Earlier tonight, the State House voted 78 – 32 to pass the “Mega Project” bill, HB 910 Amendment 3, a bill which in its amended form was only released first thing this morning.
If you take a look at my home page, you’ll see my three pillars:
- Fiscal responsibility,
- Organic job growth, and
- Rule of law.
This bill is fiscally irresponsible, picks winners and losers to give out special tax breaks, and violates reasonable norms on good governance by passing the same day as it was introduced, at least in a version with major changes from the prior one.
As a reminder, as I wrote when the prior version passed out of committee in February, even aside from other issues with the bill, it risks exploding local property taxes. This is because the Mega Project has its property tax assessment frozen at the level it was at before the development, but the actual value of the new development is counted as “new property added” for the purposes of the PTELL tax cap law, allowing tax cap-affected governments like schools, to increase the amount of their levy, but spread the increase across all other taxpayers besides the Mega Project property.
The example I gave in February is still true:
Say a school district has property worth $10 billion in total. Then a mega project is built, worth $5 billion. That additional $5 billion would be considered as “new property” which is a part of the exceptions to the usual tax cap and would allow the district to increase the levy by 50%. But the mega project assessment is frozen at the level before the construction began, so the increased levy is paid for by the property taxes for everyone else in the district increasing instead.
But the new version of the bill is even worse.
In order to make legislators across the state happy, special development incentives were added specifically for Springfield, both the city in general and the downtown district. Other incentives were added specifically for Chicago, as well as new incentives for “entertainment districts” across the state. One provision is clearly acknowledged to be intended for a specific project, a development meant for the airspace above rail lines near downtown. Another provision mandates both proximity to commuter rail and an expressway (less than 1/4 mile from each), and even though this seems so specific, try as I might, I cannot find out what the drafters had in mind. In all of these special districts, the either all, or the marginal increase in sales tax revenue gets redirected to bonds to pay off the development.
On top of that, the new bill mandates that the “special payment” made by the developer be allocated not just to the taxing bodies to offset lost revenue but be split 50/50, with half going to “property tax relief,” of which 60% is meant for direct local relief and 40% goes to a state property tax relief fund. We already know that the Bears are setting the SoFi Stadium tax level of about $8 million as the maximum they’re willing to pay, so it seems more likely that local governments will lose $4 million than that the Bears would pay double their expectation, to keep local revenues the same.
I watched the debate on the House floor, and many of the bill opponents expressed my thoughts.
Rep. Sosnowski called out the unfairness of the tax break, when it comes to restaurants and retailers — outside the Mega Projects district they won’t get the tax break and will be at a disadvantage compared to within the district. (To a certain extent this is less of a risk as the developer, e.g., the Bears, will pocket the savings and charge tenants the same rent as elsewhere, but they’ll still offer more advantageous terms if that ensures more successful tenants and fewer vacancies.)
Reps. Wilhour and Ugaste called out the claim that there was no need to “fix” the PTELL/tax cap blow-up issue because the local governments would retain control. Ugaste said (per my notes), “if local control could be trusted, we wouldn’t be having these laments about high taxes.” And Wilhour said, “we already have a property tax crisis in this state. This bill pours gasoline on it.”
And Rep. Didech made clear, in his support, the cynical reason for the property tax relief part of the bill: there would be a line item in property tax bills showing the amount of the relief and allowing lawmakers to take credit for it.
Yet despite all these giveaways, the provisions for infrastructure funding that the Bears have repeatedly said is an inseparable part of their demands of Springfield, were not included in the bill at all. And, without any specifics, the Bears immediately responded to the vote by saying “additional amendments are necessary to make the Arlington Heights site feasible for our stadium project.”
Did the Bears decide that, with the other new incentives in the bill, they would expand their demands? The STAR and the new NOVA special tax incentives exclude sports stadiums; do they want in on this to get sales tax revenue for themselves as well as the property tax freeze? Do they want, at the end of the day, more assurances from the legislature that the village of Arlington Heights and its school districts won’t be able to cite local control to stand in the way of their development plans or make a higher PILOT demand than they’re willing to pay? Is the “property tax relief” element just a non-starter? Or are the “amendments” referring to a demand that the infrastructure funding be in the same bill?
Folks, in other blog posts I’ve urged you to contact your State Rep/State Senator. Here it’s a done deal. But it’s still not OK. We must do better — and, whether I myself win or lose, we must all call on all Springfield legislators to govern more responsibly.