The Cook County 7B ordinance says a 7B redevelopment must be “reasonably expected to ultimately result in an increase in real property tax revenue and employment opportunities within the area”.   Career Education claims this will happen for their 7B redevelopment plan.   This is highly unlikely for the following reasons.

1. 1. For the first 12 years, True Partners estimates a tax savings of about $15,000,000.  That shows that a 7B results in lower, not higher, tax revenue for at least the first 12 years.  
2. 2. Career Education only wants to sign a 12 year lease.   Career Education could enjoy a tax break for 12 years and then vacate—their lease would be up—they could just move again. If they stay longer, they start paying property taxes at the normal rate, but it will take many more years to recover revenue lost in the first 12 years.  
3. 3. The 7B application is required to compare real estate tax and employment with and without the 7B.  There were comparisons, but the comparison without Career Education Corporation (CEC) assumed the building would remain vacant for 12 years.  That is an unreasonable assumption for the highly desirable Woodfield area.   I made my own comparison below with more reasonable assumptions.

13-year Property Tax revenue estimates

Assumptions:

• Annual taxes when last occupied in 2005 were $2,070,193.
• Use True Partners estimate for 2011 taxes of $887,039 without CEC redevelopment.
• Use True Partners estimate for 2011 taxes of $868,132 with CEC redevelopment and a 7B.
• The building remains vacant 4 more years without  a 7B and loses its vacancy abatement

From a taxpayers’ viewpoint, we are far better off without a 7B and waiting for a re-occupancy to occur.  Without a 7B, when full re-occupancy occurs, tax revenues will jump by about $1,000,000 a year.  With a 7B, tax revenue will be guaranteed to stay depressed for the next 10 years.

It is true that CEC improvements will add value to the building and proportionally more tax revenue.  The problem is that that increment is too small to make up for the 60% decrement during the 7B years.  Extending True Partners 7B estimates and my more realistic “no 7B” estimate, it could take until 2066 before there is a net increase of tax revenue for this property .

1. The potential decrease in real estate tax revenue for the buildings Career Education will vacate is completely discounted.  There is no way to know when their old offices in Hoffman Estates will be leased.  Assuming a short vacancy in Hoffman Estates while assuming a 12 year vacancy at 231 N Martingale is biased.  Lengthy vacancies at the old Hoffman Estates locations would drastically decrease tax revenue that would dwarf the measly increases from a 7B in Schaumburg.     Hoffman Estates is also in Cook County and should be considered, since this is a Cook County tax break.
2. The current assessment numbers used by True Partners are correct except that they do not include the any increase in value for the remodeled window façade, lobby and lower level already made.  The owner has gone back annually for the last three years to maintain a low assessment due to vacancy and market value.   Yet the building assessment still does not yet include possibly millions in improvements completed around May 2008.  The assessor needs to reevaluate the property and the owner should pay any back taxes before additional tax breaks are granted.
3. The building is already paying about 40% of what it used to due to vacancy and market conditions so any redevelopment will show some increase on this one property compared to a bar set so low.
4. There are additional requirements for the documentation of a 7B that are missing.  Section 75-65(j) requires that statistical data is needed to compare the Commercial Blight Area to the entire municipality but these statistics were not provided.  Only a handful of nearby office buildings are provided for comparison.

Increased Employment

1. Oddly, for a tax break designed to increase employment, Career Education is not promising to add any permanent jobs.  Except for temporary construction jobs, all 1100 permanent jobs are transfers from Hoffman Estates. The application lists two EDGE tax credits, meaning some of these jobs are already have State of Illinois subsidies.  I do not think it was the intent of the 7B to subsidize a mere shift of jobs from one nearby suburb to another, especially jobs within Cook County, and jobs already subsidized by the State.
2. The County ordinance on retaining a 7B is extremely weak on employment increases.   Even if there are mass layoffs, the owner doesn’t lose the tax break or have to pay anything back. The only requirement is to file a report at every reassessment period.
3. The 7B application estimates the building rehab will generate 215 construction jobs—there is no data on how that was calculated.   A 7B is a major 12 year county tax break with a requirement to increase employment. The construction jobs are a good thing but only temporary.   I believe this long-term tax break was intended to create new permanent jobs, not temporary jobs.

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