North Riverside trustees on July 13 voted to approve a generous sales tax rebate incentive to one of the village’s two car dealerships, resulting in a commitment for that business to remain in town for the next two decades.
According to the terms of the agreement passed by a 4-2 vote, the village will rebate to Zeigler Ford, 2100 Harlem Ave., 50 percent of the sales taxes it generates for the next 20 years.
The rebates are to be paid quarterly to the Kalamazoo, Michigan-based car dealer group, which purchased the business in 2018 from McCarthy Ford.
At the time Zeigler Automotive Group bought the business, its president expressed optimism that the location would be a good one for the company.
“We feel this store has great potential,” said Aaron Zeigler, president of the company, back in 2018. “With everything we know about this business and with the community’s support, we can really make this a successful store.”
Zeigler owns more than 25 dealerships in Illinois, Indiana and Michigan, and according to the terms of the North Riverside agreement, it’s prepared to make a significant investment in that business.
Dan Scheid, CFO of Zeigler Automotive Group did not respond to an email regarding the company’s plans in North Riverside.
North Riverside Mayor Hubert Hermanek Jr., however, said that Zeigler Automotive Group is in negotiations to purchase the roughly 7-acre parcel of land from Rizza Auto Group, which owns it.
Joe Rizza Ford had operated at that location from 1978 to 2017, when it sold the business to McCarthy Ford.
Hermanek said once Zeigler obtains the property, the company plans to expand the showroom and increase the dealership’s inventory. Aaron Zeigler met in person with Hermanek to pitch the sales tax rebate idea, reportedly telling the mayor that the company planned on investing $10 million to overhaul the property, modernize the showroom and significantly increasing its stock of new and used vehicles.
“He showed me the plans; it’s just beautiful,” said Hermanek. “But because of the cost, they wanted 50 percent of the sales tax.”
With the dealership changing hands three times in the past three years, Hermanek said the village getting a commitment from a major automotive group to remain in town for the long haul was vital.
“We certainly didn’t want to lose them,” Hermanek said. “It’s in everybody’s best interest that we have that commitment from them.”
North Riverside has never agreed to any sales tax rebate deals in the past, instead offering “grants” as incentives to keep or attract businesses.
In 2007, the village awarded Joe Rizza Ford a $600,000 grant to remodel the dealership when it added a new line of vehicles to the inventory. Two years earlier, the village gave Best Buy a $500,000 grant to expand its store in exchange for a promise to remain in North Riverside until 2018. The store is still there.
It’s unclear just how much money will be rebated to Zeigler Automotive Group, and the agreement does not cap the rebates at any set amount. State law requires municipalities to keep confidential sales tax receipts of individual businesses, but the state does release sales tax information for certain categories of businesses.
The “automotive” category, which includes car dealerships, gas stations and auto repair shops, brought in more nearly $2 million in municipal sales tax revenue in 2019. Another $806,000 was collected in non-home rule sales taxes in that category, but auto sales are exempt from that tax.
While rebating that sales tax revenue will direct it away from village coffers, Hermanek said the company expected to double its sales in North Riverside, offsetting that cost.
“There wasn’t a lot of wiggle room for negotiation,” said Hermanek, who added the agreement was similar to others the company has with other suburban Chicago municipalities.
According to the Daily Herald, Zeigler had a sales tax rebate agreement for one of its dealerships in Downers Grove where it was rebated 50 percent of taxes on the first $700,000 in sales and 75 percent on sales over $700,000.
In three years, according to the Daily Herald, the dealership had received $860,000 in sales tax rebates. The dealership proposed a similar rebate arrangement when it sought to expand its dealership in Lincolnwood, according to minutes of an August 2018 Lincolnwood Economic Development Commission meeting.
Zeigler pitched that village a 15-year agreement where the company would be rebated 50 percent of all sales up to $50 million and then 65 percent on sales above that amount.
The agreement passed Monday by North Riverside trustees states the company will begin construction of the improvements within three years and that they must be complete no later than two years after works starts.
Voting for the agreement were trustees Deborah Czajka, Fernando Flores, Joseph Mengoni and Terri Sarro. Trustees H. Bob Demopolous and Marybelle Mandel voted against it.
Prior to the vote, Mandel said the Zeigler proposal “was not brought before the board properly.”
“This was not held at a regular board meeting, and it was not asked of the residents to give their input at a public meeting and therefore I feel it’s improper and illegal,” Mandel said.
Hermanek replied that COVID-19 restrictions limited the ability for the board to meet and said he had called each trustee individually to tell them about the agreement and gauge their support. Trustees were also reportedly copied on multiple memos related to the proposed deal.
“You knew about this. You had plenty of opportunity to come back and ask me or anybody else regarding this,” Hermanek said.
Mandel insisted that the board could have met publicly via Zoom to discuss the proposed agreement instead of voting on it the first time the subject appeared on any public agenda.
Demopoulos appeared to have had a change of heart about the proposal, prefacing his no vote by saying, “I thought maybe at first it was a good deal, but it seems kind of greedy and might set a precedent.”
While he didn’t know the company’s exact timeline for the North Riverside location, Hermanek said Zeigler Automotive Group was ready to act.
“[Zeigler] said once they have a sale [of the property], they would like to get started as soon as possible,” Hermanek said.