TNC Lot 2, LLC is requesting Village approval for a Cook County Class 7c Property Tax Classification relative to 1421 W. Shure Drive, consisting of one parcel of property.  The property is currently 80% occupied by HSBC North America Holdings, while the remaining 20% has been vacant since the beginning of 2015. The property tax abatement in question would only apply to the currently unoccupied tenant space, which consists of 41,776 square feet of first floor space within a 209,271 square foot building.

In order for the new tenant, Northrop Grumman, to expand their operations into Arlington Heights, and for the tenant and property owner to adequately renovate the space, a Class 7c property tax abatement is being requested. The Class 7c incentive applies to commercial properties (in this case, office) whereas the 6b is designated for industrial users.  Additionally, the Class 7c incentive lasts only five years, with only one renewal opportunity whereas the 6b lasts 12 years with no current cap on number of renewals. 

The Village's guidelines for Class 7c applicants are based upon employing at least 100 workers, showing financial benefit to the Village, and commitment to providing 10% of their property tax savings over the first three years towards the Zero Interest Loan program. 

Per the incentive application, Northrop Grumman would bring 270 full-time workers to this property. The applicant anticipates having a positive financial impact on the Village with the company’s employees providing direct and indirect spending to Village businesses. Furthermore, the amount of property tax revenue gained from occupying the property with a Class 7c designation, as opposed to allowing the site to remain vacant, is estimated at over $1.9 million over the five-year life of the abatement.  The applicant has signed an agreement to provide the Village with 10% of their property tax savings over the first three years of the abatement in order to help fund the Zero Interest Loan program or other economic development programs as needed.

The County requires that the application meet four eligibility factors as well:

1. A real estate tax analysis verifying stagnation or a reduction in EAV during three of the past six years;
2. Evidence of vacancy and marketing efforts and three years of income tax statements;
3. Verification of the “but for” clause (i.e. development would not occur but for the incentive) and economic feasibility following the incentive period; and
4. Certification of increased tax revenue and employment.

Equalized assessed value decreased every year from 2013-2015.  Income tax statements were provided along with the application and the site has been heavily marketed since the building was renovated in 2015.  The application expresses that, but for the abatement, the space would not be economically feasible for the tenant.  Furthermore, increased tax revenue is shown through direct and indirect spending provided by 250 new full-time jobs, as well as the site generating over $1.9 million more in property taxes over the next five years with the incentive than with the tenant space remaining vacant.  Per the County’s requirement, an IC-IQ (Incentive Classification – Initial Questionnaire) form has also been completed and provided to the Village during the application review process.

Northrop Grumman is a Fortune 500 company looking to set up long-term facilities in Arlington Heights. The Class 7c incentive would allow for re-occupancy of a long-vacant 42,000 square foot commercial space, reducing office vacancy while allowing an established business to grow in Village and create additional employment opportunities. 

RECOMMENDATION

It is recommended that the Village Board approve the Resolution Approving a Class 7c Real Estate Tax Assessment  for TNC Lot 2, LLC for a 41,776 square foot portion of the property located at 1421 W Shure Dr.