approved a motion to have its attorneys draw up legal documents agreeing to a $3 million settlement with the Target Corp. over a questionable 2005 deal in which the village agreed to fund a parking lot as an incentive to lure the big box chain to Oak Lawn.
Under the agreement that predates the current village board, except for Trustee Bob Streit (Dist. 3), the village took out a $4 million loan for Target to develop a “public” parking lot at 94th Street and Keeler Avenue.
In turn, T that would be collected by the village. Last year, it was discovered that Target never paid the Special Service Area tax that went into effect by ordinance in 2008.
“The parking lot would ostensibly and by agreement would be a public lot but became a retail lot for customers of Target,” Village Manager Larry Deetjen told the village board at its Tuesday meeting. “It is not a public lot.”
After the village pointed out the uncollected Special Service Area tax, Target paid the village $612,428 last fall.
The agreement struck in April 2005 also called for the village to maintain the “public” lot, including plowing it after it snowed. Deetjen refused to send village public works crews over to plow the lot.
“This was a deal that for all the right reasons and wrong reasons that I do not believe was in the public interest,” Deetjen said.
The settlement calls for Target paying the village $3 million to terminate the original agreement. Sales taxes, including a 1 percent local sales tax by the village in addition to the state sales tax, and a home rule tax of .5 percent would be split 50-50 with Target.
The village also would get 50 percent in property and hotel taxes generated by the former Holiday Inn. Anything above that increment would be split 50-50 with Target.
Deetjen recommended that the village board accept the settlement.
“We can then turn around and pay off the debt we incurred to pay Target for a parking lot that I don’t believe we should own and place on the tax rolls in our community,” Deetjen said.
“We’ve gone over this for months in executive session under the threat of litigation and also talked about it in public,” the village manager added.
Trustee Tom Phelan (Dist. 6), chair of the village board’s finance committee, estimated damages to the village at $2 million.
“We as a board spent a lot of time criticizing those who agreed to the deal,” Phelan said. “In fairness to them, now we need the criticism. I don’t want anybody leaving here thinking it was Target or the old board’s fault, it’s our fault. And we need to account for that.”
Phelan said a good portion of the legal investigation into the former village attorneys is trying to “figure out what when wrong and how it went wrong.”
Agreeing to the settlement also would eliminate any Special Service Area tax, village finance director Brian Hanigan said.
Mayor Dave Heilman said he had reservations now that home rule tax was added to the mix.
“When this settlement first came out, we discussed the fact that we thought it would be a better deal, we now see numbers that would suggest otherwise,” Heilmann said.
To turn down the settlement deal would risk Target taking the $3 million to another community. The village also could be on the losing end of costly litigation, incurring legal fees and possibly losing a lawsuit.
Deetjen said that since Target opened in 2007, the store has provided additional sales tax revenue of roughly $2.2 million—including state, local and home rule sales tax.
Target has also paid $450,000 in property tax since 2007. Deetjen advised that the village pay off its debt from the parking lot with the $3 million settlement. The parking lot, which would revert to Target, would also be returned to the public tax rolls.
“Target doesn’t care how we use the money,” Deetjen said. “In principle they’re saying they’ll pay (us) back for the full amount. This economy has certainly changed the value of the land. It’s not the same as before.”
Heilmann motioned to direct the manager to have legal counsel prepare the documents for approval of the Target settlement as presented, subject to the documents coming back to the board for final approval. The board also would be notified of any changes other than what was presented to them at Tuesday’s board meeting.
The village board unanimously approved the motion.