Title/Name/Summary
Quarterly Economic Development Update - Incentives Refresher
History
The Village continues to seek ways to remove barriers to high-quality development in Orland Park. The costs to develop property in the Village is always increasing and as the Village becomes more built-out the remaining property often has development challenges that lead to even higher development costs. As such the Village offers a range of incentives for new and redevelopment throughout the Village.
The purpose of the programs are to stimulate the local economy by recruiting and retaining businesses, providing employment opportunities, expanding the goods and services available for purchase and consumption by businesses and residents of the Village, and increasing the taxes collected by the Village.
The following are the Village’s current incentive programs that were previously adopted by the Village Board including at it's June 1, 2020 Board meeting:
Sales Tax Sharing Agreements
To induce new development and redevelopment the Village utilizes sales tax sharing agreements for large sales tax generators. Projects can qualify for 50% sales tax sharing for a maximum term of ten (10) years. The maximum value of the incentive would be 25% of the overall project cost. This typically requires significant investment by the business in permanent improvements or infrastructure to the project site. In this way the Village can help facilitate development while cost sharing for permanent improvements to a property. Any project will have to provide certified project costs and evidence of sales tax payment to begin the repayment. Repayment does not begin until the Village verifies the cost.
Since 2009 the Village has approved 16 sales tax sharing agreements with large sales tax generators. These incentives helped attract and retain 8 car dealers, 3 grocery stores, and a hotel. The number of agreements does not match the number of businesses, because some of the agreements include multiple dealers owned by the same company, while some of the car dealers were granted extensions to subject to them providing significant improvements on site.
Strategic Retail Back-fill
Due to the ever-changing retail market, the Village instituted a development incentive that caters to users that have a larger footprint. Over the last 10 years, the footprint for a retail store has decreased, and the time of the “big box,” retailer is no longer commonplace.
As such, it is difficult for the Village to find tenants for some of these larger remaining spaces. As such the Village implemented the strategic retail backfill incentive:
- Encourage the re-occupancy of existing vacant retail spaces greater than 25,000 square feet;
- The existing retail space must have been vacant for at least six (6) months;
- Successful applicants will be able to share in sales taxes derived from the applicant’s property or business in an amount not to exceed 50% of the generated sales taxes for up to 10 years (max term);
- Total shared sales tax shall not exceed 25% of the total project cost by the applicant;
The Village utilized the Strategic Retail Back-fill incentive to attract Steinhafel’s to Orland Park Place. This helped occupy 97,000 square feet that was vacated by Bed Bath and Beyond and Steinhafel’s.
Non-traditional Sales Tax Sharing Program
Any owner or applicant of an existing or proposed local sales tax generating industrial development may apply to the Village for inclusion in this program provided that the new or expanding business is likely to generate increased sales taxes. Successful applicants are able to share in sales taxes derived from applicant’s property or business in an amount which shall not exceed fifty percent (50%) of the generated sales taxes for a period of time which shall not exceed ten (10) years.
The Village used this incentive one time to attract an automotive aftermarket repair, franchisor to the Orland Park Business Center. The franchisor sells equipment that is subject to sales tax. This qualified them for the program and allowed the Village to assist with the remodel and occupancy.
Back-fill Vacant Restaurant Incentive Program
Any owner or applicant that wishes to re-establish a restaurant in a currently vacant property may apply to the Village for inclusion in this program provided that the new business is likely to generate increased sales taxes. Successful applicants are able to share in sales taxes derived from applicant’s property or business in an amount which shall not exceed fifty percent (50%) of the generated sales taxes for a period of time which shall not exceed ten (10) years.
The Village has used the Back-fill Vacant Restaurant Program to attract and retain 8 restaurants. Of the 8 restaurants, 1 never opened and 1 restaurant has closed. However both of those sites have been reoccupied.
Hotel Incentive Program (New Hotels)
Provides economic incentives to develop 3 to 5 star quality hotels in Orland Park. The Village currently collects a 5% transient occupancy tax. Approved applicants are able to share in transient occupancy taxes derived from the applicant’s property or business in an amount which shall not exceed forty percent (40%) of the transient occupancy tax generated for a period of time which shall not exceed ten (10) years.
The Village utilized the Hotel Incentive combined with a sales tax sharing agreement to attract a hotel to Main Street Village West.
The Hotel Incentive Program has been utilized 1 time by the Village.
Orland Park Commercial Impact Program
The goal of the Orland Park Commercial Impact Program is to encourage new commercial growth and development through the temporary reduction and deferral of permit and impact fees. New commercial projects can receive a 25% reduction on permit/impact fees and a 25% reduction on water tap fees. Additionally, projects are allowed to defer payment until issuance of the final occupancy certificate.
The Commercial Impact Program has been utilized 7 times by the Village. This was typically added to a sales tax sharing or restaurant back-fill incentive.
