Mayors opposing STAR bonds say legislation would drain tax bases

Ann Knef Feb. 5, 2010, 1:00am


The Southwestern Illinois Council of Mayors is telling state legislators to vote against a bill that would funnel sales tax to developers of a 900-acre retail project in Glen Carbon.

A letter sent Feb. 3 to members of the House Revenue and Finance Committee and regional legislators objects to a proposed sales tax and revenue (STAR) bond bill pending in Springfield.

The bill would support development of a project known as University Town Center (UTC).

Mayors say the legislation could divert up to $500 million of sales tax to one development "at a time when the State struggles with a $13 billion debt, inadequate education funding and delayed reimbursements to hospitals and other critical services."

They object to a number of provisions in the bill which they say threaten to drain tax bases of neighboring cities and villages.

The council is led by President Kevin Hutchison of Columbia, Vice President Ray Muniz of St. Jacob, Treasurer John Hamm of Madison and Secretary Jerry Daugherty of Mascoutah.

Last year, UTC developers Bruce Holland of Holland Construction and John Costello, son of U.S. Rep. Jerry Costello, were able to secure passage of a bill diverting the mall's sales tax receipts, at least $15 million a year, from the state treasury to pay for a broad range of mall expenditures.

The bill's sponsors, including State Rep. Tom Holbrook (D-Belleville) and State Sen. James Clayborne (D-Belleville), have said the project would create 10,000 new jobs.

Illinois Department of Revenue Director Brian Hamer opposed the bill last year.

He predicted "cannibalization," warning that the mall wouldn't create new sales but would only capture sales from other stores.

Hamer supplied evidence that in six years, a similar mall near Kansas City wiped out a third of Kansas furniture stores within 150 miles.

Gov. Pat Quinn heeded Hamer's advice halfway, signing an amendatory veto that would have split sales taxes between the state and the mall.

That didn't satisfy the developers, who let the bill die.

After they introduced a similar bill this year, city and county officials started worrying.

The mayors say they recognize that development in one municipality is a "win-win" for an entire metropolitan area.

"But, mayors in the four-county area object to the fact that STAR bond legislation is limited to a narrowly defined development area, eliminating opportunities for other developments, existing and new businesses, and neighboring communities to compete," the letter states.

Other members of the mayors' council are: Jeff Hurst-Alhambra; Tom Hoechst-Alton; Mark Eckert-Belleville; Steve Bryant-Bethalto; John Miller-Collinsville; Ronnie Dell-Dupo; Fred Bright-East Alton; Herbert Simmons-East Carondelet; Alvin Parks-East St Louis; Gary Niebur-Edwardsville; Gail Mitchell-Fairview Heights; Raymond Danford-Freeburg ; Robert Jackstadt-Glen Carbon; Mike McCorrmick-Godfrey; Ed Hagnauer-Granite City; Ken Zobrist-Grantfork; Ron Mulach-Hamel; James Spann-Hartford; Charles Kujawski-Hecker; Joe Michaelis-Highland; Yvonne Hartmann-Jerseyville; John Deppe-Marine; Larry Gulledge-Maryville; Jerry Cross-Marissa; Weldon Harber-Millstadt; Gary Kearns-New Athens; Gary Graham-O'Fallon; Jim Denham-Pontoon Beach; Ken Mueller-Red Bud; Felix Floyd-Roxana; Rich Sauget, Jr.-Sauget; Jim Vernier-Shiloh; Raymond Klein-Smithton; Rob Link-Sparta; Jim Rauckman-Swansea; Tom Caraker-Troy; Ricky Gottman-Vandalia; Tom Smith-Waterloo; Fred Ufert-Wood River and Frank Dickerson-Worden.

Glen Carbon mayor Jackstadt said in a previous interview that he supports the legislation.

In their letter, the mayors point out that under the proposal, up to 8.25% in sales tax – 5% state; 1% existing municipality; 1% additional municipality; 1% business district and .25% county – can continue until all bonds, up to a maximum of thirty-five years, are retired. No cap is set on the amount of state and local sales that can be diverted to the STAR bond fund, they say.

The Revenue Department's prediction last year that $15 million in annual sales tax would be lost is "extremely low," the mayors say.

They say that under the provisions of the legislation, one destination retailer with $400 million in annual sales would generate approximately $33 million in sales tax annually all of which would go to the STAR Bond fund.

The legislation also includes a provision that precludes the STAR bond fund from receiving sales tax from a business that relocates to the STAR Bond district from within a 25-mile radius. That provision is waived, the mayors say, if the business and STAR bond municipality agree that the relocation is necessary.

"This arrangement creates a remarkable lack of accountability and oversight, and threatens to drain the tax bases of neighboring cities and villages," the mayors say.

Legislators resume session in Springfield next week.

Since the measure was referred to the Revenue and Finance Committee on Jan. 11, two sponsors have withdrawn their support, State Sen. Pamela Althoff (R-Crystal Lake) and State Rep. Robert Pritchard (R-Sycamore).

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