It’s clear why the Regional Transit Authority is suing United Airlines. But why is it suing the City of Sycamore?
The transit agencies which comprise the RTA – Pace, Metra and the Chicago Transit Authority – are continually fighting over funding. RTA needs more revenue.
So they’re going after Chicago-based United Airlines, which operates a subsidiary company, United Aviation Fuels Corp., with an office in Sycamore. The company orders jet fuel for United, and pays sales tax on the purchases in DeKalb County, where the tax is 1.5 percent lower than in Chicago.
Each year, the city of Sycamore rebates almost all of the sales tax revenue it collects from the fuel sales back to the airline. United saved almost $18 million in tax payments in 2012 through the arrangement, while Sycamore made about $400,000 it otherwise wouldn’t have.
American Airlines operates a similar enterprise in Sycamore, and the city’s arrangement with both airlines has generated more than $7 million since 2001. DeKalb County, which has no rebate agreement with the airlines, takes in about $2 million a year from the proceeds of its .25 percent share of the sales tax.
RTA is not suing American yet because its parent company, AMR, is in bankruptcy.
In its lawsuit, RTA says United Aviation Fuels Corp. is a “sham office.”
RTA contends that because the work to purchase fuel is done at United’s headquarters in Chicago, that city should receive the tax revenue. RTA estimates Chicago has lost $133 million through sales tax dodges since 2005.
The city and airline say the arrangement has been reviewed by taxing bodies and been found to be legal. The arrangement has been a matter of public record for 11 years. Why bring the lawsuit now?
Even if the idea of suing only just occurred to RTA officials, why sue the city of Sycamore? It’s not the city’s responsibility to monitor how private enterprises in the community are conducting their business, or what relationship they might have with other companies under the same ownership.
Sycamore city officials say they are confident they are in the right. However, it would be much better if they didn’t have to go to court to prove as much.
It’s unfortunate any time one public agency takes another to court – public resources are consumed on both sides. A better resolution to this problem would occur at a negotiation rather than in a courtroom.