A drawing of part of the planned Streets of St. Charles project

The St. Charles City Council has passed legislation to undo a financing snag that threatened to significantly delay or downsize a $385 million commercial/residential project at the site of the old Noah’s Ark restaurant.

Meanwhile, still unresolved is a funding problem that has held up work on the city’s long-debated community center approved by voters last year.

The Noah’s Ark measure - which puts the full faith and credit of the city behind $38 million or more in bonds to be sold to pay for streets, sewers, garages and other initial infrastructure costs - was passed 7-2 on Tuesday night. The change was sought by the developer, Cullinan Properties of Peoria, Ill.

Supporters said issuing the bonds through a newly-created neighborhood improvement district is the only way to get the project moving on schedule, while critics warned that the measure puts the city at too much risk.

Cullinan president Jeff Giebelhausen said because of the recession’s effect on financial markets, the company was unable for the past year to get buyers for bonds backed only by Cullinan. That was part of the original plan approved by the council for the project, at Interstate 70 and South Fifth Street.

Now they will be backed both by the company and the city, he said. Once the project begins operating, new tax revenue generated under a $55 million tax-increment financing plan will gradually pay off another set of bonds that will replace the first round of bonds. The city’s ”full faith and credit” backing would last only for a few years, supporters point out.

Kneemiller

“This is the only way to get the project off the ground,” said the bill’s sponsor, Councilman Bob Kneemiller of the 4th Ward. “We either do this or it won’t happen.”

One of the two opponents, Councilman Dave Beckering of the 7th Ward, pointed out that the city already had made a significant contribution by agreeing to give up much of the anticipated new tax revenue from the project - called Streets of St. Charles - through the TIF.

“I don’t know what the developer is bringing to the party,” he said. He added that “there is risk associated with this” for the city. Also voting against the bill was Council President Larry Muench of the 2nd Ward.

Councilwoman Laurie Feldman, whose 3rd Ward includes the Noah’s Ark site, responded that the benefits of the project - including the construction jobs - “far outweighs the risk.”

Beckering

“I’m tired of driving by dirt everyday,” she said, referring to the soil piled up at the site.

Plans now call for construction to begin around the end of this year on the first phase of the project - 196 luxury apartments plus 50,000 square feet of commercial space. That’s expected to be done by spring of 2011.

Had the council not agreed to add the city’s financial backing to the bonds, Giebelhausen said, “a number of deals we have lined up (for tenants) would die.” Eventually the site would have been developed anyway, he said, but not as soon as planned.

Mayor Patti York said last week that it was possible that the site could be idle for two or three years without the jump-start sought by Cullinan.

Before the council passed the Noah’s Ark measure, critics tried unsuccessfully to amend it to put a timetable on Cullinan’s planned $3.2 million purchase of a portion of the site from the nonprofit ShowMe Aquatics and Fitness organization. The amendment was defeated, 6-3.

Joining Beckering and Muench in voting for the amendment was Michael Klinghammer of the 8th Ward.

City officials say the future of the ShowMe tract at Noah’s Ark is one of the factors in the delay in a $30-million bond issue that had been scheduled for Sept. 1 to fund the community center, planned for a site further west along Interstate 70 between Hawk’s Nest and First Capitol drives.

At issue, city officials have said, is whether ShowMe - the city’s partner in the community center project - is able to make a $3.5 million payment when the community center bonds are issued. Other payments are required at later dates. The amendment would have required the purchase by July 2011.

Various closed-door meetings and negotiations with the parties have been held by the council on the issue over the past few months but a solution has yet to be worked out.

Giebelhausen, the Cullinan executive, said his company never intended to buy the ShowMe tract at this time and has other costs it is responsible for at the Noah’s Ark site now. He said, though, it is willing to sign a contract committing Cullinan to a purchase at a later date.