As chief financial officer for one of Illinois’s largest school districts, Cheryl Crates watches the money.
Early this year, she was counting on $14 million more rolling in for Community Unit District 300, after the expiration of a tax break at Sears Holdings’ 800-acre headquarters in Hoffman Estates; it is the Sears corporate campus, which includes an on-site auto center, walking trails and even a hair salon for employees. When Crates met with Hoffman Estates officials in March, she learned the money might not be coming after all because the tax break might not expire.
“I cried,” Crates said. “The school district has cut for the last two years. We’ve had no wage increases, and we were planning on that revenue to bring down our class sizes. We have one algebra class with 47 students. It was devastating.”
Crates and her school district had suddenly found themselves at the epicenter of Illinois’s latest political and financial crisis, described by one lawmaker as round-robin blackmail among Midwestern states. Unless Illinois agreed to extend the tax break, Sears threatened to leave. The state of Ohio, for one, dangled $400 million in tax incentives as a lure.
But when lawmakers agree to corporate demands for property tax relief, they induce strain on the financial stability of schools, local governments, libraries and parks that rely on those taxes as their most stable form of revenue. The State of Illinois, with $3 billion in unpaid bills, has already disrupted local governments’ revenue streams, often delivering payments to schools at least four months behind schedule.
So when Crates and her colleagues learned in March that Sears might win an extension of its tax break, they followed the lead of many corporations with well-connected lobbyists. They began a fierce campaign.
At first, the district wasn’t even involved in discussions about the bill. The village of Hoffman Estates oversees the distribution of the Sears property tax revenue. Village officials did not mention that they had helped write and introduce legislation to extend the tax break until months after they did so, according to Crates. “I was dumbfounded that a public agency like ourselves, right next door, didn’t bother to tell us and tried in the middle of the night to pass legislation without telling us,” Crates said.
The Hoffman Estates mayor, William McLeod, disputed Crates’s account. He said that school officials knew early on that the village supported Sears’s efforts to lengthen the life of the tax break.
“Rather than complaining, they should be happy to be getting $6 million” under the compromise, McLeod said of the school district. “They’ve been very boorish, very rude. Some people just roll that way. They’ve got to learn to wear their big-boy and big-girl pants.”
To fight the bill, the school district enlisted parents and students in a door-to-door campaign, bused them to Springfield for a rally outside the Capitol and circulated the names and phone numbers of legislators. A public spat ensued, with school officials openly disparaging what they saw as a back-room deal and village leaders accusing them of spreading lies.
Finally, last month, school officials landed a seat at a wide conference table in the House Speaker Michael Madigan’s office to negotiate the bill that finally passed on Tuesday. Over nearly six hours, Sears, the village of Hoffman Estates and the school district hammered out a compromise. Statewide, more school districts are finding themselves in similar situations, carefully balancing the risks of a public controversy against the reality of lost revenue.
Hundreds of school districts filed objections to property-tax reductions sought by businesses claiming their property was overassessed. Data from the Illinois Property Tax Appeal Board, compiled for The Chicago News Cooperative, show 566 cases in which districts intervened to protest tax breaks in their neighborhoods last year.
Sears was given an incentive in 1989 that froze the property value at its corporate headquarters, allowing it to use that savings for redevelopment within the campus. For purposes of tax assessments, the property value has remained unchanged.
District 300, Crates’s district, which operates 17 elementary schools, 6 middle schools and 3 high schools in the northwest suburbs, has waited more than 20 years to get full tax revenues from the Sears property.
Development came at a slower pace than the company expected. Sears still owes $125 million on infrastructure projects in the surrounding industrial park. So it lobbied hard to keep the tax break in place at least until it could pay off the bonds.
Meanwhile, the school district has been cutting its spending.
“Nobody around here has cut as much as we have,” Crates said. “Our neighboring high school district spends $5,000 more per student than we can,” she added.
“We were always told, ‘You wait 23 years, and you will have some tax money,’ That was our rainbow.”
Under the bill, which is headed to Gov. Pat Quinn, who is expected to sign it. Sears will get another 15 years of frozen property values, but it will double the amount of money it gives annually to the school district, from $2.9 million to nearly $6 million. The district’s budget is about $200 million annually.
“It’s a system that’s broken. Everyone is trying to pay the least amount of taxes they possibly can,” said Fran LaBella, who oversees business services for southwest suburban Evergreen Park Elementary School District 124.
Several years ago, the district decided to fight a property tax break requested by the area’s biggest payer, the Plaza shopping mall. The case is still pending before the Illinois Property Tax Appeal Board. If the mall owner is successful, the school district will lose about $300,000 annually. “You have to fight for your tax base,” LaBella said.
The House Democratic leader, Barbara Flynn Currie, questioned whether the state should keep bending to satisfy threats from businesses entertaining other offers.
“Do we respond or do we just say goodbye? Or do we even call their bluff?” she asked. “I mean, sometimes I think we should start calling the occasional bluff and say: ‘Wait a minute. Is this for real?’ Because the costs of moving are certainly significant.”