Mayors expected to issue protest letter over STAR bonds proposal

Ann Knef Jan. 20, 2010, 6:46am



A group of Metro-East mayors will be calling on state law makers to reject legislation that would funnel state sales tax to developers of a 900-acre retail development in Glen Carbon.

Approximately 15 mayors, including Mark Eckert of Belleville, Gail Mitchell of Fairview Heights, Gary Niebur of Edwardsville, Tom Caraker of Troy, Gary Graham of O'Fallon and Jim Vernier of Shiloh, are expected to sign a joint letter of protest over sales tax and revenue (STAR) bonds legislation under consideration in Springfield.

In a draft letter obtained by the Record, mayors say the proposal is "at best questionable public policy."

"This is not about competition or a development – it is about the granting of a developer/development unprecedented public sales tax assistance from the State of Illinois that will subsidize private businesses to the extent that existing and future business simply cannot compete against," the draft states.

A new STAR bonds proposal was tacked onto the Mental Health and Development Disabilities Act (S.B. 2093) as a House amendment by State Rep. Tom Holbrook on Jan. 11 to resuscitate a stand alone bill that foundered after Gov. Pat Quinn stamped it with an amendatory veto last year. The original bill would have captured at least $15 million a year in state sales tax, of which 100 percent would have gone to UTC developers, including Bruce Holland of Holland Construction and John Costello, son of U.S. Rep. Jerry Costello (D-Belleville).

Holbrook's amendment would collect sales tax generated by the larger destination and entertainment tenants at University Town Center (UTC) and channel all of it to developers, but collect no sales tax from smaller tenants. It also would redistribute property taxes to offset the loss of sales tax revenues attributable to the STAR bonds district for municipalities and counties within 12 miles of the district.

In the letter, the mayors state they are not opposed to the development, but that they "have serious concerns and remain opposed to the legislation" as written.

"It would be irresponsible and we would be derelict in our duties to our residents, businesses and communities if we simply go along and be silent on legislation that is at best, questionable public policy," the draft states. "The result of passage of this legislation will create a playing field that is very unlevel and that will be detrimental to development in other areas of the region."

The draft letter urges legislators to vote against the measure, but if the state proceeds with passage of the bill, the mayors recommend:

  • The bill be re-filed as a stand alone bill;

  • The Illinois Department of Revenue issue a new fiscal note and the Governor's Office and Management and Budget issue a new balanced budget note, and that no action is taken until then;

  • The use of sales tax be limited to clearly defined public improvements;

  • The number of destination users be limited to six in addition to one destination entertainment user. Sales tax funds for destination users will be retained by the state and will not be allocated to the STAR bonds fund;

  • The legislation permits a STAR bond municipality to enact an additional 1% sales tax on the development. If that authority remains in the bill the same authority should be granted all non home rule municipalities;

  • The legislation permits a STAR bond municipality to enact a 1% property tax increase on all property within the boundaries of the district. If that authority is granted by the legislation then the same authority should be granted to all communities on retail developments;

  • The state should establish a fair and reasonable dollar amount cap annually and cumulatively on the amount of state sales tax that can be deferred to the STAR bond fund. Once that dollar amount of state incentive is attained, the balance of state sales tax generated in any given year, or when the overall cap is reached, will be deposited in the state's general fund; and

  • Funding for the proposed STAR Bond Community Fund should be from a portion of the sales tax generated within the boundaries and not property tax as proposed.

    Lawmakers in the House return to Springfield on Feb. 3. The Senate resumes its session on Feb. 8.

    The mayors' draft letter indicates that the overall incentive over the life of the STAR bonds district on just three destination retailers could exceed $500 million.

    "The State of Illinois is reportedly over $11 billion in debt and the debt is growing every day," the draft states. "The financial challenges have led to failure in funding education to the level of constitutional requirement, failure to pay state bills including reimbursements to educational institutions, local government entities, hospitals, medical reimbursements, and other critical services.

    "Economic development and job creation is critical and the state's support of those goals is vital, however, the state must receive at least a portion of the financial benefit through fair and reasonable programs and initiatives."

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