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Vernon Hills may offer another incentive

What had been a rarity is becoming an accepted option to jump-start business in Vernon Hills.

For the third time since last fall, the village board is considering granting a sales tax rebate to a developer with the thought that a vacant building generating sales tax again is worth giving up a cut.

In this case, the amount considered is $518,000 in assistance to revive the long-empty former Circuit City store, 551 N. Milwaukee Ave.

"If I were going to guarantee what you were getting before ... what have you got to lose?" Jim Loarie, a partner in Oxford Development, asked trustees Tuesday during a discussion of a possible incentive.

Oxford and Shorewood Development Group LLC have a contract to buy the former Circuit City. The plan is to gut the building and replace the 18-year-old mechanical systems for a CompUSA/TigerDirect Superstore, possibly to be open by Christmas.

Developers said the purchase and renovation represents an investment of $4.7 million. They said they are putting down about 15 percent in cash, with the remainder guaranteed by company principals.

"The whole environment has changed," Loarie said. "Developers today are taking a lot more risk than they did three, four or five years ago."

Without an incentive, the return of about 2.2 percent wouldn't justify the risk, village trustees were told.

As they have been with other deals, village officials were cautious, and there was some initial opposition.

"We've only done a couple of tax deals like this, and the three we've done have had extraordinary circumstances involved," Trustee Thom Koch said.

"It's a computer store, basically of which we already have several. I don't find a compelling argument to rebate any tax money on this."

Loarie said the building has generated nothing during the past two years it has been vacant, and it has been difficult to lease because not many tenants are able or willing to take the entire building.

Developers modified their initial proposal to guarantee the village get the first $100,000 in sales tax each year, which would represent $10 million in sales - about the same amount generated by Circuit City.

CompUSA is expected to have $20 million or more in sales each year, the village board was told, meaning it would approximate a split until the requested incentive amount was met.

Loarie said the building owner's fallback would be a resale-type operation generating much less in sales.

"I don't think I want to chase this particular tenant out of this space," Mayor Roger Byrne said. "It's got much more appeal than some other use that doesn't generate this kind of tax."

Details are expected to be finalized next week, with an expected board vote Aug. 17.

"It sounds like we're mitigating our risk here," Trustee Jim Schultz said. "I was probably 95 percent against this."

The former Circuit City building prompted the village in January to set a moratorium on non-retail uses filling vacancies in its core retail area.

Officials were worried a plan for medical offices there would permanently take it off the sales tax roll and that similar situations could happen elsewhere. The moratorium recently was extended for 90 days, and the medical office is being pursued in a corporate park in town.

The first incentive the village gave was in the mid-1990s to lure computer giant CDW.

Last fall, the village agreed to a rebate of about $1.2 million for the owners of the Hawthorn Hills Fashion Square shopping center. That allowed for the arrival of a Dick's Sporting Goods store as an anchor and has resulted in the center going from half empty to nearly full in a short time.

The village also has agreed to a $955,000 rebate to build a Mariano's Fresh Market grocery in the Shoppes of Gregg's Landing.

"It's a slippery slope when you have over 3 million square feet of retail," Village Manager Mike Allison said of incentives. "It's something that gives you pause - what arrangements make sense, which don't."