated with the structures. The eligibility factors were correlated to buildings using aerial photographs, property files created from field observations, and record searches. The information was then graphically plotted on a parcel map of the Scales Mound RPA to establish the distribution of eligibility factors, and to determine which factors were present to a major or minor extent and reasonably distributed throughout the RPA. Major factors were used to establish eligibility. These factors are present to a meaningful extent and are reasonably distributed throughout the RPA. While the mere presence of the minimum number of the stated factors may be sufficient to make a finding as a conservation area and/or a blighted area, this evaluation was made on the basis that the eligibility factors must be present to an extent that indicates that public intervention is appropriate or necessary. Likewise, the distribution of the eligibility factors must be reasonably distributed throughout the RPA so that areas are not arbitrarily included in the RPA simply because of their proximity to areas that qualify as a conservation area and/or blighted area. Conservation Area Findings IMPROVED PARCELS As required by the Act, in order to be designated as a conservation area, 50 percent or more of the structures in the RPA must be 35 years old or older and at least three of the improved land eligibility factors must be found to be present to a meaningful extent within the RPA. Taking into account information obtained from the Jo Daviess Chief County Assessment Office, architectural characteristics, building configurations, and the historic development patterns within the community, we have established that of the 70 buildings, 48 buildings (69 percent) within the Scales Mound RPA are 35 years of age or older. This indicates that buildings within the area are generally rather old and may require significant reinvestment in order to compete with newer buildings elsewhere in the market. Additionally, our research has revealed that the following four factors are present to a meaningful extent and reasonably distributed throughout the RPA: 1. Lack of Growth in Equalized Assessed Value 2. Deterioration 3. Inadequate Utilities 4. Lack of Community Planning Based on the presence of these factors, the RPA meets the requirements of a conservation area under the Act. SB FRIEDMAN DEVELOPMENT ADVISORS 15 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan Maps 5A through 5E illustrate the eligibility factors found to be present to a meaningful extent within the RPA as a whole, by indicating each block where the respective factors were found to be present to a meaningful degree. The following sections summarize our field research as it pertains to each of the identified eligibility factors found present within the Scales Mound RPA. The eligibility of the improved area of the RPA is discussed in the next pages, after which follows the discussion of the eligibility of the vacant portions of the RPA. SB FRIEDMAN DEVELOPMENT ADVISORS 16 www.sbfriedman.com

Charles Mound Avenue Legend South Avenue Clark Avenue Burrall Avenue Schulyer Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Parcel contains structure 35 years or older Vacant Land 0 0.25 Miles October 2012 Map 5A: Age of Structures IMPROVED AREA - CONSERVATION AREA FACTOR Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Eligibility Study Charles Mound Avenue Legend South Avenue Schulyer Avenue Clark Avenue Burrall Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Improved Land Vacant Land Eligibility Factor Lack of Growth in EAV* *Factor analyzed on an area-wide basis 0 0.25 Miles October 2012 Map 5B: Lack of Growth in EAV IMPROVED AREA - CONSERVATION AREA FACTOR Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Eligibility Study Charles Mound Avenue Legend South Avenue Schulyer Avenue Clark Avenue Burrall Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Improved Land Vacant Land Eligibility Factor Deterioration To qualify, deterioration must be present on buildings, parking surfaces/structures or public infrastructure. 0 0.25 Miles October 2012 Map 5C: Deterioration IMPROVED AREA - CONSERVATION AREA FACTOR Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Eligibility Study Charles Mound Avenue Legend South Avenue Schulyer Avenue Clark Avenue Burrall Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Improved Land Vacant Land Eligibility Factor Inadequate Utilities* *Factor analyzed on an area-wide basis 0 0.25 Miles October 2012 Map 5D: Inadequate Utilities IMPROVED AREA - CONSERVATION AREA FACTOR Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Eligibility Study Charles Mound Avenue Legend South Avenue Schulyer Avenue Clark Avenue Burrall Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Improved Land Vacant Land Eligibility Factor Lack of Community Planning* *Factor analyzed on an area-wide basis 0 0.25 Miles October 2012 Map 5E: Lack of Community Planning IMPROVED AREA - CONSERVATION AREA FACTOR Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan Conservation Area Findings IMPROVED PARCELS 1. Lack of Growth in Equalized Assessed Value (EAV) The total Equalized Assessed Value (EAV) is a measure of the property value in the Scales Mound RPA. A lack of growth in EAV has been found for the improved portion of the Scales Mound RPA, in that the rate of growth in property values (as measured by EAV) of the RPA has been less than the balance of the Village for three out of the last five year-to-year periods for which