McHenry Market Pulse: Does the City of McHenry offer incentives to attract a new business or keep an existing business in the City???

The City of McHenry has been very proactive in seeking to attract, retain and encourage expansion of existing businesses. The City has utilized economic incentives in the past and is open to offering them to attract the appropriate tenant to the right location or keeping a business in the City if extraordinary costs are associated with a project/development…Incentives are very carefully considered, and to provide clear guidelines on their use the City Council has adopted several policy documents…

In 2009 the City of McHenry adopted an Economic Development Plan; an incentive policy (Economic Development Strategy) in 2011; West Route 120 Corridor Enhancement Initiative in 2013 and Underutilized Property Tax Abatement and Incentive Program in 2014. You can find all of this by clicking on this link: (http://www.ci.mchenry.il.us/departments/development/economic.html);

Incentives are an additional tool utilized in economic development… They are definitely the exception and not the rule however in the past several years incentives have become more common in a more competitive economic environment. Incentives are considered on a case-by-case basis…

Traditionally, prior to the onset of many retailers downsizing their prototype stores, bigger was considered better however recently, to remain competitive, alter their brand, enter into a new market or simply to meet the needs of their customers retailers have reduced their square footage requirements…

When a retailer vacates a “big box” store, often the method, financially and practically, utilized to fill a larger vacant space is dividing it into multiple tenant spaces. There are high costs associated with dividing a bigger retail space into multiple tenant spaces, which may have been formerly occupied by one tenant. Unfortunately in retail particularly one size does not fit all…

Dominick’s closed their doors in 2007 in the McHenry Commons Shopping Center, located at the northeast corner of McCullom Lake Road and Richmond Road, leaving behind a vacant 76,000 square foot building. What made this building even more challenging to fill was the prior use was a grocery store, and a non-grocery retailer does not require all the interior fixtures/infrastructure a grocery tenant normally does.

The City entered into a sales tax rebate agreement in 2011 to attract Hobby Lobby because the dollar amount associated with renovating the interior of the Dominick’s building was very high and the incentive provided the extra push to get Hobby Lobby to locate in the remainder, approximately 52,000 square-feet, of the building which was vacant for four years. In this instance an economic incentive made sense: the shopping center had lost K-Mart/Sears Grand and Dominick’s and needed a larger anchor tenant to begin its revitalization…which is on-going…

In 2014 the City Council adopted the Underutilized Property Tax Abatement and Incentive Program. This program is geared not only towards retail businesses but non-retailers, such as manufacturing/industrial users. Non-retail businesses often do not generate sales tax therefore a sales tax rebate is not an option. The Underutilized Property Tax Abatement and Incentive Program provides an avenue for non-retail businesses to fill a larger vacant building or expand as opposed to relocating out of the City.

The program is designed to abate property tax or a portion of the property tax associated with the expansion area or additional improvements, which increase the property’s overall assessed valuation. This provides an incentive for businesses to expand and potentially abate property taxes over a certain time period so the company can absorb the expansion costs. In this instance the City isn’t abating taxes it’s already receiving but those which the City will realize from the expansion, and when the abatement period is over the City realizes the additional property taxes attributed to the expansion.

While stores closing and companies relocating are unfortunately not uncommon there are many challenges associated with filling those vacant buildings or alternatively keeping a business in the City. Incentives provide the City with an additional economic development tool to address these situations….

Coming in future blog posts:

What are economic development clusters and value chains?

What are SIC, SOC and NAICS codes and what were/are they used for?

What factors do non-retail businesses consider when thinking about relocating?

How do brick and mortar businesses remain competitive with on-line businesses?

What are Class A, B and C spaces?

Franchising? What is it? What companies offer it and what challenges are associated with attracting a retailer which operates exclusively using franchising?

Future trends in economic development: “market segmentation” “showrooming”; “pop-up” stores; “placemaking/third places” and “creating an experience”….