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County board to consider checklist for tax abatements
By Stuart R. Wahlin
How many good-paying jobs are worth giving a company a tax break? What constitutes a good-paying job? These are a couple of the questions county leaders consider when deciding whether to grant property tax abatements to local employers. But at least one board member would like to see some hard-and-fast policy guidelines on the books, rather than leaving such decisions solely to the whims of the board.
Two weeks after board members voted to deny an abatement for a Sonic Drive-In in Loves Park, which is expected to serve up 60 jobs in addition to food, Paul Gorski (D-5) issued a request that the Economic Development Committee consider a number of his recommendations as a “starting point” for developing an abatement policy.
Director of Regional Planning and Economic Development Sue Mroz indicated the county does not typically entertain abatement requests for fast-food restaurants.
“But we do, at the discretion of the committee, ask usually, ‘What is the minimum wage?’” Mroz acknowledged. “And I’m sure that weighs into the decision of how much of an abatement to give them. And, obviously, if a company is coming, and they’re bringing 300 good-paying jobs with health insurance and benefits, you would give them a much better abatement…than you would a company bringing 10 jobs, and five of them are minimum wage.”
Economic Development Committee Chairman John Ekberg (R-10) warned that granting an abatement for a fast food franchise would set a troublesome precedent.
“I think that the county has to be careful about stepping into that realm, and we haven’t done it before,” he said.
Noting the market’s saturation of such restaurants, John F. Sweeney (R-14) concurred.
“I’m just against it philosophically,” he asserted. “There are so many competitors in such a small area.”
A number of board members were happy to see the City of Loves Park had approved a seven-year, 50 percent sales tax abatement for Sonic, but most were in agreement a property tax cut from the county was not appropriate.
“It’s easy for municipalities to come to us and want us to do a tax rebate when they don’t levy a real estate tax, but I don’t see a need for it,” Doug Aurand (D-3) explained. “We have Beef-a-Roos, which are local. We haven’t given them any. The other Sonic that was built out in Cherry Valley—there was no abatement for that. These companies know where they’re going, and these are minimum-wage jobs.”
Minimum wage or not, Fred Wescott (R-9) argued, a job is a job.
“And it’s 60 minimum-wage jobs,” he stressed. “And some of the other abatements we talked about were three, or six, jobs.”
Arguing it is important for the county to be known as generous with incentives when it comes to landing jobs, L.C. Wilson (D-12) noted: “There are 78,000 people [in Winnebago County] that are getting some form of welfare, so to speak. And this kind of thing that the county has supposedly looked into doing is something that I feel we need to do so that we can get the word out.”
Ekberg indicated the Sonic abatement would amount to $465 in forgiven property taxes over a three-year period.
“Wait a minute,” Gorski responded prior to the May 13 vote. “I’ll tell you what—I’ll pay it.”
Assuring colleagues his offer to pay the $465 was sincere, Gorski argued there was no reason for board members to vote against the abatement, because it would cost the county nothing.
“All right, Mr. Bigtime,” Chairman Scott Christiansen (R) retorted as the board room erupted with laughter.
“Normally, we would not even have taken this application, as a matter of policy, but it slipped through the cracks and got to committee,” Christiansen explained. “We had to follow through to here. But they [Sonic] understand.”
Gorski: Board has short memory
Gorski, however, wasn’t joking, and he seemed to question the “matter of policy” that abatements are geared toward manufacturing and industry, but not restaurants and retail.
Reasserting the need to establish abatement guidelines to “make sure that we are getting the best bang for our buck,” Gorski argued, “In fact, we have issued tax abatements for retail groups.”
In 2006, for instance, board members approved a 10-year, $80,000 abatement for a 13-store, 75,000-square-foot addition at CherryVale Mall.
In 2007, the board granted tax breaks totaling $70,886.59 for Rick’s Place, a $25 million guitar museum, restaurant, music venue, conference center and 127-room hotel planned for 6.2 acres on the southwest corner of I-90 and Riverside Boulevard. The destination, named for hometown rocker Rick Nielsen, of Cheap Trick, broke ground later that year, but the development has indefinitely been suspended while developers await an upswing in the economy.
During debate regarding Rick’s Place, some board members expressed concern the five-year abatement would give the Hyatt Place portion of the development an unfair advantage over other area hotels, similar to what had been suggested with regard to Sonic versus other fast-food restaurants.
Gorski had voted against the Rick’s Place abatement, but said it was because he viewed the site of the attraction as counterproductive to other economic development efforts of the county. Gorski argued Rick’s Place should be located in downtown Rockford, where the county has been investing in redevelopment.
“We’re spending money in one area, and giving tax abatements in another one,” he explained. “It doesn’t seem like we have a long-range plan in place.”
Last year, board members agreed to a $5,100, seven-year property tax abatement for Millennium Raceworld, a radio-controlled car facility, in Cherry Valley. Although ultimately voting in favor, Frank Gambino (R-14) expressed reservations.
“My concerns are, at this point in time, we’re looking at a tax abatement, which isn’t great,” he acknowledged, “but we’re only supplying the community five to eight jobs at $8 an hour.”
Gambino said he feared the abatement could pave the way for numerous other requests.
“I believe there’s a point where we have to start saying ‘no,’” he added. “I have a hard time supporting this at the level of economic prosperity that this appears—I just don’t see it bringing enough in to pay for tax abatement. And the precedent it sets, I think, is dangerous.”
The board’s Economic Development Committee will review Gorski’s recommendations, which are as follows:
→ A business must clearly add to the Winnebago County economic base. Improvements to the economic base may include, but are not restricted to:
a. Increase the productivity of a location or facility.
b. Increase the goods or services produced by a location or facility.
c. Provide for the retention of existing jobs and/or create new jobs in Winnebago County.
→ Must create new value:
a. Construction of a new facility.
b. Expansion of existing facility.
c. Modernization of existing facility.
→ Economic qualifications:
a. Owner or leaseholder must make a minimum of $100,000 investment.
b. Create at least 10 new, permanent full-time jobs.
c. At least 50 percent of the new employees must have been residents of the county for a minimum of one year.
→ Conditions of the abatement include:
a. The owner or leaseholder of the real property must make the improvements to the property as promised.
b. Must maintain and occupy the real property for the term of the abatement.
c. Wages for all workers performing the new construction or expansion of the real property must be paid according to the Illinois Prevailing Wage Act.
d. Wages for all workers performing any structural, mechanical, or electrical improvements, modifications, or upgrades to the real property during the term of the abatement must be paid according to the Illinois Prevailing Wage Act.
e. Have a favorable Dunn and Bradstreet background report.
f. Abatement applies to enterprise zone agreements.
g. Minimum wage for new jobs created is 200 percent of minimum wage laws.
Gorski’s suggestion to create policy guidelines was met with mixed reactions.
“I think Mr. Gorski has a great idea,” Aurand responded, noting abatements deserve scrutiny. “Let’s not give away the farm.”
But Aurand’s Republican counterpart in District 3, Kyle Logan, said he feared rigid guidelines could hurt the county in the long run.
“I don’t want to see us fall in the trap of: ‘It doesn’t fit in a box. We’re not going to consider it,’” he explained, adding that many instances call for thinking outside the box.
Meantime, Mroz said she’d discuss with the state’s attorney’s office whether such proposed guidelines would be legal under state law.
From the June 2-8, 2010 issue