How some towns cope when big-box stores leave

When a big-box retailer announces plans to close, or leave a municipality and take its tax dollars with it, some suburbs find themselves making eleventh-hour budget decisions, cutting deals and making money in ways they never thought they would before.

The smaller the town, the bigger the impact.

In West Dundee, population 7,400, the impact of Best Buy shutting its doors after 15 years was immediate and painful.

The unexpected closure — it was announced in April and the store shuttered in May — forced village officials to approve a series of last-minute budget cuts totaling $216,000.

The largest savings came by cutting hours for part-time firefighters, a move that limited response times out of one of the village’s two stations. West Dundee also moved its 54 employees to a cheaper health insurance carrier, reduced hours for part-time and seasonal employees, eliminated a community service position in the police department, canceled a National Night Out event and decided to hold fewer board meetings.

Best Buy contributed $400,000 to the village each year in sales tax, which was a tenth of the village’s sales tax haul.

The village is boosting its budget by taking a $20,000 annual fee from First Energy, the company it negotiated a deal with for electrical aggregation. Village Manager Joe Cavallaro said the money makes up for staff time spent administering the program.

For East Dundee, the disaster didn’t unfold overnight.

The town of 2,887 people so far has had six years to prepare for Walmart’s departure. The retailer had planned to close its East Dundee store and move to West Dundee years ago, but neighborhood opposition put that plan on ice. Since then, East Dundee officials have worked to add new businesses and expand the village’s boundaries to include other businesses.

In mid-August, Wal-Mart Stores Inc. announced it would move instead to another neighbor — Carpentersville.

This month, the East Dundee village board welcomed video gambling into town, in part to replace the $850,000 in revenues that Walmart store had provided annually in non-property taxes. The closure of the East Dundee store will coincide with a 2015 opening of the Carpentersville location.

The decision to allow video gambling was made with a large amount of hand-wringing. Voters in a 2010 advisory referendum had said they didn’t want it in town, but the estimated $60,000 a year in gambling revenue was too important to the bottom line for village officials.

“The thing for me regarding that particular situation is if you know you’re going to lose 20 percent of your (general fund) income ... then things that wouldn’t otherwise be on the table now have to be considered,” Village President Jerald Bartels said. “Whatever we can’t make up means things are going to have to be cut or the revenue’s going to have to come from someplace else.”

In larger towns, such as Rolling Meadows (population 24,205) and Naperville (population 142,773), one might not think losing a single big-box store would cause much of a commotion.

But Rolling Meadows officials found themselves scrambling in January 2010 when Sam’s Club abruptly closed after eight years in business, City Manager Barry Krumftok said.

The closure meant the loss of about $600,000 in various annual revenues from the retailer — nearly an 8 percent loss to the general fund.

“It really came with no advance notice,” Krumftok said. “Sunday, they were talking to their employees, Monday we were hearing about it. If you had more advanced notice, you could actually phase things, but we were reacting to it right when it happened.”

The city responded by eliminating two part-time jobs and four full-time positions among the police department’s civilian staff, delaying the hire of a finance director, eliminating holiday decorations and glow necklaces for kids at the tree-lighting ceremony, ending a program reserved to commemorate employee and volunteer milestones, and holding off on painting its historical museum, digitizing city records and parkway tree replacement, removal and trimming.

In many cases, big-box stores leave one town to build a bigger, better store just out of the taxman’s reach.

For example, Hobby Lobby will close its Mundelein store and open another one down the road in Vernon Hills by the end of this year.

Conversely, Wal-Mart intends to close its store in Vernon Hills and build a bigger one in Mundelein.

“Some people feel that they’re holding municipalities hostage, and that’s true to an extent,” Naperville Councilman Grant Wehrli said of Wal-Mart. “But the numbers don’t lie.”

Naperville officials weren’t about to let Wal-Mart leave their city without a fight.

When rumors began swirling about the retailer looking to build a bigger store on the other side of Route 59 — in Aurora — Naperville leaders snapped into action.

The city council offered to rebate $1.75 million in sales tax revenues back to Wal-Mart over the next 10 years. Wal-Mart leaders took the deal and agreed to build its super center in Naperville.

In exchange, Naperville avoided a large hole in its budget.

The retail giant has been in Naperville for about 15 years and contributes $500,000 in annual sales tax revenue — 1.9 percent of the city’s $26 million sales tax haul. Naperville could not afford to lose that money, especially in this economy, Wehrli said.

“It shows the impact that these box stores have on municipal budgets when they do decide to leave,” he said. “A 1-percent drop is substantial because then like every other municipality, we certainly pared down the size of the government due to the economy and we still need to provide essential services. It’s not a viable solution to just raise property taxes in hard economic times.”