As Tony’s Finer Foods prepares to open a new store Cermak Plaza in Berwyn this fall, the village of North Riverside is pondering ways to make its neighbor work a little harder to take the grocery store from its present home at 7401 25th St.
In late May, the North Riverside Village Board met in executive session to discuss probable or imminent litigation.
Mayor Hubert Hermanek Jr. later revealed to the Landmark that the closed session was convened to allow village trustees the opportunity to discuss whether or not to take legal action to prevent Berwyn from using a sales-tax incentive to lure Tony’s from North Riverside.
Right now, Hermanek said, the village hasn’t decided whether to file suit in Cook County Circuit Court to prevent Berwyn from using the incentive. But he didn’t rule out such action.
“At this point there’s been no decision on filing anything,” Hermanek said. “The purpose of that executive session was just to discuss our options in light of the fact of how upset our residents and the village was on what we thought Berwyn did in luring Tony’s.
“We didn’t take lightly what they did.”
In March, the Berwyn City Council approved an economic incentive that would reimburse Tony’s Finer Foods up to $5.2 million in sales taxes over a 25-year period. The city also waived building permit and utility tap-on fees as part of the relocation package.
According to the ordinance approving the deal, Tony’s would not have been able to make the move without such an incentive being offered.
The city of Berwyn says it has the legal authority to offer the sales tax incentive as an inducement to secure the move, but North Riverside’s legal counsel believes state law prohibits sales tax incentives to be used to lure a business from one town to another.
Village Attorney Michael Hayes pointed to a state statute governing “agreements to share or rebate occupation taxes” as a way for North Riverside to possibly challenge Berwyn’s use of the sales tax rebate. Sales taxes are included in the state’s definition of an occupation tax.
The state statute appears to be pretty clear in prohibiting the use of sales tax rebates to facilitate the move of a business from one place to another.
It states that a municipality “shall not” agree to rebate any portion of “occupation taxes generated by retail sales” if “the tax on those retail sales, absent the agreement, would have been paid to another unit of local government” and “the retailer maintains, within that other unit of government, a retail location from which the tangible personal property is delivered to purchasers.”
As if to drive home the point, the state statute also prohibits the ability of home rule governments, like Berwyn, to enter in such agreements. The law, the statute states “is a denial and limitation of home rule powers.”
Asked for comment on the state statute, Berwyn Mayor Robert Lovero, in an emailed statement, brushed off North Riverside’s look into potential litigation.
“In preparing for Tony’s Finer Food’s decision to move to Berwyn, we’ve been working closely with our legal advisors to ensure that the city of Berwyn has abided by all state statutes,” Lovero stated. “I understand Mayor Hermanek’s disappointment in a business leaving North Riverside, however, none of the tax incentives offered are in violation of state laws.”
In fact, the agreement with Tony’s approved by the Berwyn City Council in March includes language looking for ways to ensure the move if the sales tax incentive somehow got nixed after the fact.
A clause in the agreement states that if Illinois statute “becomes inconsistent with this agreement, then the city shall consult with Tony’s and make all reasonable efforts to substitute a mechanism to accomplish the intent of this agreement.”
Such an effort, however, “shall not be a general debt or obligation or obligation due and owing from the city or charge against its general credit or taxing powers.”
However, such an incentive could be paid out of tax increment financing funds, the agreement notes. Cermak Plaza is part of the Harlem TIF District, one of four TIF districts in Berwyn.
In the end, said Hermanek, the village of North Riverside most likely could not prevent Tony’s from making the move. Preventing the city of Berwyn from using the sales tax incentive would likely be a temporary roadblock.
“We can’t stop Tony’s from moving, but you can tell them you’re not getting that money from sales tax rebates,” Hermanek said. “We don’t want the residents to think that we’re just getting kicked around.”
