HomeMy WebLinkAbout3. Class 6B Extension Requests DiscussionVillage of Mount Prospect
Community Development Department
MEMORANDUM
Mmint ProspeLt
—M—
TO: MICHAEL E. JANONIS, VILLAGE MANAGER
FROM: DIRECTOR OF COMMUNITY DEVELOPMENT
DATE: JUNE 26, 2013
SUBJECT: CLASS 6B EXTENSION REQUESTS
Background
The Village has granted several Cook County Class 6b tax incentives over the past two decades to
attract and retain businesses. The 6b incentive reduces the assessment level for qualified
manufacturing and warehouse /distribution facilities from 25% to 10% for the first 10 years, 15% for year
11 and 20% in year 12. After year 12, the assessment level returns to the full 25% for the benefitting
property. The 6b incentive can also be renewed for additional 12 year terms if supported by the Village.
The Village has supported the renewal of six of these incentives in recent years.
The owner of the 451 Kingston Court building recently approached the Village requesting a second
extension of their 6b incentive to benefit their current tenant, White Way Signs. This is the first request
for a second extension and the Village's decision on whether to grant the request will likely set a
precedent for any future requests by other 6b beneficiaries. Cook County permits multiple extensions
of the 6b incentive so long as the Village approves an inducement resolution supporting such requests.
School District Impact
In the past the Village reached out to the affected school districts to determine if they objected to the
requested extensions and they advised that they did not because the increase in equalized assessed
value (EAV) was not considered as "new property" and therefore did not result in additional revenues to
the district. However, the 6b statutes have been amended and now the increased EAV is considered
"new property" and therefore the districts would benefit from increased EAV since it is not subject to tax
caps. District 26 has indicated that they would not be in favor of further extensions as they would forgo
the increased tax revenue. I have not reached out to the other districts at this time but believe that they
would likely share this view.
Impact on Village Revenue
While the amended statutes now recognize the increased EAV on expired 6b's as "new property ", this
does not have a direct impact on property tax revenues to the Village. When the Village adopts its
annual tax levy, we levy a dollar amount rather than a rate. Therefore, the increased EAV from the
expired 6b's wouldn't increase Village revenues but would reduce the tax rate all property owners are
charged by the Village since the Village's total EAV would increase. In essence, the tax incentive that
benefits the 6b property is spread out over all other tax payers in the Village.
Arguments for Approving Extensions
1. Cook County's tax structure places a severe burden on industrial businesses as compared to
those of surrounding counties. Tax rates without the 6b are nearly 2.5 times higher in Cook
County. They are nearly equal to other counties with the 6b.
2. The vacancy rate in the Kensington Business Center (KBC) and throughout the Village are
nearly double the regional rates and would likely rise if the 6b extensions are not granted (see
attached spreadsheet). Several of the Village's largest employers and sales tax generators
currently have 6b incentives.
3. The spin -off benefits of occupied buildings, such as employees shopping and dining in
surrounding shops, have a significant positive impact on other Mount Prospect businesses.
4. An occupied building with a 6b incentive is assessed at approximately 25% higher than a vacant
building.
Arguments for Not Approving Extensions
1. The 6b incentive was intended to attract the benefitting business, not as a long term benefit to
the business.
2. The 6b incentive gives the business a competitive advantage over others in the Village.
3. All other tax payers in the Village are subsidizing the benefitting businesses.
4. Other taxing districts that are affected by tax caps would benefit from the increased EAV that
would be considered "new property" and not subject to the caps.
5. The property would generate 2.5 times the amount of current taxes paid with the 6b incentive,
reducing the overall tax burden of all tax payers in the same districts.
Opt ions
The following are possible options to consider:
1. Adopt a policy that the Village will not grant any further 6b extensions.
2. Adopt a policy that the Village will consider each 6b incentive extension request on a case by
case basis.
3. Adopt a policy that the Village will grant all future 6b extension requests.
Please forward this memorandum and attachments to the Village Board for their review and
consideration at their July 9th Committee of the Whole meeting. Staff will be present at this meeting to
answer any questions related to this matter.
William J. looney, Jr., A P
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COOK COUNTY ASSESSOR
JOSEPH BERRIOS
o� COO* , COOK COUNTY ASSESSOR`S OFFICE
a 11$ NORTH CLARK STREET. CHICAGO IL 60602
s PHONE: 312.443.7550 FAx:312.603.3616
A %Ain COOKCOUNTY ASSESSOR. CO%1
ttN0
CLASS 6B
ELIGIBILITY BULLETIN
Cook County Living Wage Ordinance
Please be advised that every applicant for this incentive will be required to provide an affidavit
to the Assessor's Office to confirm compliance with the Cook County Living Wage Ordinance.
