CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
title
Pass the ordinance approving the Heinen Business District Redevelopment Agreement between Heinen’s, Inc. and the City of Naperville (Item 5 of 5)
body
DEPARTMENT: Legal Department
SUBMITTED BY: Michael DiSanto, City Attorney
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
In 2022, Heinen’s Inc. purchased the Butera Market building, located at 1256 through 1290 East Chicago Avenue. Heinen’s is an Ohio-based grocery store that plans to enter the Chicagoland market and build a grocery store at this location. During the due diligence period, Heinen’s became aware that the stormwater storage for the site, the adjacent bank, and the park behind the property is provided on the surface of the parking lot. The frequency of stormwater ponding in the parking lot did not appeal to Heinen’s.
A solution is to raise the parking lot and provide stormwater storage beneath it in buried vaults or chambers. This is an expensive solution. Due to the blighted condition of the site, and the additional cost to address the stormwater issue, Heinen’s sought to establish a business district as allowed by Illinois law. A business district consultant was retained by Heinen and found that the site meets the criteria for a business district and that enough revenue can be recovered by Heinen through the imposition of an additional one half of one percent (0.50%) tax to allow the site to be redeveloped.
DISCUSSION:
The Illinois Business District Redevelopment Act (the “Act”) allows a municipality to determine that it is essential to the economic and social welfare of the municipality that business districts be developed, redeveloped, improved, maintained, and revitalized, that jobs and opportunity for employment be created within the municipality, and that, if blighting conditions are present, blighting conditions be eradicated by assuring opportunities for development or redevelopment, encouraging private investment, and attracting sound and stable business and commercial growth.
On December 20, 2022, the Corporate Authorities of the City approved Ordinance 24-144 and Ordinance 24-145 establishing the Heinen Business District in the City of Naperville and imposing a 0.50% Business District Retailers’ Occupation and Service Occupation Tax on sales of general merchandise within the Business District.
Heinen’s, Inc. and the City have negotiated an agreement relative to the parties’ rights, responsibilities, and obligations related to the administration of the Heinen Business District (“Heinen Business District Redevelopment Agreement” attached hereto as Exhibit A).
The Developer has estimated that it will expend approximately $11,637,527 in hard and soft costs for the Project of which approximately $275,000 are costs related to stormwater management that are eligible for reimbursement solely from Business District Taxes. Said reimbursable costs shall not include any legal fees, costs of overhead, interest, or costs of issuance.
The agreement provides that a 0.50% business district tax will apply to general merchandise sold at Heinen’s (specifically excluded from the tax by the Act are: titled items (like vehicles), groceries, medicine and drugs, medical appliances, and some other health related items). The tax will be administered by the Illinois Department of Revenue, which will remit proceeds to the City, which in turn will distribute the proceeds to Heinen’s once an occupancy permit is issued and thereafter on an annual basis until the earlier of: (1) the expiration of the 23 year business district term; or (2) full payment of all actual expenditures of eligible expenses; or (3) full payment of the maximum reimbursement amount of $275,000.
Staff recommends City Council approve the agreement and authorize and direct the City Manager and the City Clerk to execute the agreement.
FISCAL IMPACT:
N/A