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Rebates stimulate business in Vernon Hills
Gary Steinhafel shakes hands with Vernon Hills Village President Roger Byrne during a chamber event emphasizing small business. Steinhafels was able to expand in Vernon Hills because of a sales-tax rebate agreement. | Dan Luedert~Sun-Times Media
Updated: February 18, 2013 1:16AM
VERNON HILLS — As Dave & Buster’s introduced itself to the Vernon Hills Village Board on Dec. 17, its interest in replacing GlowGolf in Hawthorn Mall brought Westfield and the village closer to a potential $7.5 million tax rebate agreement.
Finding big clients, such as Dave & Buster’s and an AMC movie theater, would show Vernon Hills a serious commitment to the $40 million to $50 million overall renovation Westfield presented in April.
While the long-awaited agreement hangs in the balance, village officials are pleased with the first five tax rebate agreements that were authorized during the recession.
Sales tax rebate programs involve a landlord or retailers asking the village for help overcoming a need. If approved, Vernon Hills would give portions of its sales tax revenue back for a certain period of time, or up to the agreed amount.
The revenue given back, however, is only money generated in the applicants’ store, creating an incentive for the company to perform.
The owners of Hawthorn Hills Square lost Linens ‘n Things in 2008, leading to a 60 percent shopping center vacancy rate. They brought a renovation plan to the village board, saying Dick’s Sporting Goods agreed to move in if certain structural improvements were made.
“Watching that shopping center go empty was like having a bright smile and somebody punching out your two front teeth,” Assistant Village Manager John Kalmar said.
Vernon Hills agreed to rebate $1.17 million to Hawthorn Hills Square. For 20 years, starting in November 2009, sales in the shopping center will be monitored and 70 percent of Vernon Hills’ sales tax revenue will be returned in years one through five. In years six through 10, the village will return 60 percent of sales tax revenue. The percentages drop later in the term.
It was the first such agreement Vernon Hills ever offered.
“When you have a regional mall, 3.4 million square feet of retail space, and you’re on two major roadways that each have more than 30,000 cars driving them per day, it doesn’t take much to sell to people that this is a good place to do business,” Kalmar said.
Vernon Hills authorized four more such deals in 2010. Some companies were denied, as village officials were selective in who deserved a rebate. Criteria involved projected revenue and how that incoming business would boost neighboring retail units.
When Circuit City left, the property owner asked for $518,000 to help HVAC upgrades and interior remodeling to attract Comp USA/Tiger Direct.
Every year, up to nine years, Vernon Hills gets $100,000 in sales tax revenue from Tiger Direct. Any sales tax generated beyond that goes back to the shopping center until the agreed rebate is met.
After Plunkett left Townline Commons, the shopping center asked for $603,000 to be split among electrical upgrades, HVAC replacements, parking lot repairs and various other renovations.
Vernon Hills agreed to rebate half of the sales tax H.H. Gregg would generate for up to 10 years or until the rebate was fulfilled.
Steinhafels received a similar agreement in December 2010, as the company purchased its building along Milwaukee Avenue.
“The decision to expand three years ago while our industry was in a severe retraction was not an easy one,” co-owner Gary Steinhafel said. “When evaluating the vacant 103,000 square foot EXPO Design Center building near Milwaukee Avenue and Highway 60, we realized our investment there would be significant.”
Vernon Hills agreed to rebate $600,000 to go toward interior and exterior remodeling. Steinhafels will get 40 percent of the village sales tax its generates for four years and then 41 percent in years five through seven until the rebate is paid in full.
“Receiving financial support from Vernon Hills was instrumental in our decision to expand, and we are appreciative of their support,” Steinhafel said. “The experience of dealing with the Vernon Hills village officials was positive and very professional.”
Mariano’s has been praised as the most successful of the six to enter into rebate programs. Moving into a newly developed building along Milwaukee Avenue, the Mariano’s store took the area by storm, knocking out a competitor and requiring two parking lot additions.
“About 20 years ago, this Dominick’s was perceived as the place to go that had good choices but it eventually became more generic,” Vernon Hills Finance Director Larry Nakrin said. “There were a lot of studies showing that people wanted to eat healthy and Dominick’s got further and further away from that need. Mariano’s came in and knocked it out of the park.”
Village President Roger Byrne and Village Manager Mike Allison agreed that a rebate agreement with Mariano’s was well worth it.
“They are the one company that might reach their rebate first, long before their term expires,” Allison said.
Vivian King, a spokesperson for parent company Roundy’s, said Mariano’s is pleased with its business in Vernon Hills but does not want to be associated with “government subsidies” and emphasized their landlord’s involvement with rebate program.
Bradford Reality owns the Mariano’s building and asked for just under $1 million to go toward parking lot and utilities upgrades. Bradford will get 37 percent of the village sales tax generated in the supermarket for 15 years or until the rebate is paid.
In April 2011, the former AMC Rivertree movie theater was renovated into Gordmans store. Inland Reality asked for nearly $385,000 to go toward the transformation.
“That was an enormous building,” Kalmar said. “There’s not much you can do with a movie theater. We couldn’t pass up somebody who was willing to try.”
Vernon Hills will give 75 percent of the sales tax generated by Gordmans back to Inland for 10 years or until that $385,000 is paid.
Kalmar said some people disagreed with issuing public money to help the retail sector, but inaction was riskier than making the rebate agreements.
“If these didn’t work, we wouldn’t have paid anything and our village operation would have been adjusted to meet the new revenue stream,” Kalmar said. “In all of these cases, the upfront work was paid for and if they failed and went dark, we would have modern buildings to offer future tenants.”
With performance the incentive to receive the rebate, Kalmar said the risk was on the developers.
After granting those six agreements, Vernon Hills officials said the money lost generated plenty more.
“We’re much healthier than we were in ’08, ’09, 10,” Kalmar said. “Our big boxes are filled with quality businesses and merchants. Generally speaking, we’re pretty good.”
