An Atlanta-based supplier with a fulfillment center in Waukegan is on track to receive an estimated $750,000 in sales tax dollars under an economic incentive agreement extended Thursday evening, a city attorney said.
The extension, which will keep 2014 agreement in place past a June expiration date and through the end of the 2020-21 budget year, was approved in a 5-4 vote.
Under the extended agreement, HD Supply promises to keep its presence in Waukegan in exchange for 50% of the city’s share of sales tax. The company also agrees to have at least 15% of its employees be Waukegan residents or to work with the Job Center of Lake County in an effort to meet that threshold.
HD Supply reached the original agreement with the city in October 2014, shortly before the company’s lease was set to expire. The Waukegan City Council had voted in November to extend the agreement to June so that an alternative deal could be negotiated.
That hasn’t happened because HD Supply was in the midst of a corporate restructuring until relatively recently, city attorney Bob Long said. Then, the coronavirus pandemic hit.
The extension approved Thursday carries the 2014 terms forward through April 30, 2021. The extension is worth an estimated $750,000 for the coming budget year, Long said, citing numbers that do not take into consideration any impacts, positive or negative, from the COVID-19 pandemic.
Ald. Ann Taylor, who opposed the extension along with Ald. Keith Turner, Felix Rivera and Lynn Florian, said she doesn’t oppose tax rebates in general, but has concerns about this one.
“We have to be very careful when we give these out, especially in light of not receiving the income that we’re going to need or the revenues that we should this year,” Taylor said, referencing the financial hit the city expects to take as a result of the novel coronavirus.
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The Waukegan City Council hasn’t received any formal estimates on how large the impact could be, but Mayor Sam Cunningham put lost revenue very roughly at $10 to $12 million in a Facebook Live town hall hosted by the city of Aurora Thursday.
The city had projected $185 million in revenue across all of its funds, including $76 million for its general fund, according to the 2020-21 budget approved earlier this month.
Cunningham and Finance Director Tina Smigielski have said it will be a while before the city really knows what the impact will be, pointing to pushed back tax deadlines and the hits the city’s pension systems could take.
Ald. Greg Moisio, who voted for the extension, said he knows the deal is “a bitter pill to swallow,” but the city has to ensure it has the money to pay its bills, including the raises laid out in union contracts unanimously approved by the council.
“There’s going to be more of these sales tax rebates coming down the pike in my opinion,” Moisio said. “Municipalities are going to be in competition, fierce competition, for the exact thing that this HD Supply does. It’s a call center. It fulfills orders. It’s actually still operational.”
Moisio said the city doesn’t know how many of its businesses will survive Gov. J.B. Pritzker’s stay-at-home order, which has closed many businesses across the state, but not HD Supply.
If the city is going to agree to sales tax rebate deals like the one with HD Supply, Taylor said she wants to see what the city will be getting for its money. Neither the original agreement nor the extension require HD Supply to purchase a site, Taylor said, a concern also echoed by Rivera.
An attempt to reach a company spokesman Friday was unsuccessful.
“I feel like there’s other businesses who have committed to our community that right now suffering, so I’m a little leery to give a tax rebate to a business that has had one for five years,” Taylor said.
Turner also pointed to the seven residents who had reached out during the council’s public comment period to ask for rental and other financial assistance.
“If these folks get a tax holiday or a tax payment, then why doesn’t everyone else?” Turner said. “We have numerous people who are out of work, nobody is talking about giving them a tax refund or anything of that nature. … We know we can’t help them and we’re not going to, so why would we give away money to this business?”
Cunningham said any aldermen with businesses with which they would like to see the city negotiate an agreement can send the businesses’ names to his office.
Ald. Edith Newsome said she, too, had concerns but this time next year, if negotiations don’t result in a deal the council feels is beneficial to the city, it can make a decision not to enter into another agreement.