National retailers and other businesses are taking a closer look at settling in the suburbs -- even if they don't always get financial incentives.
Arlington Heights, Schaumburg and other towns have taken more aggressive marketing steps to lure more businesses during the past year.
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But rather than offer municipal tax incentives they can't afford, the towns have been talking up good schools, plentiful workers and other amenities.
It's apparently working, as dozens of new businesses have taken over sites that had been abandoned during the recession.
"Sometimes these tax incentive packages can look like a sign of desperation," said Therese McGuire, professor of management and strategy at Northwestern University in Evanston. "Companies want to know if good services are delivered, if the town has good schools and good transportation."
While Chicago, the state and some suburbs use special incentives to attract companies or retain those that threaten to leave, other suburbs rely on development officials who hawk the town's charms at conventions, beef up websites and brochures, and waste no time approaching a retailer rumored to be hunting for a new location.
"We identify these retailers that are expanding, and present locations to their brokers very quickly," said John C. Melaniphy III, Arlington Heights business and development coordinator.
In the past year, Arlington Heights has attracted high-tech company ChicagoMicro to its downtown. Other new arrivals include Dollar Tree, Smashburger, Jersey Mike's, Caribou Coffee, Biggby Coffee, Furniture Stop, LitePoint Corp. and Okaya USA. More will arrive later this year, including Ross Dress for Less and electronics retailer HHGregg, which is being used as a catalyst to attract additional retailers at the Annex of Arlington Shopping Center, Melaniphy said.
In addition, a new restaurant is close to inking a deal for the emptied Pappadeaux site at Golf and Algonquin roads.
In the past year, Arlington Heights has recruited businesses to lease more than 100,000 square feet of vacant retail space, which is expected to generate about $600,000 annually in sales taxes to the village, said Melaniphy.
His goal is to add another $100 million in retail sales, which translates into more tax revenue for the village.
"We have been able to recruit all of these new retailers and restaurants without any municipal incentives," he said.
The depressed real estate market and lower leasing costs have helped. But Melaniphy said it's knowing the right brokers, dealing directly with the decision-makers for the businesses and keeping the relationship strong even after signing the dotted line.
Maintaining a strong relationship is often the most important to businesses, said Patrick J. Murphy, associate professor of management at DePaul University.
"Some businesses have a strategic reason to be in that area," Murphy said. "And that strategy often outweighs any tax incentives."
Many suburbs, including Arlington Heights, do make use of tax-increment financing, which can help businesses with some costs of redeveloping or relocating in zones designated as blighted.
And towns aren't the only ones that can provide incentives for businesses to locate in particular areas. Cook County, for instance, can grant property tax reductions for redevelopment of sites that are economically depressed or had been environmentally contaminated, according to the Cook County assessor's office website.
Career Education Corp. sought incentives when it first considered moving to Schaumburg, said Matt Frank, Schaumburg's economic development coordinator.
"The village of Schaumburg worked with Career Education on a Cook County Class 7B application (property tax incentive)," said Frank. "The Class 7B application did not qualify and was dropped."
Career Education moved in anyway.
Schaumburg does not provide sales tax incentives to businesses, but strives to be business-friendly in other ways, he said.
"We assist businesses with site selection, market analysis, identifying resources and other services," Frank said.
The village has attracted about 30 businesses back to Woodfield Shopping Center and other locations in the past year -- even after Schaumburg enacted its first municipal property tax in 2009.
New stores at Woodfield include 77kids by American Eagle, Bose, Burlington Coat Factory, Hugo Boss, Michael Kors, Swatch and others. Golf Road also now has Destination XL, Eileen Fisher, GFS Marketplace, Rosati's Pizza, Sarku Japan Teriyaki & Sushi Express, Schaumburg KIA and Sears Outlet. Elsewhere, Schaumburg has attracted Jersey Mikes Subs, Jimmy John's, Krispy Krunchy Chicken, Mad Mark's Mystic Pizza, Meatheads, Moe's Southwest and Whole Foods, among others.
"Our village board wants to keep an even playing field and does not want to open up the door to sales tax incentives to our numerous businesses in town or other potential businesses," Frank said.
The evidence on whether tax incentives are influential is mixed, McGuire said.
"Many big businesses may ask for the breaks, but it's not necessarily the case that they'll get them," said McGuire. "And it may not even matter. Companies are looking for certainty and predicability."