School dis­trict su­ing Sears

Claims it should get back mil­lions in di­verted tax money

Chicago Tribune - - CHICAGOLAND - By Robert McCop­pin rm­c­cop­pin@chicagotri­bune.com Twit­ter @RobertMcCop­pin

In more bad news for Sears, a sub­ur­ban school dis­trict is su­ing the once-mighty re­tail giant, say­ing the schools should get back some of the mil­lions of dollars in di­verted tax money be­cause Sears has vi­o­lated the agree­ment that brought its head­quar­ters to Hoff­man Es­tates.

Nearly 30 years ago, to lure Sears’ home base from Sears Tower in Chicago and keep it in Illi­nois, the re­tailer re­ceived nearly $250 mil­lion in tax breaks and in­cen­tives to move to its sprawl­ing Hoff­man Es­tates head­quar­ters.

With that deal, much of the prop­erty tax rev­enue gen­er­ated by Sears’ head of­fices in Hoff­man Es­tates went back into the devel­op­ment of the sur­round­ing Prairie Stone Busi­ness Park, near the Jane Ad­dams Toll­way at Illi­nois Route 59.

When the deal was to ex­pire in 2012, lo­cal tax­ing districts like Com­mu­nity Unit School Dis­trict 300 were sup­posed to see the full ben­e­fit of the in­creased tax base, but in­stead Sears landed an ex­tended deal with the re­newed threat of leav­ing the state.

“Sears again started scar­ing law­mak­ers with the pos­si­bil­ity of large scale job losses in the area by threat­en­ing to move its head­quar­ters out of Illi­nois,” Dis­trict 300 con­tends in the suit it filed against Sears and the vil­lage of Hoff­man Es­tates.

The law­suit says Sears and the vil­lage as­sured the school sys­tem that it would “ex­pe­ri­ence sub­stan­tial ben­e­fits with Sears’ prop­erty in the vil­lage fully back on the tax rolls.”

“Those as­sur­ances never ma­te­ri­al­ized,” the suit states.

In fact, the law­suit con­tends, Sears has bro­ken its part of the bar­gain be­cause, af­ter a series of lay­offs and store clos­ings, the Hoff­man Es­tates head­quar­ters is now pro­vid­ing fewer than the 4,250 jobs re­quired by the eco­nomic devel­op­ment agree­ment.

Dis­trict 300, with 21,000 stu­dents mostly in Al­go­nquin and Car­pen­tersville, filed suit Wednesday in Cook County.

Me­dia re­ports in­di­cated that Sears laid off 220 em­ploy­ees at its head­quar­ters in Jan­uary.

The suit cites a state­ment from the Illi­nois Depart­ment of Com­merce and Eco­nomic Op­por­tu­nity that Sears fell be­low the jobs thresh­old re­quired to qual­ify for the tax breaks. It also quotes a Sears spokesman say­ing the com­pany fell be­low the jobs floor.

The suit does not spec­ify the amount of money it seeks from Sears but in­di­cates it may be as much as all the tax breaks the com­pany has re­ceived this year.

Sears spokesman Howard Riefs is­sued a brief state­ment about the suit and two of the tax break deals it ref­er­ences: “As we have stated nu­mer­ous times over the years, the ... tax in­cen­tives are gov­erned by unique statutes and have unique job re­quire­ments. This com­plaint is with­out merit.”

But Dis­trict 300 Su­per­in­ten­dent Fred Heid said Hoff­man Es­tates’ agree­ment with Sears has also been a prob­lem for the lo­cal schools.

The dis­trict gives up an es­ti­mated $13 mil­lion a year in prop­erty tax rev­enue and gets only about $3 mil­lion a year in money gen­er­ated by the devel­op­ment area, which in­cludes the Sears Cen­tre arena, a Ca­bela’s and other busi­nesses. That’s why the dis­trict sent bus­loads of stu­dents to Spring­field to march and protest be­fore the agree­ments were made.

“Our dis­trict was very much in­volved in fight­ing against it to en­sure there were pro­vi­sions to pro­tect us and make sure we get a fair share,” Heid said. “There should be a high level of ac­count­abil­ity, and that wasn’t the case.”

Dis­trict of­fi­cials be­lieve they are owed about $29 mil­lion in past, un­jus­ti­fied tax breaks to Sears, with mil­lions more be­ing ac­cu­mu­lated this year.

The school dis­trict re­ceives about 60 per­cent of a prop­erty owner’s tax bill, mean­ing other lo­cal tax­ing bodies pre­sum­ably would be due tax re­funds as well, dis­trict of­fi­cials as­sert.

School of­fi­cials are also seek­ing an au­dit of whether Sears met its obli­ga­tions ever since the cur­rent tax in­cen­tive deals were made in 2012.

A rep­re­sen­ta­tive for the vil­lage of Hoff­man Es­tates could not im­me­di­ately be reached.

Sears threat­ened le­gal ac­tion of its own when it bat­tled the state last year over $14.8 mil­lion in tax cred­its the re­tailer claimed it was owed in 2016 be­fore it fell short of the em­ployee min­i­mum to be el­i­gi­ble for the in­cen­tive. That dis­pute was set­tled late last year with Sears get­ting the cred­its but agree­ing not to seek them for 2017.

But Sears’ woes have only deep­ened since, with a pos­si­ble bank­ruptcy fil­ing im­mi­nent. Chicago Tri­bune’s Stacy St. Clair con­trib­uted.

STACEY WESCOTT/CHICAGO TRI­BUNE

Sears re­ceived nearly $250 mil­lion in tax breaks and in­cen­tives to lo­cate its cam­pus in Hoff­man Es­tates three decades ago.

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