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RTA files lawsuit in sales tax scheme

Published: Thursday, March 20, 2014 11:37 p.m. CST • Updated: Wednesday, April 9, 2014 1:37 p.m. CST
Caption
(Danielle Guerra – dguerra@shawmedia)
In a letter to the Regional Transit Authority dated March 10, Petroliance CEO Kevin McCarter said three people work out of The Krueger Business Center, 114 N. Washington St., in Genoa. But on Thursday, the front door was locked with no signage visible and a for rent sign on the floor could be seen from the glass front door. About $50 million in revenue is generated by sales based out of the Genoa office, McCarter wrote.

GENOA – The Chicago-based Regional Transportation Authority is suing the city of Genoa and fuel and oil distribution company PetroLiance, claiming the company set up a sham office in Genoa to avoid paying sales tax to the Regional Transit Authority.

In the lawsuit, the RTA alleges PetroLiance actually conducts its sales in Elgin, which is in the RTA's taxing area, but has set up an office in Genoa as part of a "tax kickback scheme."

Under an agreement between Genoa and PetroLiance that was signed in 2005, the company, which was then known as Boncosky Oil Co., agreed to open a sales office at 114 N. Washington St., No. 4, in Genoa. In exchange, the city agreed to rebate 50 percent of sales tax revenues from the company's sales.

The agreement between Genoa and PetroLiance has cost the RTA, Kane County and Elgin – where the RTA says PetroLiance's work is actually done – a “significant” amount of tax revenue, the RTA said. Jordan Matyas, chief of staff for the RTA, which oversees the Chicago Transit Authority, the region’s Metra commuter line and the Pace suburban bus service, could not pin a dollar-amount on the lost taxes.

When it was signed, Genoa official expected the agreement would net $75,000 for the city, increasing its annual sales tax revenue of $290,000 by 26 percent. From Dec. 2012 to Nov. 2013, the agreement generated $133,728 for the city.

Elgin's tax rate in Kane County is 8.25 percent, compared with 6.25 percent in Genoa.

In the suit filed Wednesday in Cook County, the RTA seeks to recoup the tax revenue it has lost as a result of the agreement, attorney's costs and an additional 50 percent of the amount of lost tax.

"These agreements need to stop," Matyas said. “We want the court to say not only are we entitled to damages, but these practices need to stop."

Ruth Schossberg, who serves as special counsel for the city of Genoa in relation to the agreement, said the city was in compliance with the law when the agreement was signed.

About $50 million in revenue is generated by sales based out of the “order acceptance office” in Genoa where three people work, PetroLiance CEO Kevin McCarter wrote in a letter to the RTA.

Matyas argued, "It's a question of the totality of the business, where are the sales being negotiated, where are the deliveries being made."

PetroLiance officials did not return requests for comment.

The lawsuit is the latest in a series of suits filed by the RTA. In addition to the lawsuit against Genoa and PetroLiance, the RTA on Wednesday filed suit against the city of Morris over a similar agreement with Bell Fuels and the city of Savanna and Palatine Oil.

The suits come on the heels of another lawsuit the RTA filed last week against the city of Sycamore and American Airlines regarding a sham office in Sycamore City Hall. The RTA also field suit against United Airlines for a fuel-purchasing agreement in the city of Sycamore last year.

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