Due to vague reporting requirements, the IDOR database does not consistently provide comprehensive details about the specific structure of sales tax rebate agreements -- the state statute only requires that counties and municipalities report information on the process for determining the amount of sales tax rebated.  Sales tax rebates are typically structured to rebate a set proportion of sales tax revenues for a period of years or until a certain maximum rebate amount is met.  By setting a limit on the number of years or the amount of money, or including a sales threshold, a local government can establish more control over the amount of sales tax revenues that accrue to the municipality or county.  For example, a local government might agree that a business will receive 50 percent of state sales tax disbursements for 10 years that would otherwise have gone to the municipality, or up to $5 million.  Some agreements specify that the retailer must meet a certain sales threshold before the local government will rebate the sales taxes.  In some cases, both state and local sales tax revenue is rebated, while other agreements rebate just one or the other.  

 

Looking at only rebate agreements that report a maximum limit, a total of $495.9 million of local sales tax revenues could be rebated to businesses and developers if the agreements' maximums are met.  Of all agreements analyzed, 206 either have a maximum rebate amount listed in the database, or, in some cases, the maximum was known to CMAP through past research on sales tax rebates.  This does not mean that the business or developer will receive the maximum amount listed, but rather it indicates a local government's commitment to provide the full funds if sales reach a certain threshold.  Since a maximum is unknown or not in place for nearly half of the agreements, the total amount of sales tax revenues that local governments could disburse to business via rebates could therefore exceed $495.9 million.  The rebates with the highest maximum amounts tended to be entire shopping center developments and auto dealerships.  The following chart summarizes the distribution of maximum rebates among the 206 agreements where the maximum was known.  

 

 

The number of local governments with active sales tax rebate agreements has not changed significantly since November 2013, when the IDOR database was previously analyzed. Similar to the prior analysis, 132 local governments (131 municipalities and one county) across northeastern Illinois have an active sales tax rebate agreement as of November 2015.  Among the 36 municipalities in the region that had new sales tax rebates come into effect in 2014 or 2015, most already had other agreements in effect.  As shown in the following map, just seven municipalities had new rebates come into effect since November 2013.  

 

In Illinois, state sales tax revenue is disbursed to municipalities and counties based on where sales are made.  For municipalities, the revenues often exceed the cost of providing services and infrastructure to these developments.  This means that retail has the potential to provide a strong fiscal benefit to communities.  According to a recent study of Cook County development patterns, commercial and industrial parcels are more likely to be located near municipal boundaries in Cook County.  A municipality's fiscal benefits may increase if retail developments are located on their municipal boundaries because more of the service and infrastructure costs may be borne by neighboring jurisdictions.  

 

Not only are retail developments more likely to be located on municipal borders, this relationship may be even stronger for developments receiving sales tax rebates.  CMAP analyzed the extent that developments receiving sales tax rebates are near municipal borders, and the likelihood of locating near a border varied by type of development.  The City of Chicago was excluded because it has no sales tax rebate agreements.  Across the CMAP region, 60 percent of the rebates were provided to developments located on or adjacent to a municipal border.  In contrast, an estimated 47 percent of all retail businesses in suburban areas, with and without a rebate, are located on or adjacent to a municipal border.  As shown in the following table, retail developments receiving sales tax rebates were more often located near borders than vehicle dealerships.  Other types of developments receiving sales tax rebates were even more commonly located near borders.  These businesses are often distribution offices that may generate significant truck traffic, and thus increased infrastructure costs.  

 

 

Developments receiving sales tax rebates are also frequently located on or adjacent to non-local roads. The preponderance of retail locations on non-local roads may be due to the higher traffic volumes that many retailers require that are more typical of the state and county networks.  The State and counties also receive sales tax revenue that would help offset their increased roadway-related costs due to new developments.  However, these jurisdictions may not experience a net fiscal benefit if revenues do not support the costs of infrastructure for these developments, or if a cumulative volume of new development generates the need for accelerated expansion and replacement of existing facilities.  

 

Among the 359 sales tax rebates in the region, 88 percent of the developments were located on or adjacent to state and/or county maintained roadways.  The following chart illustrates developments receiving rebates by type of development and jurisdiction of adjacent roadways.  In addition, the market area of a given retail development likely encompasses roadways maintained by a variety of jurisdictions.