Suburban communities add business district taxes but what are developers doing with the money?

A number of Chicago suburbs have instituted business district taxes that partially funnel money to developers:

The business district tax is becoming more common as municipalities struggle to recover from the Great Recession and loss of shoppers to the Internet. Leaders in both Roselle and Villa Park initiated 1 percent business district taxes within the past year, the maximum rate on districts that cannot exceed 1 square mile. In some suburban locations, the additional business district tax can raise the sales tax to 9.25 percent, equal to the sales tax in Chicago…

Bloomingdale has two such districts. One adds a 1 percent sales tax to purchases inside Stratford Square and another adds the same percentage at Indian Lakes Resort, where it’s used to help pay off $4.8 million in village-issued debt that went to the resort for improvements…

Last year, the village paid the owners of the mall $1,199,151, which is more than 95 percent of all the money generated by the business district tax. Since the tax was implemented, the village has paid the mall owner more than $8 million. According to village finance records, the mall owner still is owed more than $11 million…

Lombard has a similar deal with its mall owner. The village instituted a 1 percent business district tax almost a decade ago. It helps push the sales tax rate at Yorktown Center mall to 9.25 percent.

Lombard’s deal allows up to $25 million in business district taxes to be rebated to Yorktown’s owner through 2024, in exchange for an addition that was built onto the mall where an abandoned Montgomery Ward once stood. So far, the mall’s owner has received almost $4.2 million from the business tax…

Taxpayers in Oakbrook Terrace are the ones with skin in the game. The city borrowed nearly $8.2 million to spur development of the Oakbrook Terrace Square Shopping Center. City officials did not return calls seeking comment about the city’s stake in the shopping center. However, according to the city’s budget documents, the investment has yet to pay off.

Given the problems facing the American shopping mall as well as the financial difficulties facing many suburbs, perhaps these suburbs think such taxes are necessary to help keep sales tax generators in the community. Yet, if the extra money generated is given to developers who then line their own pockets, how much is the local taxpayer helped? This raises similar questions to giving corporations tax breaks to locate their headquarters or facilities in suburban communities. Few politicians or residents want to lose a potential tax revenue generator – especially a large shopping mall, even if they are relatively ugly and detract from local businesses given their reliance on chain stores – but there is often little public discussion of the trade-offs involved with the tax breaks.

Are there suburban shopping centers that don’t have such a tax and if not, do they advertise to this effect?

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