By Bob Susnjara

Round Lake Mayor Bill Gentes says three words are part of the reason for abandoned homes and other potential signs of financial distress in one village subdivision.

Those words are “special service area.”

Developers get a town to approve a special service area, then in turn charge less for homes because they don’t pay for the infrastructure, like roads and sewers. Those costs are incurred by homeowners on a monthly basis later.

The upside, proponents say, is that homeowners can benefit if a developer’s up-front costs are reduced. For example, certain amenities might be built in a subdivision if a developer doesn’t have to pay for the infrastructure.

But the downside is that because the fees can unexpectedly drive up tax bills, sometimes homeowners are caught by surprise.

That’s the case in Round Lake’s four-year-old Lakewood Grove subdivision, said Gentes. Some residents didn’t factor in their special service area costs when they bought their discounted homes, and that’s led to financial difficulties and, in some cases, foreclosure.

Gentes said Lakewood Grove’s special taxing area, in hindsight, was a bad idea. It’s believed at least 15 homes have been abandoned at the subdivision near Cedar Lake Road and Route 60.

“I would have never, ever considered a special service area,” he said. “As mayor, I will never consider an SSA.”

Foreclosure continues to be a national worry, in part because of resetting of adjustable-rate mortgages and subprime loans that were made to borrowers with shaky credit.

Nationwide, 635,159 foreclosure filings were recorded in the third quarter, according to California-based RealtyTrac Inc. That was a 30 percent increase compared to the previous three months and a 100 percent jump from the third-quarter in 2006.

Illinois had 20,008 third-quarter foreclosures, down 4.2 percent from the number recorded from April through June. However, the 20,008 foreclosures were a 39 percent increase from the third quarter in 2006.

But it’s not because of special service areas, said Lakewood Homes Executive Vice President Christopher Shaxted.

“Typically, people aren’t getting in trouble because there’s another $130 (per month) in cost,” he said.

Shaxted said most buyers grasp the idea they receive an early cost savings when they move into a house in a special service area. Some owners would not have been able to purchase their homes if not for the reduced prices.

Moreover, he said, the lack of payments for infrastructure allowed Lakewood to provide $5 million toward construction of Fremont Elementary District 79’s intermediate school. The school, which opened this year, has Lakewood Grove within its boundaries.

“We see it as beneficial in a number of communities we have,” Shaxted said, referring to special service areas.

Not all developers support special service areas.

Kris Gosselin, director of sales and marketing at Residential Homes of America in Lake Forest, said the company’s research shows houses aren’t cheaper up front in the special taxing districts. She said resale problems often occur for houses in the special service areas.

“I think you just don’t do it because it’s not the right thing to do,” Gosselin said.

Lakewood Grove’s special-service area bills are $1,750 to $2,300 annually, depending on the value of a house. The monthly special-service area charge is on top of taxes and mortgage payments.

Although he acknowledged the cost savings won’t be as much as residents want, Gentes said Round Lake village board members agreed earlier this year to provide some relief to Lakewood Grove homeowners.

Gentes said the Round Lake board approved refinancing for a loan that paid for the Lakewood Grove infrastructure. He estimated it would shave about $380 in annual special service area payments for owners of single-family homes at the subdivision.

Round Lake had 60 foreclosures, or 38.49 per 1,000 owner-occupied units in 2006, according to data on the six-county Chicago area compiled by the Woodstock Institute and distributed to the 272-member Metropolitan Mayors Caucus in the summer. It was the first comprehensive look at foreclosures in the Chicago area.

Gentes questions the methodology for the report, which placed his town in the upper tier for local foreclosures in 2006.

He said Woodstock Institute used Round Lake’s population of 5,400 as listed in the 2000 census to compute last year’s foreclosure ratio of 38.49 per 1,000 homes. The institute should have used Round Lake’s most recent population estimate of 16,500, he said.

“We’ve tripled in size,” Gentes said. “If you look at the foreclosure rate and they’re folding that into our foreclosure ratio, my God, it’s high.”

Woodstock Institute Research Director Geoff Smith said while Gentes has a point, there’s no better way than the 2000 census to gather standardized data on all Chicago-area municipalities.

Smith said a 2007 foreclosure report will be ready early next year. He said the institute has performed a quick year-to-year regional analysis.

“Basically, the number of foreclosure filings was up quite a bit when comparing the first half of 2006 to the first half of 2007,” he said.

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