The Cook County Assessor will not grant any request for incentive classification until it
receives the required affidavit.
Incentive Benefits
The Class 6b classification is designed to encourage industrial development throughout Cook
County by offering a real estate tax incentive for the development of new industrial facilities, the
rehabilitation of existing industrial structures, and the industrial reutilization of abandoned
buildings. The goal of Class 6b is to attract new industry, stimulate expansion and retention of
existing industry and increase employment opportunities.
Under the incentive provided by Class 6b qualifying industrial real estate would be eligible for the
Class 6b level of assessment from the date that new construction or substantial rehabilitation is
completed and initially assessed or, in the case of abandoned property, from the date of
substantial re- occupancy. Properties receiving Class 6b will be assessed at 10% of market value
for the first 10 years, 15% in the 11th year and 20% in the 12th year. This constitutes a
substantial reduction in the level of assessment and results in significant tax savings. In the
absence of this incentive, industrial real estate would normally be assessed at 25% of its market
value.
Where buildings or other structures qualify for the incentive as new construction or as abandoned
property as defined below, the reduced level of assessment under Class 6b will apply to those
structures in their entirety as well as to the land upon which they are situated. Where there is
substantial rehabilitation of an existing structure which has not been abandoned„ the reduced
incentive level of assessment is applicable to the additional market value attributable to the
rehabilitation, including qualified land related to the rehabilitation. (Please note that the
additional value attributable to the rehabilitation for assessment purposes is likely to be
lower than the actual amount spent on the rehabilitation.) Land qualifies when the
rehabilitation adds vertical or horizontal square footage to the improvements. The amount of land
eligible for the incentive shall be in such proportion as the square footage added by the
rehabilitation bears to the total square footage of the improvements on the parcel.
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Eligibility Requirements
Real estate is eligible for Class 6b status under the following conditions:
The real estate is used primarily for "industrial purposes ".
2. There is either (a) new construction, (b) substantial rehabilitation, or (c) substantial re-
occupancy of "abandoned" property.
3. An Eligibility Application and supporting documents have been timely filed with the Office
of the Assessor according to deadlines as set forth in the "What Must Be Filed" and 'Time
for Filing" sections of this Bulletin.
4. The municipality in which such real estate is located (or the County Board if the real
estate is located in an unincorporated area) must, by lawful resolution or ordinance,
expressly state that it supports and consents to the filing of a Class 6b Application and that
it finds Class 6b necessary for development to occur on the subject property.
The following definitions, as set forth in the Cook County Real Property Assessment
Classification Ordinance, pertain to the Class 6b incentive provision:
Industrial purposes: "Any real estate used primarily in manufacturing ... or in the extraction
or processing of raw materials unserviceable in their natural state to create new physical
products or materials, or in the processing of materials for recycling, or in the transportation or
storage of raw materials or finished or partially finished physical goods in the wholesale
distribution of such materials or goods for sale or leasing. "
Manufacturing: 'The material staging and production of goods used in procedures
commonly regarded as manufacturing, processing, fabrication, or assembling which changes
existing material into new shapes, new qualities, or new combinations and including research
and development associated with the production of goods."
Abandoned property: "Buildings and other structures that, after having been vacant and
unused for at least 24 continuous months, are purchased for value by a purchaser in whom
the seller has no direct financial interest." An exception to this definition shall be, "if the
municipality or the Board of Commissioners, as the case may be, finds that special
circumstances justify finding that the property is `abandoned' for the purpose of Class 6b."
The finding of abandonment, along with the specification of the special circumstances, shall
be included in the resolution or ordinance supporting and consenting to the incentive
application. Not withstanding the foregoing, special circumstances may not be determined
to justify finding that a property is deemed "abandoned" where:
A. There has been a purchase for value and the buildings and other structures have not
been vacant and unused prior to such purchase; or
B. There has been no purchase for value and the buildings and other structures have
been vacant and unused for less than 24 continuous months.
If the ordinance or resolution containing a finding of "special circumstances" is that of a
municipality, the approval of the County Board of Commissioners is required to validate
such a finding that the property is deemed "abandoned" for purposes of the incentive, and a
resolution to that effect shall be included with the eligibility application.
