South Suburbs fighting Cook County on proposed change to financial incentive

South suburban officials are raising their voices against a proposed change by Cook County to the Class 8 and other tax exemption that would force contractors to pay a prevailing wage on business work sites.

They say this proposed change in construction contracts could sideline all new development in the area. Dozens of officials testified against changes to the tax incentive amendment at the Cook County Board of Commissioners finance committee meeting March 1. No action was taken but the amendment is on the committee's agenda again for Wednesday, March 14.

Homewood Mayor Richard Hofeld called the proposal “the most important economic development issue” he’s faced in 21 years. He was one of the officials who spoke March 1.

Homewood and Flossmoor have used the Class 8 tax incentive to help spur development. The tax reduction is used in areas of “severe economic stagnation.” Both towns use the incentive to help compete for businesses with Indiana and Will County, where taxes are lower.

When Class 8 is approved, qualifying properties pay taxes equal to 10 percent of the assessed market value for 10 years, 15 percent for the 11th year and 20 percent for the 12th year. 

The standard without the incentive is 25 percent.

“The Class 8 is the ideal use,” Hofeld said. “Real estate taxes rise from a vacant rate to a residential rate,” Hofeld said.

Forcing businesses to pay a prevailing wage could wipe out any savings businesses get from the tax reduction, Hofeld argues.
The county proposal calls for any employer receiving a Class 6b, Class 8 or Class 9 property tax incentive to pay any contractor, subcontractor or lessee performing the construction work within the property what's called a “prevailing wage.” That is the rate paid for similar public work in other areas of Cook County as set by the Illinois Department of Labor. 

In many cases, paying the prevailing wage would add significant costs to a project. Only businesses on government contracts are currently required to meet that standard. 

The proposed amendment would also require that contractors participate in Department of Labor apprenticeship programs. The South Suburban Mayors and Managers Association said in a release that requiring apprenticeship programs would “dramatically limit the participation of local small and mid-size contractors in projects within their own communities.”

“The Class 8 is not an incentive. It’s an equalizer,” Hofeld said. “It puts the south suburbs on a level playing field with Indiana five minutes away. It makes us competitive. Without it, we’re through.”

Hofeld said the Class 8 has done what it was intended to do, helping to generate growth and stability. He believes the proposed changes will erase those gains.

“This is not about corporate America. This is about the survival of Hazel Crest, Richton Park, Ford Heights, South Holland, Glenwood, Homewood and all south suburban towns,” he said. “As mayor, quite frankly I don’t know what else to do.”

Other potential incentives are flawed, Hofeld said. Tax abatement is inefficient because it requires the consent of all taxing bodies. Tax Increment Financing requires a business to be located within a TIF district and the district to have sufficient funding. Sales tax sharing, in towns with a municipal sales tax, takes potential funding from other areas of the budget. 

SSMMA Executive Director Kristi DeLaurentiis also spoke to the county finance committee. 

“This is not unique to the south suburbs but it is magnified in the south suburbs,” DeLaurentiis said. “Our concern is that it’s too easy to avoid Cook County and move on to neighboring counties and neighboring states, for that matter, that are less costly and easier to navigate through the process. 

"With this amendment, no projects means no construction jobs and no employees, either. So, that doesn’t help any of us,” she stressed.
Union representatives spoke in favor of the amendment. DeLaurentiis said she understood their goals were to improve wages and conformity of contracting services.

“Their interest is in jobs. They’re not concerned about the tax implications,” she told the committee. “That is your responsibility to think about.”

DeLaurentiis said the amendment would add red tape to tax incentives. She asked the committee to convene a tax force to look for common ground among all concerned parties. 

“These extra layers added to a tax incentive policy, a program that is supposed to spur investment, will harm us,” she said. 

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