Nov. 5—STERLING — The Sterling City Council unanimously approved a redevelopment agreement Monday for improvements that would turn a former bank into short-term rentals and business space.

M5 Property Holdings, LLC purchased the former downtown Midland Bank facility at 302 First Ave. in Sterling earlier this year. Sterling City Manager Scott Schumard said M5′s Rocky McGowan has expedient plans for the building.

"They have intentions to fully gut the building and turn it into a combination of short-term rentals on the upper floors and business space on the main two floors, with a separate business in the basement," Schumard said. "This is similar to what was done with the Lawrence building downtown."

Schumard said McGowan plans to use tax increment financing funds to help offset project costs. The TIF funds will come from the additional property taxes the project generates on these properties.

"TIF funds are the additional property taxes paid by properties in a TIF district," Schumard said. "If a TIF district was created in 2020 and the equalized assessed value was $2,000,000 and by 2024, the equalized assessed value from growth and improvements is $5,000,000, the taxes on the additional $3,000,000 of assessments go into the TIF fund. That can then be used on designated TIF projects from the original or amended TIF plan."

TIF funding can work in a few different ways, according to Schumard. One option is for a city to borrow money by issuing a TIF bond to help a developer build a project. Then, the city uses the future property taxes from the new development to pay back the bond.

"This was done with the city's first TIF for the Library Plaza area and again with the Rock River TIF for rehabbing the old North Western Steel and Wire for Sterling Steel & Wire, and for the Lincolnway-Lynn TIF for the Kohls's and PetSmart," Schumard said.

The other option is to pay as you go.

"There's no borrowing, but as a project generates increased property taxes, those taxes can then be used to reimburse a developer for TIF-qualified costs, which can include demolition and renovation," Schumard said. "This was done with the Lincoln Highway TIF (former Kmart) and the East Central Business District TIF. This project is part of that TIF. As M5 makes improvements that generate additional property taxes, those increased taxes above the base year can be used to reimburse the developer for qualified demolition or renovation/improvement costs."

Schumard said M5 hopes to finish the project within a year of starting.

"He's [McGowan] wanting to go," Schumard said. "He's a go-getter and he's got people standing by who are ready to go."