DeKALB – City leaders are trying to lure Internet retailers with an 85 percent sales-tax rebate.
The first step in the coaxing process came Monday when aldermen unanimously approved an agreement with a shell company called Great Lakes Economic Development LLC.
The company was created by Tom McPeak, a partner with Atlanta-based Barnwell Consulting, who said he has an undisclosed client interested in setting up shop in DeKalb.
“I’ve got a plan B,” McPeak said. “I’ve got a plan C, I’ve got a plan D. I only want to do it in one place. I would like for it to be DeKalb.”
DeKalb was appealing, McPeak said, because the city’s home-rule tax and its share of the municipal retailers occupation tax adds up to 2.75 percent, a slightly higher tax rate than other communities outside Chicago.
Although the City Council would need to approve a separate agreement with any retailers, the basics of the agreement are that the company would set up an office in DeKalb in an existing building. All the company’s Illinois orders would have to be processed and paid through that office in order for DeKalb to receive the sales tax revenue.
In turn, the city would return 85 percent of the city’s portion of sales tax to the company for 25 years. McPeak estimated the agreement would net the city at least $200,000 in annual sales tax.
In total, the city received about $11 million in sales tax in the fiscal year that ended June 30, Finance Director Cathy Haley said.
Third Ward Alderwoman Kristen Lash said she was uncomfortable with offering incentives and the 25-year agreement term.
“You’re talking about, ‘Look at the revenue that will come to the city,’ and I completely understand that,” Lash said. “But look at revenue that would come to the city at the end of that agreement, too.”
McPeak and City Manager Anne Marie Gaura said the length of the agreement would benefit the city.
“If you make it for a shorter period of time, they can easily move,” McPeak said. “... They don’t make a major capital investment that cannot be relocated like an auto manufacturing plant or a steel mill.”
The agreement sounded better than most other incentive agreements to 1st Ward Alderman David Jacobson.
“They either take our proximity to the university,” Jacobson said. “They take our geographic location with fiber. They’re coming to take. The way I see this one is it’s a big river of money flowing and we want to siphon a little stream toward DeKalb.”
In their backup materials for the council, city staff made sure to point out the deal is different from the fuel sales agreements between United Airlines and American Airlines and Sycamore because the city is not diverting tax revenue from a brick and mortar location elsewhere. The Regional Transportation Authority has filed lawsuits to end those agreements.
Just in case, however, the city will require all parties of the agreement to provide the city legal defense.