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What Must Be Filed
An applicant seeking the reclassification of real estate to Class 6b is required to file a "Class 6b
Eligibility Application " with the Office of the Assessor. At the time of filing the application, a filing
fee of $500.00 must be paid. In addition, an applicant may submit, at the same time, a certified
copy of an ordinance or resolution adopted by the municipality in which the real estate is located
(or the County Board, if the real estate is located in an unincorporated area) expressly stating that
it supports and consents to the fling of a Class 6b Application and that it finds Class 6b
necessary for development to occur on the subject property. If the resolution is not filed at the
time the Eligibility Application is submitted to the Assessor, the applicant must file, at that time, a
letter from the municipality or the County Board confirming that a resolution or ordinance
supporting the incentive has been requested. If the applicant is seeking to apply based on the
reoccupation of abandoned property and will be seeking a finding of "special circumstances"
from the municipality, in addition to obtaining a letter from the municipality confirming that a
resolution or ordinance supporting the incentive has been requested, the applicant must also
file a letter from the County Board confirming that a resolution validating a municipal finding of
special circumstances has been requested.
Should the municipality or the County Board, at a later date, deny the applicant's request for a
resolution or ordinance, whether or not construction or re- occupancy has begun, the applicant will
be deemed ineligible for reclassification to Class 6b. Any information that is not known or any
supporting documents that are not available at the time of the initial filing must be submitted as a
supplement to the Application.
After the construction or re- occupancy has taken place, an applicant must also file an "Incentives
Appeal Form" requesting that the real estate be reclassified to Class 6b. At the time of filing the
appeal, an appeal fee of $100.00 must be paid. If a resolution from the municipality where the
property is located, or the Cook County Board of Commissioners if located in an unincorporated
area, was not filed with the Eligibility Application, the applicant must file a certified copy of the
resolution or ordinance supporting the incentive at this time. No final action on a request for
reclassification to Class 6b will be taken until an Appeal and an Eligibility Application, along with
the required documentation as described therein, are completed and filed with the Office of the
Assessor.
In addition, during the term of the incentive, the Class 6b recipient must file a triennial affidavit
attesting to the use of the property and the number of workers employed at the Class 6b site.
The Assessor will mail Class 6b recipients the affidavit forms at the time of their triennial
reassessments. The affidavit must be signed, notarized and returned to the Assessor within
three weeks. Failure to file the triennial affidavits within that time will result in the loss of the
incentive.
Time for Filing
The Eligibility Application along with the appropriate resolution or letter confirming that a
resolution has been requested must be filed with the Assessor prior to, but no earlier than one
year before, commencement of new construction (excluding demolition, if any) or substantial
rehabilitation. With respect to abandoned property, the eligibility application must be made to
the Assessor prior to the commencement of the reoccupation of the vacant and unused
property.
Where reoccupation of "abandoned" property and subsequent substantial rehabilitation is
planned, a single Eligibility Application and resolution, ordinance, or letter confirming that a
resolution has been requested, may be filed for both situations, provided that the Application is
filed prior to the commencement of reoccupation and such rehabilitation.
To finalize the classification change, a "Real Estate Assessed Valuation Appeal" must be filed
after the construction or re- occupancy has taken place. In instances where a certified copy of an
ordinance or resolution expressly stating that the municipality or County Board supports and
consents to filing of a Class 6b Application has not yet been filed, it must be filed at this time. For
the purpose of certifying final assessments on a timely basis to the Board of Appeals, deadlines
for filing Appeals are established on a township basis. Check with the Office of the Assessor to
determine when the deadline occurs for a particular township.
The 6b classification may be renewed during the last year in which a property is entitled to a
10 1 "o assessment level or when the incentive is still applied at the 15 or 20 assessment
level, by filing a renewal application and a certified copy of a resolution or ordinance adopted
by the municipality in which the real estate is located, or by the County Board, if located in an
unincorporated area of Cook County, expressly stating that it supports and consents to the
renewal of the Class 6b incentive and that it has determined that the industrial use of the
property is necessary and beneficial to the local economy. The notice of intent to request
renewal will be forwarded by the Assessor's Office to the Cook County Board. The owners
must notify the Assessor's Office of their intent to request renewal at the time they request a
resolution or ordinance agreeing to the renewal from the municipality or County Board. The
number of renewal period requests is not limited.
Questions regarding Class 6b may be directed to the Development Incentives
Department of the Office of the Cook County Assessor, Room 301, 118 North Clark
Street, Chicago, Illinois 60602, (312) 603 -7529.
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