Advanced Manufacturing Incentive (Property Tax Exemption)
Any owner or applicant of a newly established or proposed advanced manufacturing facility, or the owner or applicant of an existing advanced manufacturing facility, that wishes to expand substantially, may apply to the Village for inclusion in this program. To qualify, businesses need to invest a minimum of $5 million. Approved projects will receive partial property tax exemptions from the Village in an amount not to exceed fifty percent (50%) of the Village-specific property tax for a period of time which shall not exceed ten (10) years.
The Advanced Manufacturing Incentive has not been requested by a developer.
Commercial Office Incentive Program (Property Tax Exemption)
Any owner or applicant of a newly established or proposed office facility, or the owner or applicant of an existing office facility, that wishes to expand substantially, may apply to the Village for inclusion in this program. To qualify, businesses need to invest a minimum of $2 million. Approved projects will receive partial property tax exemptions from the Village in an amount not to exceed fifty percent (50%) of the Village-specific property tax for a period of time which shall not exceed ten (10) years.
The Commercial Office Incentive Program has not been requested by a developer.
Outdoor Dining Expansion Program
Any owner or applicant that wishes to expand outdoor dining at a food establishment may apply to the Village for inclusion in this program provided that the expansion is reasonably likely to generate enhanced or increased sales taxes. Successful applicants are able to share in sales taxes derived from applicant’s property or business in an amount which shall not exceed fifty percent (50%) of the Village’s share of any newly generated sales taxes generated, based on the increment above the average of the applicants past three (3) year’s generated annual sales tax, for a period of time which shall not exceed ten (10) years.
Successful applicants can also receive a 100% waiver on development service fees associated with the outdoor dining expansion project.
Finally, parking space requirements for the applicant can be reduced within 20% of the Village’s requirements for total number of parking spaces required on a lot, so long as the Village’s Development Services Department determines that the number of required parking spaces will not unreasonably increase parking congestion along public streets or in parking areas located on nearby lots.
The Outdoor Dining Expansion Program has not been requested by any restaurant in the Village.
The length of any agreement and the maximum reimbursement amount are both maximums and both will be determined by the Village Board based on community interest, positive impact on other businesses, and site improvements that are visible to the public.
Participation in the economic development incentive programs shall be based upon approval by the Village Board on a case by case basis.
All agreements are subject to review and approval by the Village Board of Trustees.
Cook County also offers a series of property tax incentives based on specific criteria applicable for commercial and industrial development. The Village does not approve the incentive applications. However, a resolution of support must accompany any application for a special assessment. The incentives are reviewed potentially approved and issued by Cook County. These incentives are particularly important because Orland Park is adjacent to Will County which could offer up to 40% property tax savings.
Class 6b
Any building used for industrial purposes that meets the following criteria are eligible for the 12 year incentive. Project must include new construction, substantial rehabilitation, or re-occupancy of abandoned property. The property must have been vacant for at least 12 months. The standard assessment rate for commercial property in Cook County is 25%. If the incentive is approved the property will be assessed 10% for 10 years, 15% for the 11th year, and 20% for the 12th year. The incentive is renewable.
Class 7a and 7b
The Class 7 incentives are for property used for commercial purposes. The 7a is applicable to projects that cost less than $2 million and the 7b is for projects that cost less than $2 million. Commercial development involving newly constructed buildings, the utilization of vacant structures abandoned for at least 12 months, or substantial rehabilitation. If the incentive is approved the property will be assessed 10% for 10 years, 15% for the 11th year, and 20% for the 12th year. The incentive is renewable.
The 7b incentive requires a resolution of support from the Village, in addition, the 7b incentive requires that the area subject to the incentive is designated by Federal, State, or local agency as blighted. If an area does not already exist, the Village can designate an area as blighted by resolution. This is subject to the requestor providing analysis indicating that the blighting criteria is present, that is ultimately approved by Cook County.
Class 7c
The 7c incentive requires that the property is used for commercial purposes involving new construction, substantial rehabilitation or re-occupancy of vacant structures abandoned for at least 12 months. The 7c does not require that the area be designated as blighted. The incentive is a 5 year term, where approved property will be assessed at 10% for 3 years, 15 % for the 4th year and 20% for the 5th year. The incentive is renewable.
Class 8
The Class 8 incentive is designed to encourage industrial and commercial development in areas of the County which are experiencing severe economic stagnation. In order to qualify for a Class 8 the property must be located in Bloom, Bremen, Calumet, Rich and Thornton townships. Properties in Orland Park on the east side of Harlem Avenue are in Bremen Township and qualify for the Class 8. Approved property will be assessed at 10% for 10 years, 15% for 11th year and 20% for the 12th year. The Class 8 incentive is renewable.
The Village has passed 71 resolutions supporting properties applying for Cook County Property Tax incentives, since 1991. In the last 10 years, the Village has passed 27 resolutions. In total, there were 5 Class 8, 6 Class 6b, 3 Class 7b and 13 7c resolutions were passed over this time period.
This item is for discussion only.
Recommended Action/Motion
For discussion only.