When a suburb doesn’t support the big tax break supported office park

An interesting story is brewing in Hoffman Estates where the State of Illinois wants to keep the Sears headquarters by continuing a major tax break but the local school district and some in the community don’t want to live with the reduced tax revenue for years to come. Central to the story: the tax break didn’t help fill up the 780 acre office park, leading to less tax revenue than expected even with Sears located there.

Instead, two decades after the special taxing area was created, some 200 acres remain undeveloped in the 780-acre park anchored by Sears Holdings Corp.’s headquarters. A swath of land that was supposed to generate $50 million in property taxes in 2012 raised only $25 million in the past tax year…

The ambitious project’s inception came at the pinnacle of “euphoria” over a booming commercial real estate market, said John McDonald, who teaches land economics and real estate at Roosevelt University. But that party ended with the economic slowdown of the early 1990s, and the market, he said, has not rebounded. There is no “desperate need for office space anywhere right now,” he said…

The inability of the park to pull in the predicted revenues underlies the battle over Sears’ future. The fight has largely centered on Community Unit School District 300, a financially strapped taxing body whose officials claimed it stood to lose more than $10 million in revenue per year under the original plan to extend the taxing area’s term.

The parties and legislators are continuing to discuss whether Sears would be required to keep some 4,000 of the roughly 6,100 jobs at its headquarters well into the future. The potential consequences should the company not meet that condition remain unclear, said Hoffman Estates Corporation Counsel Arthur Janura.

Typically, suburbs are thought to be in favor of these tax breaks as it helps lure new businesses to town. However, this situation is a cautionary tale about tax breaks: just because one is granted doesn’t necessarily mean that businesses will necessarily move in. If everyone is building big industrial or office parks and offering tax breaks, can everyone win? And in an era of falling tax revenue and rising costs, suburbs need to maximize their assets.

Of course, the State of Illinois will look really bad if Sears leaves as it will feed a (growing?) narrative that Illinois is generally bad for business. It will be fascinating to see how the State and Hoffman Estates come to some sort of agreement that everyone can live with.