BELLEVILLE — An alderwoman and a City Council candidate want more oversight of businesses given incentive deals.
Ward 7 Alderwoman Lillian Schneider and Michael Hagberg, a candidate for alderman in Ward 5, said the city's many tax increment financing districts prompted them to question whether businesses are held accountable when given incentives paid out with TIF money. They want city staff to check on the businesses and have updated information available.
"If we have the time to give the money out, we have the time to check on it," Schneider said.
Mayor Mark Eckert said city staffers check on businesses that get incentives. The city, however, does not have the staff to do monthly checks on every business that has an agreement with the city, Eckert said.
City officials approved about 45 business agreements since 2008.
Schneider told the City Council during a January meeting that when she started checking on such businesses, she found that Market Fresh Pizza, at Eighth and West Main streets, had closed. She asked whether the owner will be penalized.
The 2010 agreement states that the city gave the business a certificate that allowed for abatement of sales tax for building materials, an estimated $3,400 in savings, and agreed to reconstruct the sidewalk near the building, an estimated $6,600 in construction costs.
The pizza business agreed to invest at least $151,000, create 10 jobs in the first year and six jobs in the second year, stay open for five years and make $349,000 annually subject to sales tax.
Business owner Kevin Kobishop could not be reached for comment.
Development agreements in general call for owners to repay public money for failing to meet obligations. But Eckert and Finance Director Jamie Maitret said in this case, Kobishop did not receive money.
The city cannot require businesses to use the sales tax abatement certificate to buy building materials in Belleville, or even Illinois, and often businesses do not spend the full amount they're allowed.
Eckert said the city will not ask for money back for fixing the sidewalk because it's an improvement that benefits the area and the city as a whole.
Though it's unfortunate Market Fresh closed, Eckert said the business gave the building a facelift, leaving the neighborhood in better shape than before.
Still, Schneider and Hagberg want the city to track businesses diligently.
"Who's checking on it and are taxpayers getting what they thought they would be getting?" Hagberg said.
The city could do reviews on the anniversary date of every agreement or create an incentives committee tasked to track such deals. Such oversight would give city officials early warning if a business had any financial struggles.
Hagberg saw some red flags in Market Fresh's agreement. He questions why city officials thought the small business could sustain 16 jobs or make $349,000 in annual taxable sales.
Eric Schauster, the city's economic development specialist and grants coordinator, said the business, which sold fresh "take-and-bake" pizza dough, was the first of its kind in the metro-east.
Eckert said the city does keep an eye on businesses and actively recover money from those that fail to meet requirements.
The city has an ongoing lawsuit against Fischer Lumber, which closed in 2011. The 2004 agreement allowed the business rebates for incremental property tax increases up to $355,000 but also called for them to invest $2.58 million and stay open for 15 years.
Schauster said Harold Smith Pharmacy is another business in recent years to default on its agreement. The business repaid the city $8,000 for demolition costs.
"The city requested money back and we paid it back," Todd Evers said. "There are no hard feelings."
Evers said he closed the pharmacy in 2011, but the city is still better for it because the business succeeded in tearing down an adjacent "eyesore." Evers has since opened a discount store at the site.
Schauster said the pharmacy also was allowed a 25 percent rebate annually for incremental property tax up to $1,533 but never asked the city for reimbursement.
Incentives such as incremental property tax rebates have a built in checks-and-balances, so Hagberg prefers the city awarding this type of incentive instead of others.
To be reimbursed, business owners must first pay their property taxes, Schauster said. Then, before processing the rebate, the city asks for documentation of the business fulfilling other parts of the agreement, such as employing a certain number of people or generating a certain amount of sales.
The city has frequent contact with McCullough's Flooring at 4400 North Belt West because the business has a $95,000 loan from the city -- the only incentive of its kind.
Eckert said the city's agreement with McCullough's is a great example of a deal that has had a positive ripple effect.
"It was a breath of fresh air on that corner," Eckert said.
The incentives helped McCullough's stay in Belleville, helped Wagner Buick GMC sell the building and turned a vacant building around to draw more traffic to the area, Eckert said. The building now houses Abbott Ambulance, too.
Tracy McCullough, who owns the business with her husband, said their company had outgrown its facility on Main Street and was looking for a location that would accommodate their needs. They considered all options and their real estate agent suggested talking to the city.
"It definitely kept us in Belleville and helped us grow," McCullough said. "In a tough economy, it really helped us a lot. It's a win-win for all of us involved ... It's been a blessing."
McCullough said the incentives, when used properly, are a great tool to keep businesses in the area, and the city should continue to track and monitor the agreements as well.
When negotiating the business agreement, McCullough said the business set their sight on growth. Because of the location and larger space, they projected hiring more workers and greater sales.
McCullough said the business is on target for its goals: Last year was the business' best year as far as sales and they hired additional employees.
Schneider and Hagberg said they will continue to ask questions whenever the city decides to use TIF money as a service to taxpayers.
"Anybody that says, 'give me something,' they got something. There's no asking, 'Is this a good deal for the taxpayers?'" Hagberg said.
The most recent action was when the City Council approved $15,000 to pay for demolition and asbestos surveys for two buildings at the site of Midwest Plumbing, 118 N. 16th St. Critics say the area is not blighted and TIF money should be used for infrastructure projects or to fix streets in worse condition.
Eckert said the improvements to the area by the plumbing company was a factor that convinced nearby St. Paul's Home to go forward with its $27 million expansion.
Eckert also said Midwest Plumbing's owner, Dave Terschluse, has invested more than $50,000 to improve the site. The owner is also willing to pay for demolition and asbestos costs beyond the $15,000. Terschluse could not be reached for comment.
Since early January, Schneider has been asking the city for documents on development agreements dating back to 2008. She said the city's inability to readily provide the information indicate that city staff is not checking on the businesses.
Schneider said the importance of her request for transparency was underscored on Thursday when Wagner Motor Car Co. transferred ownership to Oliver C. Joseph Chrysler Dodge Jeep. Both car dealerships have incentive agreements with the city.
A review of a 2006 agreement, amended twice in 2010, showed that the city gave Wagner at least $2.4 million in the form of grants, rebate of incremental property tax increases and sales tax abatement. But a conversation with city staff was necessary to further determine the source of money, and when and how the money was distributed and used.
Hagberg also wonders how the city monitored the number of employees Wagner had or how much Wagner made in taxable sales each year.
The city receives sales tax revenue information from the Department of Revenue but the reports do not give a breakdown of money generated from individual businesses.
Eckert said the city has a good pulse on how a business like Wagner's is doing based on discussions with the owner and because the city's sales tax revenue continues to grow. If Wagner wasn't faring well, then the city would see a drop in sales tax revenue, Eckert said.
Eckert said Schneider's requests have been time-consuming for a city department that is already short on staff. Already, Schauster spent nearly 50 hours in January processing Schneider's requests -- time he said could be spent checking on businesses.
Eckert said Schneider's request is broad and she should talk to him if she has questions about specific businesses. Eckert said he appreciates Schneider's effort to watch taxpayers' dollars, but he feels like she is just out looking for mistakes by his administration because it's an election year.
Schneider is not on the April 9 ballot.
"If you look hard enough you can find something itty bitty to say, 'Gotcha!'" Eckert said. "But on behalf of my hardworking staff, I resent the way she's going about this. We're not asleep here and we're monitoring these things."
Contact reporter Jacqueline Lee at firstname.lastname@example.org or 239-2655. Follow her on Twitter at twitter.com/BNDBelleville.