By Ted Schnell • BocaJump
The developer of the Otter Creek retail center along Randall Road on Elgin’s West Side is asking the city to consider establishing a business district there to generate finances to repave the area’s parking lot and to relocate a detention pond at the front of the area.
The Elgin City Council on Wednesday will consider a feasibility study of the request by Otter Creek LLC, which owns the Otter Creek retail center located on the west side of south Randall Road between U.S. 20 and South Street.
Assistant City Manager Rick Kozal on Monday compared the establishment of the business district is akin to a tax increment financing district, but without the nuances associated with property taxes collected by various government bodies such as cities, the county, school districts and other similar agencies.
Instead, Kozal said, a business district allows sales tax increases in one-quarter percent increments up to 1 percent within the district. The money generated by the tax then can be used for infrastructure improvements in the district.
Elgin’s sales tax rate in the Otter Creek area is 8.75 percent, which could increase up to 9.75 percent if a business district is initiated.
Kozal said, however, that Target, which occupies a separate building in the southern portion of the shopping center, is excluded from the proposed business district.
“The purpose of this … is to get an objective analysis by a consultant who has a lot of experience in this area and make a determination as to whether there is enough revenue over there to justify making this investment,” Kozal said. “This is the first phase to find out whether it is even feasible.”
Kozal said the best example of the use of this kind of business district is the out lots at the Yorktown Shopping Center. The area used to be a mall but grew with the development of a business district.
“That is the ideal,” he said.
Aside from Target, the shopping center’s largest retailers are Burlington Coat Factory, Hobby Lobby and Office Max, as well as Gold’s Gym.
The study will include an analysis of the impact of raising the sales tax within that district, Kozal said, since there is an argument that even a small increase in the sales tax potentially could cause some patrons to flee, resulting in lower sales tax revenues.
“That’s all part of the analysis with this,” Kozal said.
Otter Creek LLC wants to create a business district to help it finance the repaving of the center’s parking lot, and the relocating of a storm-water detention area in an out lot near Randall Road to an interior lot. The developer purchased the center in 2007, and since then says it has invested $4.2 million in the center to reconfigure the two vacant “big box” tenant spaces, including façade rehabilitations throughout the retail center and other tenant space improvements and incentives.
In March 2009, the developer entered into a sales tax sharing agreement with the city to assist in securing the Burlington Coat Factory as a tenant. Under the agreement, the city agreed to rebate up to $495,500 in sales tax generated by the Burlington Coat Factory over a five-year period. Last year, the city made its first sales tax rebate payment to developer in the amount of $87,499.02.
Kozal said that if the feasibility study is favorable toward establishing a business district, staff then would seek City Council approval to proceed further.
