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Those scrutinizing Navistar move question proposed tax incentives
By Jake Griffin | Daily Herald Staff

The distinctive satellite dish distinguishes the Alcatel-Lucent building in Lisle sought by Navistar.

 

Tanit Jarusan | Staff Photographer

Artist's rendering of what the new Navistar campus will look like from the air.

 

Navistar

How Navistar envisions its new corporate headquarters in Lisle.

 

Navistar

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Published: 3/20/2010 11:23 PM | Updated: 3/22/2010 10:07 AM

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When Navistar announced plans last summer to move its corporate headquarters to the mammoth and now empty Alcatel-Lucent building in Lisle, it was believed the ballyhooed deal would be wrapped up by March.

As the end of the month looms, completion of the move is hardly wrapped up.

The engine- and truck-building giant formerly known as International Harvester is looking to take over the building known for its massive satellite dish-shaped glass facade. It once was a bustling corporate campus, but now sits empty.

Admitted governmental and public relations missteps have dogged the proposal almost since the outset, but now the company is on a marketing blitz after resubmitting its relocation plan to Lisle officials who are deciding whether to create a special taxing district to help fund infrastructure improvements.

Navistar wants to amass its global operations in Lisle and bring hundreds of employees to DuPage, while creating 600 to 800 new jobs. Consolidating the company's research and development engineering corps is the cornerstone of the move, the company says.

Led by Navistar Vice President Don Sharp with assistance from communications strategist Dennis Culloton, the renewed effort focuses on the economic benefits to the village, county and region and partnerships with existing businesses. They're also doing damage control on the ill will created by the secretive and aggressive tack of the initial push. Lisle hasn't set a date to hear the latest proposal, but it's expected to go to the planning and zoning board in April.

Some wonder if it's too late. Hurt feelings linger on the DuPage County Forest Preserve commission, which took the brunt of the public's scorn over the proposed sale of its land adjacent to the relocation site. Commissioners complained they were never informed about key details of the proposed move that angered and worried residents who live nearby. Commissioners haven't decided if they'll extend the deadline on the land deal that runs out at the end of this month.

The upset residents remain suspicious of Navistar after the first go-round called for a massive diesel engine testing facility to be built yards away from their doorsteps and 126,000 gallons of diesel fuel to be stored even closer. They were joined in their outrage by the operators of a nearby school for autistic children who feared the potential of added noise and air pollution would be catastrophic for the children who are extra sensitive to such disturbances.

While the new plans move all those facilities much farther away and significantly decreases the amount of fuel being stored and number of testing bays, it's done little to mollify homeowners in the upscale Pebble Creek neighborhood. The residents remain vigilant at various board meetings, questioning future growth at the site that could bring back the testing bays and fuel storage, but their vitriol has shifted in recent weeks to Navistar's desire for the tax incentives.

Tiff over TIF

Creating a special taxing district at the relocation site has been a staple of Navistar's proposal since its inception. However, it's arguable without that demand, much of the hullabaloo over the move could have been avoided because the company is seeking no zoning variances from Lisle; it simply could have moved in to the building at 2600 Warrenville Road and fought for the addition of the testing center facility after taking custody of the property.

Now, opponents are using the so-called Tax Increment Financing District - originally valued at about $20 million worth of property tax rebates during the 23-year life span of the TIF - to thwart the move. They don't believe the multi-billion-dollar corporation needs the incentive.

"Navistar should be able to pay for their own construction," said MaryLynn Zajdel, a neighboring resident and a founding member of Citizens for Healthy Development, a group formed to fight Navistar's move. "TIFs are basically a shift of the property tax burden from commercial properties to other properties, mostly residential."

These taxing districts work by freezing the value of a parcel at its current assessed level for the duration of the district's existence. Any additional property value created during the next 23 years goes to the municipality to be used for infrastructure costs within the district.

Towns, park districts, libraries, schools and other taxing bodies can levy property taxes from a TIF district only at the value assessed when it was created. TIF opponents complain that these taxing bodies traditionally receive more revenue from property owners each year by lowering the property tax rate slightly while property values increase significantly. So a TIF district that sees a decreased tax rate will actually generate less tax revenue than it did the year before. Because taxing bodies can levy a specific dollar amount, they'll end up collecting more from other property owners to make up the difference.

However, property values throughout the county have been on the decline, and some don't believe property tax rate reductions are going to be as common as they've been in the past. That means a Navistar TIF would deliver a more consistent stream of property tax revenues than others in the area.

In any event, Sharp makes no apologies for seeking the rebate.

"We're going to pour over $100 million into this property, and all we're really asking is we don't get penalized and that we can recoup some of that investment in the form of a TIF," he said. "There's also a whole other stream of tax revenue that's going to come from the jobs we're bringing and that's in the area of $60 million to the whole state and local combined. We're putting a lot more money in this than we're ever going to get back from the TIF."

Also, the new workers will buy houses and shop in the county, Sharp argued. He also noted that hundreds of construction jobs will be created if the move goes through because of the renovations to the existing campus and new buildings that are planned.

But some are still skeptical of the need and the precedent it sets for future economic development projects. These taxing districts were initially created to clean up blighted areas.

Brian Costin, director of outreach for the nonpartisan research organization Illinois Policy Institute, doesn't believe the TIF is necessary.

