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With Michael's Gone, Village Re-Examines Tax Agreement with Lemon Tree

A new sales tax agreement was up for first read at Tuesday's Village Council meeting.

 

With Michael's Fresh Market closed for good—and not for remodeling like on-site signage indicates—the village revisited its sales tax agreements with Michael's and Lemon Tree Grocer during Tuesday night's Council meeting.

In 2009 the village made a sales tax agreement with Michael’s Fresh Market and Lemon Tree Grocer, but the agreement was conditional that both stores stayed in business. Michael’s is no longer, so the original agreement is null-and-void.

Now, a new agreement is on the table with Lemon Tree: for the next eight years the village will rebate 100 percent of the sales tax paid on groceries and packaged liquor—approximately $14,000 in 2012.

Lemon Tree, as part of the agreement, is required to operate a grocery store for a minimum of 13 years. If they don’t, they’ll be required to pay back the tax rebate on a specific schedule.

Additionally, 51 percent of its sales each quarter must be from grocery sales.

Mayor Martin Tully said this was a “unique situation because of how it fell into our lap.” Tully said the community was “screaming” for a grocery store in the downtown area and the Lemon Tree is a creative solution.

“This isn’t something I would do anything to maintain—it has to make sense,” Tully said, adding that if the council is comfortable with it, and it works within an existing framework, it should be pursued.

Commissioner Marilyn Schnell questioned where the 51 percent quota originated and Village Manager Dave Fieldman said it was based on past liquor practices.

Commissioner William Waldack said the Lemon Tree is a great business, but didn’t think subsidizing the business would be fair to its competitors—[the village] doesn't offer rebates to Jewel or Ultra, he said.

“I’m tending to think this rebate idea is not a good idea,” he said, adding that it's possible he could change his mind.

As for the the space that currently holds Michae'ls, there's no replacement at the moment, according to Michael Cassa, president of the Downers Grove Economic Development Corporation. Cassa said there have been some initial talks with businesses, but nothing far enough along to be worth mentioning.

Village Communications Director Doug Kozlowski echoed Cassa's sentiments, adding that at one point there was a petition filed to subdivide the property but that the petition had been withdrawn.

Scott C.

9:01 am on Wednesday, December 7, 2011

I'm all in favor of taking common sense steps to keep a value add operation like Lemon Tree downtown. Obviously we need to draw the line somewhere, but the realities of the marketplace require some level of flexibility. We should make whatever concessions are appropriate to be helpful if doing so impacts their ability to succeed in our downtown.

With respect to Bill, his analogy doesn't work. True, we don't subsidize Jewel or Ultra, but they aren't willing to put a store downtown DG, are they?

The Lemon Tree shares a lot of similarities with Wal Mart's approach to "Neighborhood Markets." The model is relatively new and still catching on, but its a growing trend. We should help Lemon Tree navigate these waters as they continue to operate in these early years.

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Cliff Grammich

9:20 am on Wednesday, December 7, 2011

And, Scott, we should subsidize businesses downtown because . . . ? I'm rather concerned about the large number of vacant commercial properties on my side of town, including that caused by the recent vacancy of Michael's. I'm willing to accept the judgment of the free market there. Can we accept it elsewhere?

But I'd really rather not get bogged down in arguing over a "mere" $14,000 subsidy. Rather than framing this as a discussion of how well we're developing downtown, I am very curious about how well DG is doing in comparison to others in attracting and retaining businesses. A report the village posted earlier, http://www.melaniphy.com/sites/default/files/Newsletter%20April%202011.pdf, suggested not very well, but it only goes through FY 2010.

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Scott C.

9:46 am on Wednesday, December 7, 2011

Cliff, I didn't make the call to subsidize them. The Village already did. The issue is whether the failure of one retailer for whom the deal was made should nullify it for the other.
I share each of your concerns about vacant commercial properties and DG's performance in attracting businesses.

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Cliff Grammich

10:14 am on Wednesday, December 7, 2011

Scott, the issue you raised, and to which I responded, was the geographic location of the business receiving the subsidy.

As for "whether the failure of one retailer for whom the deal was made should nullify it for the other," I don't know why the failure of one "micropolicy" should result in its re-engineering, but, again, why limit the discussion so? $14K one way or another ain't all that much. But such dribs and drabs can add up without a comprehensive plan to attract and retain businesses, and sales-tax revenues, throughout the village.

Cinda K. Lester

9:12 am on Wednesday, December 7, 2011

Word on the street was that Caputo's was moving into the Michael's space. Have there been any permits applied for?

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Jeffrey Crane

9:17 am on Wednesday, December 7, 2011

When we start giving concessions to residential taxpayers, then we can offer tax incentives to business. Business is attracted to location based on opportunity. Obviously giving concessions doesn't guarantee a successful business model. If the business fails in short order, the contract is null and void. What is the point?

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Scott C.

9:44 am on Wednesday, December 7, 2011

Jeff, the point is that the failure of Michael's is not the failure of Lemon Tree. A tax deal was made for these two retailers. One of them went out of business. So the question is whether it should nullify the deal for the other retailer, which is still in business and isn't responsible for the failure of the other but could be impacted by it.

Kent Frederick

9:18 am on Wednesday, December 7, 2011

Of course, there are some questions that need to be answered, such as:

Why did Michael's close the store? It had only been opened about 18 months.

Why is the DG location still shown on the Michael's website?

What about the rumor that people heard from store employees that the store was being sold to Caputo's?

Why hasn't Michael's removed the furnishings? That just give the impression that the store will reopen.

Why did Michael's put up signs saying the store was being remodeled, rather than saying closed and directing customers to other locations?

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Jeffrey Crane

9:21 am on Wednesday, December 7, 2011

Additionally, how much is the village willing to spend in legal fees to try to get a failed business to fulfill their contract?

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Linda Schranz

2:03 pm on Wednesday, December 7, 2011

I personally don't think that Lemon Tree is going to be around for eight or 13 years. And where will Downers Grove get the back taxes from if the store goes bankrupt?

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George Swimmer

5:54 pm on Wednesday, December 7, 2011

Life is a venture and there is some degree of risk in almost anything. The sales tax rebate, just like IRS tax credits, is a viable and often used incentive to attract business.
The Lemon Tree is a nice little business that adds some zest to our downtown. The employees are nice, the store is well maintained, and the number of people visiting the location seems to be growing. Yesterday I walked in to purchase one banana, and I was treated with a store coupon to a free salad at their very nice salad bar. It made my day.

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Scott C.

2:04 pm on Thursday, December 8, 2011

You need look no further than today's news about the departure of Sara Lee from Downers Grove to Chicago to realize the importance of tax incentives. Granted, the Sara Lee situation is a complex one, but if you read this article, the focus is on the incentives they had to move downtown.
They're simply part of the deal and part of our reality.
http://www.chicagotribune.com/business/breaking/chi-sara-lee-coming-back-to-chicago-20111208,0,3470995.story

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David Fisher

2:05 pm on Monday, January 2, 2012

I too heard Caputo's was moving into this space next Summer.

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