information is available as shown in Table 1. The lack of growth in EAV within an area is one of the strongest indicators that the area as a whole is beginning to fall into decline. Table 1: Percent Change in Equalized Assessed Valuation 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 Improved RPA Parcels 3.67% 10.21% 0.87% -6.04% 9.24% Balance of the Village 4.64% 11.26% -1.34% -1.22% -0.66% Source: Jo Daviess County Assessor, Jo Daviess County Tax Extension Department, S. B. Friedman & Company Note: Qualifying periods are highlighted in gray. This eligibility factor was considered to be present to a meaningful extent for the entire Scales Mound RPA. 2. Deterioration Thirty-four (34) of the 70 buildings (49 percent) within the Scales Mound RPA demonstrate a significant level of deterioration. Catalogued deterioration includes the occurrence of major defects in building components, including cracks in building foundations, decay and rusting of wooden and metal structures, and cracked exterior wall surfaces. Deterioration was also observed in cracked or broken driveways, parking areas, and the public rights-of-way, including, sidewalks, streets, alleys, and curbs. 63% of all parcels exhibit factors of deterioration of infrastructure. These are conditions not readily correctable through normal maintenance. Structural deterioration coupled with the older buildings and public rights-of-way indicate that an area is at risk of becoming blighted. Combined, deterioration of buildings, site improvements and infrastructure was found on 66% of all parcels. Thus, the deterioration eligibility factor was found to be present to a meaningful extent and reasonably distributed throughout the RPA. 3. Inadequate Utilities Inadequate utilities were found to impact all improved parcels within the RPA. According to Village engineering documents and interviews with Village officials, the entire Village has an inadequate sewer system, and fieldwork and property records data indicate an apparent lack of natural gas service on SB FRIEDMAN DEVELOPMENT ADVISORS 22 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan numerous parcels. In July of 2004, Fehr-Graham & Associates prepared a report entitled Inflow and Infiltration Investigation Report for the Village, to identify ways to improve wastewater collection and treatment. The report documents the insufficient capacity of the sanitary sewer collection system, as well as evidence of the supporting infrastructure falling into disrepair. The problems noted included sewage backups that resulted in the Village bypassing sewage into a drainage channel. An April 2007 memo entitled Engineer s Opinion Letter also further emphasized that there are presently still sewer and wastewater deficiencies and an overall lack of investment in public infrastructure in Scales Mound. Village officials also stated there are no storm sewers in the Village. This periodically results in flooding within the improved area of the RPA. Since the 2004 Report and 2007 Engineer s Opinion Letter, there have been no substantial updates in the Village s sanitary sewer and wastewater systems. In addition to inadequacies in the sewer and wastewater treatment in the Village, several parcels are also served by antiquated gas services such as liquid propane tanks. The Act recognizes the use of antiquated gas services such as liquid propane tanks--or the total absence of these utilities--as meeting the Inadequate Utilities eligibility factor. Based on this information, inadequate utilities were found to be present on an area-wide basis. Antiquated gas service coupled with the deficiencies in the sewer and wastewater treatment can contribute to a significant risk of infrastructure failures within the RPA. 4. Lack of Community Planning Lack of community planning is an area-wide factor not necessarily attributable to any one parcel. The presence of this factor is indicated by evidence of adverse or incompatible land use relationships, inadequate street layout, and parcels of inadequate shape and size to meet contemporary development standards. This factor is also found to be present if the area was originally developed prior to the adoption of a comprehensive plan. The lack of community planning factor is applicable to this RPA for several reasons. First, the Village has never had and still lacks a comprehensive plan. Second, Village officials have indicated that the Village s development and orientation around the Illinois Central Railroad (now the Canadian National Railroad) have resulted in traffic circulation challenges. According to Village officials, freight trains frequently stop on the train tracks, which bisect downtown, blocking the primary access point connecting the north and south sides of the Village. Third, during fieldwork, S. B. Friedman & Company observed a lack of designated rights-of-way (several parcels are only accessible through driveways and/or parking areas of another parcel). More specifically, several commercial areas were identified as having a lack of marked alleys and parking due to their inadequate shape and size. Fourth, substantial portions of the Village lack sidewalks, hindering safe accessibility throughout the town for pedestrians. Finally, the July 2004 Inflow and Infiltration Investigation Report prepared by Fehr-Graham & Associates and the April 2007 Engineer s Opinion Letter have confirmed that there is a lack of investment in public infrastructure, including inadequate sanitary sewer collection system and a water supply system that is insufficient for development. Based on the information gathered, a lack of community planning was found to be present for all improved parcels (100 percent) within the RPA. SB FRIEDMAN DEVELOPMENT ADVISORS 23 www.sbfriedman.com