"It's a kind of bastardization of the TIF laws and it perverts it away from the original intent, which was to give politicians a way to deal with blight," he said. "I understand they want to get as good a deal as they can, but this site isn't a blight. And this district is designed in this case to specifically benefit one company."

Sharp said the TIF is a significant financial incentive available to the company to remain in Illinois. Combined with the price of the property, it made sense for the company, whose corporate headquarters are now in Warrenville, to stay in DuPage.

"We believe staying in Illinois and the West suburbs was great for us and great for the area," he said. "Other states offer far greater packages, but what really made this project work is getting an attractive price on the property."

Big deals

Lucent Technologies had operated at the Warrenville Road site since 1982, but it made a major investment in the property during the telecommunications boom of the late 1990s and early 2000s. The company opened the so-called satellite dish building in 2001, creating a 600,000-square-foot campus on the 87-acre parcel.

At its height, nearly 4,000 employees worked in the buildings. But the tech bubble burst in the mid-2000s, Lucent merged with Alcatel, and the number of employees dwindled to about 2,000 in the spring of 2009 when the property was put on the market. It's been vacant since the start of this year.

It wasn't for sale long when Navistar came calling. The Daily Herald first reported Navistar's interest in July.

With a reported price tag of about $33 million, the deal was put in motion. Alcatel-Lucent spokeswoman Mary Ward wouldn't say if there were any other nibbles on the property. Navistar began trying to make the property whole again last spring in an effort to create its international headquarters and bring a reported 2,000 new jobs to DuPage. That number has since been reduced to 1,600.

The forest preserve had bought a ring road around the backside of the property in 2007 along with some other open land adjacent to the Danada Forest Preserve. Commissioners never wanted the road because of the cost of maintaining it, but Alcatel-Lucent demanded they take it as part of the deal.

Navistar wanted the road back to provide access for deliveries and to allow access to parking. However, the forest preserve can't sell its land to private entities, but it can sell land to other taxing bodies. So, the county and Lisle stepped in with economic development funds totaling $1.5 million - $1 million from the county and $500,000 from Lisle - to purchase the road with plans to give it to Navistar. An intergovernmental agreement was approved by Lisle's village board, the county board and finally the forest preserve commission in the summertime. Lisle Trustee Joe Schmitt and county board members Dirk Enger and Rita Gonzalez were the only elected officials to vote against the land deal.

The deal was heralded as an economic development victory despite the flagging economy. The state House of Representatives also unanimously supported a plan to give the company a $4 million tax credit for the next 10 years.

But the euphoria didn't last long.

Bigger problems

In September, Navistar revealed its original proposal, which included the maligned engine-testing facility and fuel storage plans.

Neighboring residents were outraged that the county and Lisle were giving away tax dollars and the forest preserve was selling a natural area for something they considered to be "dangerous" and "unhealthy." Hyperbolic comparisons to the atrocities of Hiroshima and Nazi concentration camps were part of several residents' speeches at various board meetings. The operators of the school for autistic children hired noted environmental attorney Shawn Collins to fight for them as well.

An e-mail uncovered by residents in November between Lisle officials suggested forest preserve President Dewey Pierotti would have to be coaxed into supporting the land deal through "backroom politics." The insinuation offended forest preserve commissioners, who told residents they were as surprised as anyone to learn of the testing facility because they had been assured by county and Lisle officials that the proposal had been properly vetted ahead of the agreement and wasn't controversial. Forest officials threatened to revoke the agreement, but didn't.

In addition, residents learned that one of Lisle's planning and zoning commissioners was a paid consultant of Navistar. Though the commissioner never participated in any of the hearings on the Navistar proposal, he never publicly revealed his connection and the reasons for his absence at those meetings.

By December, Navistar was pulling back. They asked Lisle for a "deferral" and eventually yanked their petitions.

In the meantime, Alcatel-Lucent began seeking a reassessment of its property value. They argued that because the property was being sold for $33 million, it should be assessed at that level and not its current $109 million value. A compromise that won't be formally approved by the county's board of review until next week, lowered the property value to $78 million. That set off another firestorm among the residents who accused Navistar of colluding with Alcatel-Lucent on the property tax appeal to "scare" elected officials into supporting the Navistar move so that a valuable commercial parcel would continue filling their coffers.

The residents blasted Lisle Township Assessor John Trowbridge II for even entertaining the notion.

"It would be like you showing up with a note from your mother-in-law at his office saying she might buy your house for a lesser amount," neighbor Zajdel said.

Trowbridge refused comment because the appeal is pending.

Sharp denies the residents' accusations, though he does say Alcatel-Lucent's tax appeal illustrates the dangers of leaving the property vacant. He said Navistar is committed to restoring the property's value to the $109 million mark if the TIF is approved.

"If the deal doesn't go and we don't end up buying that property, what do you think Lucent is going to do with a vacant property?" Sharp asked. "If we move, it gives the local taxing districts some comfort and stability that we're maintaining the property value."

Company officials most recently were in front of the forest preserve commission this past Tuesday, armed with supporters, mea culpas and answers. While they didn't receive any promises from the commission on an extension on the road sale agreement, they weren't denied, either.

"We're encouraged by the progress we're making with the forest preserve, DuPage County and village of Lisle as we all work extremely hard to get their questions answered and move toward approval of the agreement," Sharp said. "I'm really encouraged by the path we're on."