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Pilsen, Little Village, Back of the Yards

City Should Kill Hilco’s $19.7 Million Tax Break Deal After Botched Smokestack Demolition, Alderman Says

Ald. Michael Rodriguez wants the city to enact a "clawback" ordinance that would revoke economic development tax incentives given to corporations that “betray the public’s trust.”

Little Village residents protest the city's decision to restart Hilco demolition outside City Hall in Chicago in May.
Colin Boyle/ Block Club Chicago
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LITTLE VILLAGE — The developer behind April’s botched coal plant smokestack implosion stands to get $19.7 million in tax breaks to redevelop the site.

But Little Village’s alderman began the process Friday to revoke the incentives.

Ald. Michael Rodriguez wants the city to enact a “clawback” ordinance allowing the city to revoke economic development tax incentives given to corporations that “betray the public’s trust.”

In his crosshairs is Hilco Global, the company tearing down the shuttered Crawford Coal Plant in Little Village to build a massive Target distribution center.

Neighborhood residents have long protested the project, saying they finally got rid of one polluter only to get another in return. The diesel trucks streaming in and out of the distribution hub would worsen the neighborhood’s air quality, they say.

Their fears were realized April 11 when Hilco’s plan to remove the nearly 400-foot smokestack at the coal plant went spectacularly wrong, toppling the smokestack and sending a plume of dust and debris over Little Village.

Credit: Maclovio/ instagram@macnifying_glass
Little Village streets were covered in dust following demolition of a smokestack at the old Crawford Coal Plant April 11.

Ald. Rodriguez said that massive failure should trigger a revocation of Hilco’s tax breaks. He told a City Council committee Friday that an ordinance to do just that needs to be passed. He introduced a resolution calling on the city to create the needed law.

“These incentives are designed to spur economic growth, not stop that growth, and we’ve had that happen in our community and I want to make sure that doesn’t happen again,” Rodriguez said at a Friday hearing before the council’s Committee on Economic, Capital and Technological Development.

The tax incentives are technically a tool of Cook County government, but individual cities like Chicago must approve them. Similarly, the city can create a way to revoke the incentives, the committee was told.

Rodriguez’s predecessor, former Ald. Ricardo Munoz, helped Hilco get the tax break last year to redevelop the site despite the community opposition.

Known as a “Class 6b” tax incentive, Hilco only has to pay real estate taxes on 10 percent of its overall property tax assessment for 10 years. Years 11 and 12 are also deeply discounted, saving the Northbrook-based company $19.7 million over the life of the agreement.

Gary Epstein, executive vice president of Hilco, said in a statement the purpose of that particular tax break is to “attract new industry, stimulate expansion and grow employment opportunities.”

“This benefits the local residents and is used to encourage developers to take on complex projects that would otherwise remain obsolete and often contaminated,” Epstein said. “The future of this site in Little Village is very special, with major economic and environmental benefits for local residents and we’re eager to make this vision a reality.”

But Rodriguez says the company broke the public’s trust when its contractor botched the smokestack removal. The city quickly pointed the finger at Hilco and its contractors, but city officials approved the implosion, let it go forward despite the coronavirus respiratory pandemic and were on site when it happened.

The developer was hit with a $68,000 dollar fine, and demolition work was temporarily halted at the site.

“My resolution will start a process by which we can examine the record of, not just Hilco, but any company that wants the people of this city and this county to give them lucrative tax breaks,” Rodriguez said. “The city should not do this lightly, but there should be a process that gives us the option, when the company turns out to be a bad actor. It is certainly a consensus in Little Village that this description fits Hilco.”

Credit: Alejandro Reyes/YouTube
A drone video showed how the dust cloud spread from the Crawford demolition site and descended onto Little Village homes.

At the beginning of Friday’s meeting, Rodriguez read letters of support for revoking the incentive from U.S. Rep. Chuy Garcia and Cook County Commissioner Alma Anaya, who also represents Little Village.

But Kim Wasserman, executive director of the Little Village Environmental Justice Organization that has long protested the development, sent a letter to Rodriguez on Thursday saying the group “was not comfortable publicly supporting” his resolution because it lacked the teeth of an actual ordinance. The group meanwhile is working with Anaya’s office to learn how to kill the tax breaks at the county level.

“We learned Hilco will need to either reapply for the 6B or send in a letter requesting an extension. Hilco has submitted an updated application as of May 14th,” Wasserman said.

“We are now working to pressure the Assessor’s office to deny the application, and we are working with the Commissioner to bulk up the application process moving forward to ensure these processes can have a full County Commissioner vote moving forward and are subject to concrete steps for revocation versus the current culture-based ‘process’ that is being used, which lacks any formal actions or procedures for revocation,” she said. 

Officials from Cook County and the county assessor’s told the committee they encouraged the city to pass a revocation ordinance, saying it would be compatible with the intent of the laws that created the incentives.

In fact, a county ordinance passed in 2017 allows for municipalities to decide the rules for revoking a county incentive, said Dan Madden, an attorney in the assessor’s Office.

“When the incentive recipient fails to fulfill their promises, or turns out to be a detriment to the community, what is the recourse going to be?” he asked. “We certainly encourage the City of Chicago to make a formal, well defined process that would allow it to exercise the power bestowed on it by the County.”

Greg LeRoy, a development consultant and executive director of Good Jobs First, told the committee that not only is having a clawback ordinance considered a best practice for government tax incentives, but there’s no evidence that having one hurts a city’s ability to attract business. 

A study conducted by Good Jobs First, found that of 250 state incentive programs, 90 percent are protected with clawback provisions or structured to be performance based, where the company must reach performance metrics to receive the incentive.

“Virtually every major state program in the country protects taxpayers by either never delivering until the company does, or giving the state the right to take money back or rescind a deal or rewrite a deal to reflect a shortfall,” he said. “To me, the opposite position is indefensible.”

Tim Jeffries, of the city’s Department of Planning and Development, said the city has “not pursued revocation in the past” for legal considerations, but Jeffries has led a 6-month review of the incentive program and said revocation “absolutely has a role to play” going forward.

Ald. Gilbert Villegas (36), chairman of the committee and Mayor Lori Lightfoot’s City Council floor leader, said he hopes to create a clawback ordinance “at some point.”

Lightfoot’s office did not immediately respond when asked if she supports such an ordinance.

Read all of Block Club’s Crawford coverage here

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