Sears settles suit with school district over tax breaks

Retailer accused of not maintaining job numbers at HQ

A suburban school district will get $2 million to settle part of a lawsuit with the former parent company of Sears over claims that the bankrupt retailer failed to maintain the promised number of jobs in exchange for tax breaks at its headquarters in Hoffman Estates.

Sears Holdings Corp. will get $5 million out of the agreement, and Community Unit School District 300 in Algonquin still may sue to get past or future compensation from a lucrative but disputed property tax fund, the district’s attorney, Ken Florey, said.

“The settlement is a good settlement for District 300,” Florey said. “It’s a settlement that all parties involved can accept.”

The money at stake comes from an economic development area that was created to attract Sears to the site from the Sears Tower in Chicago in 1989, and renewed in 2012.

The deal gave tax breaks and reimbursements to Sears to develop the largely vacant site, using property tax increases resulting from the development, similar to a tax increment financing, or TIF, district. In this case, 13 taxing bodies also shared 45% of the tax proceeds.

In return, Sears was required to maintain a certain number of jobs at the site.

But the giant retailer ran into losses and filed for bankruptcy in 2018. Just before it did, District 300 filed suit against Sears in Cook County Circuit Court, claiming it was owed money because Sears did not maintain the required 4,250 jobs on site.

Sears responded that it did maintain enough jobs when counting contractors and other workers on the site.

Under the negotiated agreement, Sears gets part of the money it was originally due as developer of the site, Florey said, while the school district gets back a chunk of what it would have made from property taxes if there was no economic development agreement. The money was on hold because of Sears’ bankruptcy case.

The deal only applies to proceeds from 2017. The deal for the Economic Development Area runs through 2027, and Florey said the dispute over proceeds from other years remains to be litigated in state court before Judge Celia Gamrath.

The fund generated $17 million from 2017 alone, according to village figures, and generally had increased annually until Sears’ downturn in recent years. The site contains the Sears Centre Arena, a Cabela’s, a Marriott hotel, and a Holiday Inn under construction.

District 300 is one of the taxing bodies in the development area, though none of its schools are located in it. It is the sixth largest district in the state based on an enrollment of about 21,000 students, and includes Algonquin, Carpentersville and Hampshire.

Sears did not respond to requests for comment.

The village of Hoffman Estates receives and distributes the tax funds. Its board is scheduled to meet Monday to vote on approving the disbursement, following the court order.

Other taxing bodies that receive funds from the economic development area fund include Hoffman Estates Park District, Elgin Community College, Elgin School District U-46, and Cook County.