cover
TO: Mayor Robert J. O’Connor
FROM: Bill Wiet, Chief Development Services Officer
DATE: November 16, 2016
SUBJECT:
To amend Resolution R15-261 to replace the rebate funding mechanism from the approved State Retail Sales Tax rebate, to the City's Food and Beverage Tax rebate. In doing so the difference in rebate formula would provide the necessary funds to the project as first recommended.
PURPOSE:
City of Aurora Ordinance #R15-261 outlined a tax revenue sharing agreement with JTE Family Properties, LLC (JTE). That Ordinance identified the tax revenue as “retail sales tax.” The tax revenue sharing agreement should have been written as a food and beverage tax. The retail sales tax would not have produced the necessary funds to reimburse JTE for a portion of their improvements.
BACKGROUND:
Per the agreement, JTE purchased the vacant building at 1030-1034 Prairie Street. JTE renovated the property to operate as a restaurant, now known as Spartan House. Spartan offers a menu of pub food in a casual dining environmental, interactive vending, and five video gaming terminals. Per the agreement, JTE made required right-of-way improvements to Prairie Street, and the City of Aurora made required right-of-way improvements to Hartford Avenue. Given the total investment costs of the project, the renovation would not have been feasible without economic assistance from the City through a food and beverage tax revenue sharing agreement. At present JTE is exceeding its sales projections.
DISCUSSION:
The tax revenue sharing agreement will provide a rebate to JTE up to $110,000 over a ten year period of food and beverage tax generated by Spartan House. The current rate of food and beverage tax is 1.75%. The food and beverage tax rebate allocation shall be as follows:
Year 1 (90%): $18,900
Year 2 (80%): $16,800
Year 3 (70%): $14,700
Year 4 (60%): $12,600
Year 5 (50%): $10,500
Year 6 (50%): $10,500
Year 7 (50%): $10,500
Year 8 (50%): $10,500
Year 9 (50%): $10,000 (remainder, projected)
Year 10 (50%): (any additional remainder, TBD)
Conditions:
If JTE Family Properties, LLC fails to meet the obligations agreed upon within the Food and Beverage Tax Revenue Sharing agreement, the City shall be repaid in the following manner:
In the first twelve (12) month period after the Commencement Date, the City shall be repaid one-hundred percent (100%) of any sums paid or rebated to JTE pursuant to this Agreement, since the Commencement Date.
In the second twelve (12) month period after the Commencement Date, the City shall be repaid ninety percent (90%) of any sums paid or rebated to JTE pursuant to this Agreement, since the Commencement Date.
In the third twelve (12) month period after the Commencement Date, the City shall be repaid eighty percent (80%) of any sums paid or rebated to JTE pursuant to this Agreement, since the Commencement Date.
In the fourth twelve (12) month period after the Commencement Date, the City shall be repaid seventy percent (70%) of any sums paid or rebated to JTE pursuant to this Agreement, since the Commencement Date.
In the fifth twelve (12) month period after the Commencement Date, the City shall be repaid sixty percent (60%) of any sums paid or rebated to JTE pursuant to this Agreement, since the Commencement Date.
In years 6-10 following the Commencement Date, the City shall be repaid fifty percent (50%) of any sums paid or rebated to JTE pursuant to this Agreement, since the Commencement Date.
IMPACT STATEMENT:
The impact should be minimal given JTE Family Properties LLC will be rebated with funds that are produced at the premises.
RECOMMENDATIONS:
The Invest Aurora Board of Directors at their regularly scheduled meeting on 8/11/15 made a favorable recommendation of the Food and Beverage Tax Revenue Sharing Agreement between the City of Aurora and JTE Family Properties, LLC.
It is the recommendation of Invest Aurora staff that the Finance Committee recognize the error in the previous Invest Aurora memo and City of Aurora Ordinance, and correctly award the food and beverage tax rebate in an amount not to exceed $110,000 as established in the schedule above.
cc: Alderman O’Connor, Chairman
Alderman Mervine
Alderman Bohman
Alderman Mesiacos, Alternate
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution Approving First Amendment to Resolution R15-261 Authorizing the Execution of a Sales Tax Revenue Sharing Agreement between the City of Aurora and JTE Family Properties, LLC for the Property Located at 1032 Prairie Street, Aurora, Illinois
body
WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, The City Council of the City of Aurora approved on September 8, 2015 by Resolution R15-261 a Retail Sales Tax Sharing Agreement for the property located at 1032 Prairie Street; and
WHEREAS, the Agreement proposed a State Retail Sales Tax rebate with JTE Family Properties, and
WHEREAS, it is desirous to amend the Resolution to replace the State Retail Sales Tax rebate with the City of Aurora Food and Beverage Tax rebate in order to produce the necessary funds to reimburse JTE Family Properties LLC for their investment into the project.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows:
1. That the Mayor and City Council of the City of Aurora hereby find that it is in the best interests of the City of Aurora and its residents that the aforesaid "First Amendment to Sales Tax Agreement" with JTE Family Properties LLC be entered into by the City of Aurora, with said First Amendment to be substantially in the form attached hereto and made a part thereof as Exhibit A.
2. That the Mayor and City Clerk of the City of Aurora, Kane, Kendall, Will and DuPage Counties, Illinois, are hereby authorized to execute for and on behalf of the City of Aurora, the aforesaid First Amendment to Sales Tax Agreement.