Cook County sues over tax incentive program

Cook County became the third entity on Monday to file a lawsuit against two northeastern Illinois communities over tax-incentive programs that county officials claim rob local governments of sales tax revenues.

The city of Chicago and the Regional Transportation Authority have already filed lawsuits against Kankakee and Channahon. Both have programs encouraging businesses to come to their communities and avoid higher sales taxes in other areas. The communities then share a portion of the sales tax with the companies through a rebate.

Cook County Board President Toni Preckwinkle called it a wrongful kickback scheme after announcing a 12-count complaint. She alleges that the companies save money by moving purchases through satellite offices in outlying areas, but still rely on Cook County’s infrastructure and transportation.

“We’re not going to tolerate any practice that harms taxpayers and deprives our county of revenues,” she said. This type of practice by any municipalities or government is fundamentally wrong.”

Preckwinkle didn’t know which companies were involved or how much the county could recover.

Kankakee Mayor Nina Epstein, who didn’t immediately return a call seeking comment on Monday, has called Chicago and RTA’s lawsuits “befuddlements.” She said the programs bring jobs to Illinois, are vital to the financial health of her city of about 27,000 residents. She said the $3.5 million generated annually in sales taxes by the program helps city officials avoid making budget cuts.

Channahon’s acting village administrator and police chief Joe Pena declined to comment Monday on Cook County’s lawsuit, saying he hadn’t seen it yet.

“We feel everything we’re doing is appropriate within the current legislation,” he said of the tax incentive programs.

The lawsuits were filed after the Chicago Tribune reported that dozens of businesses, including catalog houses, appliance companies and others were taking advantage of lower tax rates by opening locations in outlying communities. For example, the sales tax rate in Kankakee is 6.25 percent compared to 9.75 percent in Chicago.

The RTA relies heavily on sales tax revenue to oversee mass transit agencies in the Chicago area and it alleges is owed at least $100 million in lost revenue.