Skokie’s Westfield Old Orchard shopping mall will be getting a financial boost, paid by shoppers, in the form of an additional 1% sales tax at the mall.
The money will go, Skokie officials said, toward helping the mall’s corporate owners pay their Cook County property tax bill and to bring about $84 million in improvements they believe will prevent the decline that has stricken other malls.
The Skokie Village Board during its March 7 meeting voted 6 to 1 to give final approval to enter into a public/private redevelopment agreement with Westfield making the outdoors mall a “business district,” an Illinois taxing designation. It will require stores, restaurants and businesses there to charge an extra 1% sales tax that will be funneled back to the mall’s owners, the Paris-based corporation Unibail-Rodamco-Westfield.
The Village Board had voted Feb. 7 to give preliminary approval to the deal.
Under the state statute that allows for the creation of the business district, the amount of extra sales tax charged in the district can range from 0.25% to 1%, and the district can remain in place for up to 23 years, village staff said.
Several residents who addressed the board at the March 7 meeting said the mall should pay for the rehab and said the new tax is merely “corporate welfare.”
“It’s not the village’s job to keep on bailing businesses or business models afloat,” Skokie resident Matt Jarvis told the board. “If Westfield can’t compete in the market it should be forced to sell to be redeveloped.”
“Tax dollars should be focused on making brick and mortar commercial options more accessible to residents where they live and not encouraging people to commute to a mall,” he said.
Under the agreement, the $5 million generated annually by the additional 1% sales tax will be used by Westfield to carry out more than $84 million in upgrades and rehabs in the mall, the largest tax generator in the village. The state statute creating a business district includes designating the upscale outdoors mall as “blighted,” village staff said.
Mayor George Van Dusen said the new tax is essential to keep the upscale mall vibrant and competitive with online retailers and to help Westfield shoulder the property tax burden. Village officials said that of the more than 30 properties Westfield has in its North American portfolio, Old Orchard has the highest property taxes per square foot.
“I think we have a choice right now,” Van Dusen said. “We know there’s a problem. We can act and curb the problem or we can hide and put our head in the sand and pretend there isn’t a problem.
“We can avert that problem by doing our job and our job is to face the facts,” he said. “Take action. It might not be the most popular but five years from now or 10 years from now…we’ll look back and say Skokie made the investment. They made the tough decision and the benefit has reaped to the municipality in terms of property tax as well as sales tax.”
The Old Orchard mall generated about $35 million in sales taxes for the village in 2021, but due to COVID that number was down from about $50 million in previous years, village staff said. They added that currently sales tax in the village is 10.25% for retailers and 12.25% for eateries and bars, which collect an additional 2.25 percent food and beverage tax. The extra 1% tax would come on top of those rates.
Serge Khalimsky, general manager for Westfield Old Orchard, told the board that the mall is an economic liability in its present condition and that it would not be redeveloped without the money generated by the new tax.
“We’ve really collaborated very closely with Skokie and with our consultants to land at a sensible level of sales tax relative to the size of investment that we are contemplating together,” he said, adding that prior to COVID the mall had about $500 million in annual sales.
“We are looking to double that figure and in essence really double the sales tax base for the community,” he said.
Skokie staff also said that about 80% of the patrons at the mall come from outside of the north suburb so the new tax will not be a financial burden on Skokie residents.
“So then we ask ourselves, what is best for Skokie?” said Trustee Ralph Klein, who voted in favor of the tax. “When somebody else pays the freight or when we have to ask our constituents to pay the freight? We have to worry more about our Skokie residents than we do about people who are outside. That’s my take.”
But Trustee James Johnson said the village should consider lowering the amount of the new tax and also said the tax does not address the root problem at the mall.
“For me the main issue is I think there’s a fundamental mismatch here between the problem that has been identified and the solution that has been proposed,” said Johnson, who cast the lone vote against the tax. “The problem in the property tax burden, the high cost of doing business in Cook County.”
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“The solution, it doesn’t actually decrease the property tax burden for Westfield or any other business in the community, but instead kind of allows Westfield to pass on a lot of the cost of doing business to the consumers,” he added. “I think the solution doesn’t match the problem. I think there’s a mismatch policy-wise here. To me, that’s not a great sign of great policy making.”
