Skokie lawmakers are poised to take an unprecedented step to pump greater economic life into Westfield Old Orchard Shopping Center, despite the concerns of one Skokie lawmaker who said it’s an inappropriate use of taxpayer money.
“We’ve never allowed any commercial area to operate under a different sales tax than everywhere else in town,” said trustee James Johnson. “I’m going to be voting against it.”
The Skokie Village Board is scheduled to take a preliminary Feb. 7 vote on making the mall a “business district,” a classification that would allow businesses there to charge an extra 1% sales tax, according to documents. The revenue generated could be used to reinvest in and reinvigorate the mall, said Len Becker, Skokie economic development specialist.
If passed on Feb. 7, the board will take a final vote on the proposal in March.
“By doing so, this local tool will finance and facilitate development and redevelopment of the remainder of the (shopping) center to attract new and retain existing retail and restaurants to this important village property, sales tax generator and employment center,” Becker wrote to the Village Board in a Jan. 6 memo.
Old Orchard has been and remains the largest sales tax generator in the village and also pays tens of million of dollars in property taxes. If created, the business district would help ease the property tax burden at the mall, officials said.
The current sales tax in the village is 10.25 percent for retailers. Restaurants, bars and eateries collected an additional 2.25 percent food and beverage tax.
The Old Orchard mall generated about $35 million in sales tax revenues for Skokie in 2021, but due to COVID that number was down from about $50 million in previous years, Becker said in an interview. He said if the new business district is created, a predicted $5 million generated by the additional 1% sales tax would be used by Westfield to do about $120 million in upgrades and rehabs in the mall.
But Johnson, the trustee, said the mall is making money and that designating it a “business district” is unnecessary.
“This is a tool that is intended to be used for ‘blighted areas,'” he said. “The Old Orchard shopping center in the most commercially successful area in all of Skokie.”
According to Becker’s memo, the property tax burden at Old Orchard “is significantly higher than the national industry average of 12 percent.”
He said the timing of the effort is critically important as a result of the rapidly changing retail landscape combined with regional opportunities from the demise of other centers exacerbated by COVID.
“As such, Old Orchard sits at the precipice of a generational opportunity to become one of the top five regional centers in the U.S.,” he said.
The proposed business district is comprised of over 1.7 million square feet of commercial development that includes large retailers such as Macy’s, Nordstrom, and Bloomingdale’s, the memo says. It says other uses include national chain and smaller independent retailers, restaurants, offices, open areas, recreation and entertainment uses.
According to the memo, Old Orchard originally opened in 1956, and retailers struggled in the 1980s an 1990s.
In 1991, new ownership undertook a major investment in the center, which included the demolition of the Montgomery Ward store to make room for a 200,000 square foot Nordstrom store as well as 100,000 square feet for the addition of 62 new stores. Since that time, the center experienced a modest renovation in 2007. and since then, no significant investment has occurred within the center, the memo said. The mall had about $360 million in sales in 2021.
The memo said the center is beginning to experience larger and longer vacancies due to current retail market trends and the obsolete design of the center, and that Westfield has also provided evidence confirming “deterioration of interior and exterior site improvements due to deferred capital investment throughout the center, and an overall decline in Equalized Assessed Valuation.”
But Johnson said the proposal is simply “a public private partnership to help boost sales tax revenue at the mall.”
“I think it’s a misuse of this tool,” he said. “I don’t think it’s really equitable for us to work to relieve the property tax burden faced by Old Orchard in a way that doesn’t ease the burden for all the other businesses in the community.”
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