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Pilsen, Little Village, Back of the Yards

City Council Approves Plan To Scrap Tax Breaks For ‘Bad Actor’ Developers — But It Won’t Apply To Hilco

The ordinance gives the city a way to penalize companies that violate rules and development agreements. But it will not apply retroactively to Hilco, responsible for the demolition that covered Little Village in dust.

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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CHICAGO — Chicago’s City Council approved an ordinance Wednesday that gives city leaders a new tool to punish “bad actor” developers who violate rules and endanger neighbors.

The ordinance allows the city to claw back lucrative tax incentives from developers who fail to comply with environmental rules and other city regulations. But it can’t be used retroactively to discipline companies like Hilco Redevelopment Partners, the developer responsible for a botched demolition that covered Little Village in dust.

Ald. Michael Rodriguez (22nd), who represents parts of Little Village, introduced the measure after the botched implosion. Rodriguez hoped passing the ordinance would allow the city to revoke the $19.7 million tax break it granted Hilco to redevelop the site into a Target distribution center.

But officials with the city’s Law Department said the measure won’t apply retroactively to previously awarded tax breaks like the one awarded to Hilco.

“The new revocation grounds created by the ordinance do not apply retroactively,” Kathleen Fieweger, a spokeswoman for the department, said Tuesday.

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

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

Asked last week, a staffer with the city’s Department of Planning and Development said they could not say whether the ordinance could be applied to past city contracts.

Rodriguez said the passage of the ordinance nonetheless sends a “strong message to bad actors in the city that they’re going to be held accountable.”

The city must pass legislation to approve tax incentives, which are championed as a vital tool for economic development. But the tax breaks themselves ultimately are awarded by the Cook County Board of Commissioners. The Board allows individual municipalities to create their own mechanism to revoke the incentives.

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 developer — or new owners if the property is sold — $19.7 million over the life of the agreement.

After a similar resolution was passed in July, Gary Epstein, executive vice president of Hilco, defended the tax break.

“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.”

Last week, Rodriguez told Block Club an attorney with the City Council’s Legislative Reference Bureau issued an opinion that the ordinance could be used to go after incentives already awarded.

“Considering that there was a county law allowing for revocation previously, we’re going to keep on looking at the applications of the law,” he said Wednesday.

“With Hilco, there’s been a lot of bad actions, and we’re going to continue to use all of our powers to hold them accountable,” he said. 

Prior to the committee meeting, Rodriguez amended the ordinance to reflect recent changes made by the city to require companies receiving property tax incentives to sign redevelopment agreements with the city.

Now, a tax break can be revoked if the company breaks a redevelopment agreement, violates federal, state or local law, or violates environmental laws if they were a consideration in awarding the incentive.

If a resolution calling for revocation is filed, the Committee on Economic, Capital and Technology Development would provide notice to the property owner and the resolution would be sent to committee for a public hearing with a recommendation from the commissioner of the Department of Planning and Development.

The mayor, Planning and Development commissioner and alderman would have the ability to file a resolution calling for the revocation of a tax incentive.

Read all of Block Club’s Crawford coverage here.

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