Village of Scales Mound Scales Mound Redevelopment Project Area and Plan Blighted Area Findings VACANT PARCELS As required by the Act, to qualify for inclusion in a blighted area, one of the one-factor vacant land eligibility factors must be found present to a meaningful extent on the vacant parcels within the Scales Mound RPA. Based on a memo dated October 12, 2012 (an extension of the full report titled Engineer s Opinion Letter, prepared in April of 2007), the engineering firm of Fehr-Graham & Associates concluded that runoff from the vacant parcels within the RPA contributes to flooding within the watershed. According to the memo and report, all vacant parcels in the RPA drain into the Mill Creek watershed. In addition, without mitigation, any development or redevelopment that would occur on these parcels would likely contribute to increases in flooding in the watershed. Therefore, all nine parcels that were observed to be vacant would qualify for inclusion in a blighted area under the Act. Due to the current infrastructure conditions and drainage issues within the Village, all (100 percent) of the vacant parcels in the Scales Mound RPA were determined to be subject to or contribute to chronic flooding. Map 6 on the following page describes those vacant parcels exhibiting chronic flooding. It is important to note that, in order for the flooding factor to apply to a vacant parcel, the Redevelopment Plan must provide for facilities or improvements to contribute to the alleviation of all or part of the flooding. This condition is addressed in subsequent parts of this report. SB FRIEDMAN DEVELOPMENT ADVISORS 24 www.sbfriedman.com

Eligibility Study Charles Mound Avenue Legend South Avenue Schulyer Avenue Clark Avenue Burrall Avenue Elizabeth Scales Mound Road Franklin Street Provost Avenue Franklin Street Main Street Washington Street Main Street Mason Avenue Brayman Avenue North Avenue Jackson Street Jackson Street Stagecoach Trail RPA Boundary Improved Land Vacant Land Eligibility Factor Flooding* *Factor analyzed on an area-wide basis 0 0.25 Miles October 2012 Map 6: Flooding VACANT LAND - BLIGHTED AREA ONE FACTOR TEST Scales Mound Tax Increment Financing District VILLAGE OF SCALES MOUND, IL www.sbfriedman.com

Redevelopment Needs of the Scales Mound RPA 4. Redevelopment Plan and Project The land use and existing conditions for the RPA suggest five major redevelopment needs for the Scales Mound RPA: 1. Capital improvements that further the objectives set forth in this Redevelopment Plan 2. Streetscape and infrastructure improvements, including utilities 3. Rehabilitation of existing buildings, including preservation of historic structures 4. Resources for commercial, residential and recreational development 5. Site preparation, environmental remediation, stormwater management and private sector site assembly This Redevelopment Plan identifies tools for the Village to support the establishment and improvement of the RPA as a commercial and residential district, provide necessary infrastructure improvements and new public facilities that benefit both residents and visitors, and support other public and private improvements that serve the best interests of the Village and local community. Currently, the Scales Mound RPA is characterized by overall lack of growth in property values, inadequate public utilities and infrastructure, signs of structural deterioration, and an overall lack of community planning. Additionally, vacant land in the RPA is characterized by chronic flooding or the contribution to flooding in the watershed. These building and area conditions reduce the value of commercial and residential properties in the area compared to commercial and residential districts in other communities with which the RPA must compete for investment, limiting local area employment opportunities and growth, and contributing to the lack of new investment within the RPA. The public improvements outlined in this Redevelopment Plan will create an environment conducive to private investment and redevelopment within the Scales Mound RPA. The goals, objectives and strategies discussed below have been developed to address these needs and facilitate the sustainable redevelopment of the Scales Mound RPA. To support specific projects and encourage future investment in the RPA, public resources, including Tax Increment Financing, may be used to: modernize RPA infrastructure and create new public facilities; beautify public areas and create an identity for the community; support façade and building rehabilitation; and facilitate site assembly, site preparation, and demolition for future private sector redevelopment activities. The private sector often seeks to acquire and assemble property to create redevelopment opportunities and suitable sites for modern development needs. Property assembly and demolition by the private sector to meet the goals and objectives of this Redevelopment Plan can be assisted using tax increment revenues. Goals, Objectives and Strategies Goals, objectives and strategies designed to address the needs of the community form the overall framework of this Redevelopment Plan, and consider the use of anticipated tax increment funds generated within the Scales Mound RPA. SB FRIEDMAN DEVELOPMENT ADVISORS 26 www.sbfriedman.com