Car dealerships in the south suburbs have been hit with both barrels in the past few years.
The first shot was the already crippling property tax rates in south Cook County. Property taxes have doubled for some dealerships in recent years.
If that wasn't enough to put them out of business, the recession has slowed car sales to a crawl, taking down several dealerships in the area and putting others on the edge of closing.
One ray of hope that's emerged is Cook County's approval this month of new rules for a property tax incentive that could drastically cut property taxes for businesses - including car dealerships - that qualify.
The rule change was prompted by Homewood Mayor Rich Hofeld in an effort to keep a dealership in the village from closing.
"If they close we have a dealership that will never reopen, and that means people out of work and no sales tax," Hofeld said.
Steve Phillipos, principal owner of Steve Peters Chevrolet in Homewood - one of only two dealerships in the village - had appealed to Hofeld that without the incentive the dealerships would close.
"Without it we're dead," he said.
Hofeld went to the Cook County Board several months ago in an effort to get the requirement waived that a business must be abandoned for two years to receive the tax incentive. The board voted to do so April 15.
Phillipos said he still has a few hurdles to get over before his business can be fully operational. Currently, the dealership is down to a six-person staff trying to stay open long enough to get approved for the incentive and receive financing from GMAC to restock its inventory.
Tuesday night, Homewood's village board approved rebating much of its sales tax revenue back to the dealership to help it stay afloat during the rough economy. The county requires the tax rebate under the new rules for the incentive.
"That was the first step for the dealership to be fully operational," said Brian Liston, an attorney for the dealership who specializes in land use and tax incentive issues. Liston said the dealership still needs approval from Cook County for the incentive and from the Cook County assessor for property tax reclassification.
"We're gathering documents to show the dealership qualifies for the incentive," Liston said. "Steve Peters will be the first dealership to go in front of the board for this incentive, which can be a tough position. I feel confident the dealership can prove hardship. It'll set the pace for other dealerships that will apply."
Several dealerships in the area are looking to jump on board with the incentive if they qualify.
"Our property taxes have gone through the roof in the last two years," said Mike Jopes, CFO of Napleton/River Oaks Lincoln-Mercury in Calumet City. Jopes said the dealership now pays about $300,000 a year in property taxes while the business's sales have sharply dropped.
"Property taxes are such a prohibitive cost that we're considering whether we can stay here," Jopes said.
Jopes said he is just starting to investigate if the dealership qualifies for the incentive. He also is seeking the incentive for Napleton Lincoln-Mercury in Blue Island.
James Miller, co-owner of James Miller Chevrolet, said he pays approximately $140,000 annually in property taxes on his dealership at the Matteson Auto Mall. That, on top of his fears about the financial stability of General Motors, has given him enough concern to look into the incentive.
"I'll definitely call the village about it," Miller said. "We're struggling. There's a chance we won't survive."
Miller said such incentives, however, should be short term and not "just pad the pockets" of dealerships.
"I'm for it if it benefits a community and helps sustain a struggling business through rough economic times or another unforeseen hardship," he said.
The incentive reduces for five years a commercial business's property tax assessment rate from 38 percent to 16 percent, and an industrial business's property tax assessment rate from 36 percent to 16 percent. The incentive is nonrenewable.
Among the qualifications for the incentive:
• Businesses must be in areas including any real estate obtained through the Cook County Tax Reactivation Project; areas certified in need of substantial revitalization; an enterprise community; or any one of the following five townships: Bloom, Bremen, Calumet, Rich or Thornton.
• The municipality in which the business is located must agree to give back to the business a portion of its sales tax revenue generated from the business. The municipality also must support the incentive for the property.
• The business must prove that due to economic conditions its net income is down at least 40 percent compared with the average income of the previous three years.
• The business must provide evidence the incentive is necessary for the business to continue operations and would go out of business within 60 days without it.
The office of Cook County Commissioner Joan Murphy (D-Crestwood), who spearheaded the change in the incentive's rules, will be sending out information this week about the incentive to officials in her district. Murphy was due to speak about it Wednesday night to the South Suburban Mayors and Managers Association.
