On December 16th, 2011, Illinois Governor Pat Quinn signed SB0397 into law as Public Act 97-0636, which, among other things, allows the Village of Hoffman Estates to extend the term of the Sears Economic Development Area (Sears EDA) for an additional 15 years. Sears had threatened to move its operations out of Hoffman Estates when its current agreement with the Village expires in 2012 if the legislature had failed to approve the extension, which could have resulted in a loss of approximately 15,000 jobs in the region. The adoption of SB0397 is a pre-condition to the Village’s extension of the EDA and the resulting public assistance. The Village and Sears still need to negotiate an amendment to the existing Development Agreement.
Unlike the TIF Statute, the Economic Development Area Tax Increment Allocation Act provides that municipalities can pledge tax increment to projects in Economic Development Areas without making a blight finding. However, Economic Development Area projects must create or retain at least 4,250 jobs. Additionally, private investment in Economic Development Areas must equal at least $100,000,000. Unlike a TIF District, which only requires municipal approval, both municipal and State Department of Commerce and Economic Opportunity approval are required to establish an Economic Development Area.
The Sears EDA was initially established in 1989 by the Village of Hoffman Estates. In 1990, the Village and Sears entered into a Development Agreement in which Sears agreed to construct a 1,600,000 square foot office complex and complete related infrastructure improvements in the Sears EDA, and the Village agreed to provide Sears with assistance including a portion of the incremental property taxes in the Sears EDA. According to Sears, it will have received a total of approximately $75 million in property tax assistance from the Village since the adoption of the Development Agreement in 1990.
It has been reported that Sears will receive approximately $125 million in property tax assistance if the Village approves an amended Development Agreement. In order to receive the assistance from the Village, SB0397 requires Sears to maintain at least 4,250 jobs in the Sears EDA for 15 years. Sears will likely also receive an additional $150 million in State income tax credits under the provisions of SB0397.