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Friday, Jun 5, 2009 - Posted by Rich Miller

* The problems with and questions about this specific project are legion…

The Illinois Senate on Sunday sent Gov. Pat Quinn a bill that will provide an unusual state tax benefit to the developers of a planned commercial hub at Glen Carbon.

The proposed $1.5 billion development, called University Town Center, would be funded with “sales tax revenue’’ (STAR) bonds, which would be paid off by using the sales taxes collected within the development.

More…

Holland wants to build the complex near the intersection of Interstate 270 and Illinois 157, and has plans for new restaurants, retail stores, performing arts and entertainment. Holbrook said the development would bring 10,000 construction jobs and 3,000 permanent jobs to the region. But Haine and Hoffman said they worry it will take jobs and businesses away from other metro-east communities.

More…

Supporters say the project will create 10,000 construction jobs and 3,200 permanent jobs. They argue that the taxes paid by those workers – along with construction costs and other activities – will more than make up the estimated $15 million that the state will lose from sending back the sales tax revenues to pay off the bonds.

More economic worries…

A project of this size is likely to divert business from other Madison and St. Clair businesses. Motels in the area are currently running at 54% capacity (down 24% from last year) and we have an approved hotel on hold. O’Fallon alone has more than 175 acres of Interstate-ready retail building lots that do not require government support. O’Fallon and Fairview Heights have three major furniture stores and a national electronics store sitting empty and available immediately for rent.

The prerequisite political connection…

Also involved [in the development project is] John Costello, son of U.S. Rep. Jerry Costello, D-Belleville.

Environmental concerns…

“The amendments did not change the floodplain requirement. An eligible site must be at least 600 acres and have 30 percent in the 100-year floodplain. The Glen Carbon site is 900-plus acres, 100 percent is in the 100-year floodplain. It consists entirely of jurisdictional and prior-converted wetlands, which play an important role in storing floodwaters and trapping sediment that comes from water flowing from the bluff.”[…]

“… That water will go elsewhere, not remain on site,” Andria said.

At last check, the developer had signed no contracts to actually bring any retail, hotel, etc. establishments to the site. He doesn’t even own all the land. The STAR bonds would help pay for that.

* How the bonds work: The developer will get all the state sales tax money generated by businesses in the STAR bond district. That can be used to sell bonds, which the developer can use to build both horizontal and vertical infrastructure - roads, sewers or even stores for the companies he’s luring.

* The immediate problem is obvious. A study by the Dept. of Revenue claims the state will lose $15 million a year in sales tax revenues. There’s only so much money that will be spent on retail in a given area. So some retail spending will shift to the STAR bond district, creating losers elsewhere in the region. Businesses won’t be able to relocate to the district, but as experience with TIF districts have shown, they may be able to get around that.

* And that brings me to the real problem with this legislation. The bill is specifically written for the Glen Carbon site, but laws can be changed as easily as 1-2-3 in Springfield. Rosemont is already looking at a STAR bond district. A suburban Will County town has already contacted its lobbyist about getting in on the action. Chicago would be foolish not to make a move in that direction.

TIF districts are a much abused economic development tool, but that’s local property tax money we’re talking about here, so it’s no skin off the state’s back. But this STAR bond thing is state money. How long do you think it’ll be before Mayor Daley and others decide to let their TIF districts expire and convert them to STAR bond districts? Half of Chicago, remember, is already in a TIF district.

* Imagine the budgetary consequences for Illinois in just a few short years if this thing spreads. And it will spread. That’s guaranteed. Stuff like this always spreads. Just look at Nevada. It used STAR bond districts to lure a Cabela’s (a name that is also being mentioned for the Illinois site) to Reno and a Legends casino in nearby Sparks. Legends, by the way, is also part of a Kansas City STAR bond development.

And now, Las Vegas wants in on the act…

And as Reno developers work to protect their own projects, Las Vegas businesses also are working their own deals. Harrah’s Entertainment wants a special exemption for the stadium it wants to build with STAR bonds and the city of Las Vegas wants to be able to use STAR bonds in its redevelopment areas.

Once this thing starts, it’ll never stop. Guaranteed. It won’t be long before a very large chunk of this state is in a STAR bond district, meaning that state sales tax money will be spent on local projects, meaning that the state’s budget situation will only get worse while the locals try to cannibalize each other. Mark my words.

