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Will rebates recede in Vernon Hills?

Vernon Hills leaders were busy this week informally approving variations for signs and other details involving several new businesses, but the use of incentives to lure them may be winding down.

“I’d like to lose the word ‘rebate’ pretty quick,” Mayor Roger Byrne said Tuesday as the village board was about to consider various requests, including a sales tax rebate, from the owner of the Rivertree Court Shopping Center.

Inland Commercial Property Management, which has owned the center at Milwaukee Avenue and Route 60 since 1997, is requesting a total of about $500,000 in rebates over 10 years. The funds would be used to retrofit and expand the vacant AMC Rivertree Court theater for a Gordmans Department store, an Omaha-based discount department chain that is making a push into the Chicago market.

Other improvements also are planned for the prominent strip center, which has 49 tenant spaces spanning about 350,000 square feet.

“The contribution in sales tax is much-needed and valuable in the repositioning of this asset,” said Scott Carr, representing Inland.

Since the fall of 2009, the village has entered into five sales tax rebate agreements equal to about $4.2 million in current dollars, with various merchants to fill large vacant commercial spaces and improve its extensive retail base.

Besides Gordmans, new arrivals in various locations in Vernon Hills will include Steinhafel Furntiture; Mariano’s Fresh Market; TigerDirect, Inc.; and HHGregg, Inc.

But recent news that one of the rebate recipients sold the former Circuit City property for a profit of more than $2 million shortly after entering into a pact worth about $518,000 in incentives and long before the replacement store was scheduled to open aggravated village officials and led to a call for more conditions.

“It was something I never anticipated. It was something I’ve never seen before,” Trustee Thom Koch said Wednesday.

The thought was that if a significant profit could be made so quickly, the owner probably didn’t need the incentive in the first place, according to village officials.

So for the first time, conditions have been suggested to a proposed sales tax incentive agreement that would have the owner reimburse the village if the property is sold.

“Once I’ve been burned, I’m shy the second time,” Koch told Carr during the meeting Tuesday. “If you were to sell it for a huge profit, I think you should give the public back their money.”

Koch said he didn’t envision Inland selling the center but wanted a safeguard.

It was noted that the PetSmart store also is leaving Rivertree to fill the former Linens ‘N’ Things space in the Hawthorn Hills Fashion Square center cross the street. That center, now anchored by Dick’s Sporting Goods, was the first major property to receive a village incentive.

Carr previously told the zoning board of appeals that the center is facing significant challenges because of tenant loss.

“The investment is going to stay with the property,” according to Carr. “For us to backfill 75,000 square of feet of space (at Rivertree) in a year is significant.”

Village board members appeared to be in general agreement regarding an incentive for Inland but details of potential paybacks were not settled and will be discussed further.

Carr praised the village’s efforts, saying other communities “just don’t get it.”

And the effort appears to be working. At the end of 2010, the vacancy rate for the village’s retail base was about 15 percent, according to John Kalmar, assistant village manager.

It is expected to be about half that by the end of 2011, Kalmar said, adding that incentives likely will be fewer and farther between.

“That’s a very important thing to remember going forward — we’ll be left with limited vacant space here in town,” Kalmar said.

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