33 Comments

- Speaking at Will - Friday, Jun 5, 09 @ 10:58 am:
== It won’t be long before a very large chunk of this state is in a STAR bond district, meaning that state sales tax money will be spent on local projects, ==

Good. The states broke already. at least in this scenario people see some results from thier state tax dollars.

- 32nd Ward Roscoe Village - Friday, Jun 5, 09 @ 10:59 am:
I have a question about when bills are sent to the governor, how many days does he have to sign it or veto it? Also, if the bill has passed both houses, how long does the legislature have to send it to the governor? I tried to find the answers to both in the unhelpful online legislative guide to no avail. Thanks.

- N'ville - Friday, Jun 5, 09 @ 11:04 am:
The GA has 30 days to send a bill to the Governor. The Governor then has 60 days to act. If he does not act on the legislation, it becomes law on the 61st day. We have a “pocket signature” in Illinois, instead of a “pocket veto”.

- Scooby - Friday, Jun 5, 09 @ 11:04 am:
The GA has 30 days to send the bills to the Governor, who then has 60 days to act on them.

- job killer - Friday, Jun 5, 09 @ 11:04 am:
Rich, Your right, this is one of the worst bills ever. Reis - Stephens - and McCarter were the only ones who get it and spoke out in opposition. Those of us who surround this project are going to suffer for years. Illinois needs to focus on the real problems of job loss like workers comp and high taxes.

- wordslinger - Friday, Jun 5, 09 @ 11:04 am:
What a monster. Gouge your existing businesses and take state sales tax money to back bonds for insider private developers. Environmental problems and no voter input, to boot.

I guess the game is played the same way all over the state.

I’d be curious to see what other revenues the local backers are planning to use to secure the bonds. Future sales tax revenues from some pie-in-the-sky development is not going to cut it, especially now. Looking at the bill synopsis, there was some mention of using existing TIF funds.

- soccermom - Friday, Jun 5, 09 @ 11:06 am:
Look, up in the sky! It’s a bird! It’s a plane! It’s Super-TIF!

Veto, PLEASE!

- jeff - Friday, Jun 5, 09 @ 11:18 am:
I predict in 2 years that Rich will be writing about STAR bonds as much as Ben Jovarksy has been writing about TIFs in Chicago. Once they learn how little the public understands how they work the cash register starts ringing.

- Marty - Friday, Jun 5, 09 @ 11:37 am:
Rich is absolutely correct, this is atrocious in so many ways…

- Objective Dem - Friday, Jun 5, 09 @ 11:44 am:
Sounds like the bottom line is the developers are trying to have the extra cost associated with building in the floodplain paid for by the government.

I’m sure there is a lot of good land around outside the floodplain that wouldn’t require this subsidy.

Filling in this much floodplain would likely have some ramifications down stream - which means other Illinois communities. I wonder what that will cost us down the road.

A quick guess is the developer bought the land at “swamp land” prices. Now they will sell at full market rate. They will make a lot of money off this deal.

Plus as you point out the precedent that will be set with STAR.

This is truly ranks as one of the worse pieces of legislation ever.

- winco - Friday, Jun 5, 09 @ 11:47 am:
I gather the local portions of the sales tax is not affected? The problem with this (assuming it expands as reasonably predicted), and with TIF, is that the taxing bodies most affected would not have input as to who gets to give away their tax revenue (school districts with the TIF, the state here).

- VanillaMan - Friday, Jun 5, 09 @ 11:49 am:
The legislation not only stinks, but everyone who crafted it and supported it are stinkers too and we should hold each of them up for ridicule. You know how well digust, shame and ridicule works as a deterrent for Illinois politicians.

- moron - Friday, Jun 5, 09 @ 11:51 am:
This is an end-around to Article VIII of our state constitution’s which mandates a balanced budget and prohibits deficit spending. From a taxpayer’s perspective, spending money you don’t have and spending the tax revenue of the future today are indistinguishable.

- vole - Friday, Jun 5, 09 @ 11:54 am:
Crony capitalism of the Texas kind. Obviously, this ain’t for the “jobs”. Follow the money.

- Jake from Elwood - Friday, Jun 5, 09 @ 11:55 am:
Hmm. . .a sales tax TIF. Not a good idea. But it is no better or worse than the existing TIF law. In either case, developers and municipalities join forces to extract monies from other units of local government (school districts, townships, special districts, and now, the state). New developments are built that compete with existing businesses. TIF and STAR are equally oppressive development incentives. The taxpayers lose again.

- moron - Friday, Jun 5, 09 @ 11:57 am:
I know that time travel is impossible because, if it did, we could travel to the future, steal a bunch of money, bring it back to the present, and solve all our problems, but we have lots of problems, so I know that time travel is impossible.

- moron - Friday, Jun 5, 09 @ 12:02 pm:
Already under our existing state TIF laws, local sales taxes may be captured in TIF districts, but to date Chicago has not got involved in that game, because if they did someone from the state would be entitled to a seat on their shadowy rubber-stamp TIF Review Boards, and the City would lose absolute control.

- moron - Friday, Jun 5, 09 @ 12:09 pm:
Senate SB1909 51 YEAS 4 NAYS 1 PRESENT
Y Althoff Y Delgado Y Hunter Y Martinez Y Rutherford
Y Bivins Y Demuzio Y Hutchinson Y McCarter Y Sandoval
Y Bomke Y Dillard Y Jacobs Y Meeks Y Schoenberg
Y Bond N Duffy Y Jones, E. Y Millner Y Silverstein
NV Brady Y Forby Y Jones, J. Y Munoz Y Steans
N Burzynski Y Frerichs Y Koehler N Murphy Y Sullivan
Y Clayborne N Garrett Y Kotowski Y Noland Y Syverson
Y Collins Y Haine Y Lauzen Y Pankau Y Trotter
Y Cronin P Harmon NV Lightford NV Radogno Y Viverito
Y Crotty Y Hendon Y Link Y Raoul Y Wilhelmi
Y Dahl Y Holmes Y Luechtefeld Y Righter Y Mr. President
Y DeLeo Y Hultgren Y Maloney Y Risinger

- moron - Friday, Jun 5, 09 @ 12:13 pm:
HOUSE ROLL CALL
SENATE BILL 1909
78 YEAS 39 NAYS 0 PRESENT
Y Acevedo Y Davis,Monique Y Jefferson Y Reboletti
Y Arroyo Y Davis,William N Joyce N Reis
Y Bassi Y DeLuca N Kosel Y Reitz
Y Beaubien Y Dugan Y Lang Y Riley
Y Beiser Y Dunkin Y Leitch Y Rita
N Bellock N Durkin Y Lyons N Rose
Y Berrios Y Eddy Y Mathias N Ryg
Y Biggins N Farnham N Mautino Y Sacia
Y Black N Feigenholtz N May Y Saviano
Y Boland N Flider N McAsey N Schmitz
Y Bost E Flowers Y McAuliffe Y Senger
Y Bradley Y Ford N McCarthy Y Smith
Y Brady N Fortner Y McGuire Y Sommer
Y Brauer N Franks N Mell Y Soto
N Brosnahan N Fritchey Y Mendoza N Stephens
Y Burke N Froehlich Y Miller Y Sullivan
Y Burns Y Golar Y Mitchell,Bill Y Thapedi
N Cavaletto Y Gordon,Careen Y Mitchell,Jerry
Y Tracy
Y Chapa LaVia N Gordon,Jehan Y Moffitt Y Tryon
Y Coladipietro Y Graham N Mulligan Y Turner
N Cole N Hamos Y Myers Y Verschoore
Y Collins Y Hannig N Nekritz N Wait
Y Colvin Y Harris Y Osmond N Walker
Y Connelly N Hatcher N Osterman Y Washington
N Coulson Y Hernandez Y Phelps Y Watson
N Crespo Y Hoffman N Pihos N Winters
N Cross Y Holbrook Y Poe Y Yarbrough
Y Cultra Y Howard Y Pritchard Y Zalewski
N Currie Y Jackson Y Ramey Y Mr. Speaker
Y D’Amico N Jakobsson

- Cal Skinner - Friday, Jun 5, 09 @ 12:13 pm:
Potentially worse that TIF districts.

I though letting TIF districts get the increase in sales tax had been repealed because it cost too much money.

Now that you’re looking at tax holes, how much has John Sullivan’s ethanol subsidy (mainly to ADM) cost so far?

- Ghost - Friday, Jun 5, 09 @ 1:04 pm:
I just want a PTAR, let me keep myprioperty taxes and use them to um, sell bonds to develope my house! it will add thousands in constructions jobs and create jobs for workers to take care of the new facilties.

- Moderate REpub - Friday, Jun 5, 09 @ 1:24 pm:
The “master developer” language is what gets me.

The master developer must own or control 50% of the property prior to May 26, 2009. Districts may only be created in a specific location outside of Glen Carbon Illinois, in the Metro-East.

So basically this is legislation crafted to financially benefit 1 person (Holland). How is this constitutional?

- The Doc - Friday, Jun 5, 09 @ 1:25 pm:
Cal, I believe that is exactly how TIFs operate - collecting all of the increased sales tax revenue beginning on the date the TIF was established for a period of 23 years (or so).

- moron - Friday, Jun 5, 09 @ 1:38 pm:
A fair bit of cross-aisle support. Finally, a political consensus arises on how to fund capital projects! Can we do the whole capital budget this way, bonding out the sales tax of the future? It seems like a politically feasible approach anyway.

This is yer proverbial camel’s nose.

- moron - Friday, Jun 5, 09 @ 1:49 pm:
Holland Construction Services president Bruce Holland and area politicians announce plans for the massive University Town Center development in Glen Carbon.

http://videos.bnd.com/vmix_hosted_apps/p/media?id=3523471

- moron - Friday, Jun 5, 09 @ 1:53 pm:
sort makes you wonder what ELSE happened Sunday…

- fed up - Friday, Jun 5, 09 @ 3:00 pm:
TIFS are destroying Chicago Mayor daley diverts property tax money from paying operating expenses to paying his developer buddys via TIFS then claims the city is broke. Sales taxneeds to be used for its intended purpose not freebie loans to developers. If its worth building developers will build it without a handout.

- moron - Friday, Jun 5, 09 @ 3:11 pm:
Maybe every developer in the state won’t notice the deal Holland got and won’t ask, “Where’s mine?”

The race to the bottom starts when Quinn signs this.

- 3 beers to springfield - Friday, Jun 5, 09 @ 4:08 pm:
Cal Skinner is correct. The State eliminated sales tax TIFs because the State was giving up too much revenue. A few sales tax TIFs are allowed to recapture a portion of state sales tax to pay off bonds sold before a certain date. Do the developers realize that the owners of all buildings in the 100-year flood plain will have to purchase flood insurance no matter how much fill they haul in? Also, has the Corps of Engineers approved filling this land?

- Angry Chicagoan - Friday, Jun 5, 09 @ 6:31 pm:
So all the legislature can agree on is things that are truly reprehensible. Sad.

- Anon - Friday, Jun 5, 09 @ 6:58 pm:
As a local municipal official involved in economic development matters, I can attest to the fact that the state of IL does little, if anything, to assist with economic development. There is no statewide policy on economic development and I challenge anyone to tell me what the state priorities are in this regard. The state of IL has done more to chase away business than they have to attract it, leaving the locals on their own to do the best they can. Sure TIF is abused by some, but it used for a lot good projects as well. Let’s not throw the baby out with the bath water. As for STAR, sure there is potential for growth, but why should only local taxes be included in the kitty? The state stands to benefit from the jobs and tax revenue that are generated by these projects. I know what my local sales tax dollars pay for. I have no idea what my state sales tax dollars (which are 5X the municipal share) are used for.

- Vote Quimby! - Saturday, Jun 6, 09 @ 10:21 pm:
And we just added a .25 cent sales tax to repair the levees protecting this area! This drives me friggin nuts! If Quinn signs this, I will not only be disappointed in him but I will explore moving to Missouri

- Heartsick in the Metro-East - Sunday, Jun 7, 09 @ 10:01 pm:
Another aspect of this that’s frustrating is that tax-advantaged schemes to promote development, like TIFs, are supposed to help people in blighted areas. That’s a noble idea–but has anybody driven through GC and Edwardsville lately? Construction has boomed throughout the region for years, taking out woods, the county nursing home, publicly accessible soccer fields to put in more crappy chain restaurants. Now it looks like they’ll eliminate farmland and a pick-your-own berry patch.

Let us keep our green space and someplace for the fricking floodwaters to go. It’s all slowly breaking my heart.

Thanks for the post, Rich.

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