WE HAVE MOVED!!!
Holsten Corporate Office is now located at:
1020 W. Montrose Ave, Chicago, IL 60613
So welcome to Wilson Yard, Mr. Holsten!
We're of two minds about this. On the plus side, if the developer is right there, it's probably going to be better managed, with fewer problems, than if he weren't. And even if he gets to leave every night to go home to the 'burbs, he'll have a taste of what Uptown is like (excellent, since he's made so much money from our TIF taxes).
On the minus side, we were promised that the Wilson Yard retail spaces would save Uptown economically. Yet we can't help but notice that the "small business incubator" spaces -- i.e., not Target -- are heavy on the services side, services that don't bring in sales tax. A real estate management company, a bank, a weight loss center, as well as some empty storefronts... no sales taxes. The nail salon and hair salon at least sell some products, which will add something to the tax base, even though it's not their primary business. But really, only Target, Subway and AT&T are adding to Uptown's tax base.
Wilson Yard has cost taxpayers $112,000,000.00. Can Target, Subway and AT&T pay it all back?
Assuming that Subway and AT&T are insignificant compared to Target, you can use Target's annual report to do the math. In 2010, Target had ~$66B in sales and 1750 stores, for an average sales per store of ~$37MM*. Assuming the standard 8.75% sales tax, that's ~$3.3M in annual tax revenue. Not accounting for the time value of money, that's ~4 years to break even, which doesn't account for the value to the residents of having a Target conveniently located, and a presumed "halo effect" of it being in the neighborhood.
ReplyDelete(*I realize some of their sales are through their website, but the Wilson Yard store is probably also higher in sales than an average store.)
Four years to break even? Huh?
ReplyDeleteThe four year estimate may be off by a factor of ten...
ReplyDelete(* Wilson Yard store is probably also higher in sales than an average store.)
ReplyDeleteSo it seems it’s a valuable site/good location, so why did Target need the TIF at all to build there?
Justin, since very little of the sales tax actually is directed to the city, I think your numbers are a bit off. At least 5% of the 9.75% goes to the state, with the rest largely split between RTA/CTA, the county, and the city's GRF. I'm sure there are a few others I'm forgetting.
ReplyDeleteIn any case, UU is right: for the neighborhood to break even on what the TIF sapped is not going to occur while any of us are still around.
so why did Target need the TIF at all to build there?
ReplyDeleteAccording to the "official" information, Target received no TIF money.
Patrick - Very good point, I don't know the breakout of the sales tax recipients and didn't want to venture a guess, but you're right. An appropriate analysis would only include those taxing bodies who are also represented by the property taxes that funded the TIF.
ReplyDeletePlease keep this in mind as well... this is not a "Super Target" and while sales may be more than some, even most, standard Targets, I sincerely doubt they're more than many "Super Targets;" the sales mix, i.e. low tax to high tax is also not a given. So, given that the city gets 1.25% on "high tax" and 0% on "low tax" and given that Target's sales are something more than 0% grocery, drugs, and optical but something less than 100% grocery, drugs, and optical, we can only give a range for annual sales tax collection on the mean store sales. .0125 x 37MM is $462,500; the most one could expect the store to generate. If 10% of gross sales are for low tax items, only 416,250 would be collected. So, for Helen and Peter's $150 million dollar project, we're looking at a 325 plus year break even.
ReplyDeleteDon't forget about the income taxes paid for the rental units and commercial leases. Seems like that number would be much larger than sales tax will ever generate.
ReplyDeleteNot sure what your point is Kieran but, I wouldn't expect extremely low income, very low income, and low income renters to pay much, if any, income tax. Peter collects the commercial leases, not the taxpayers.
ReplyDeleteSorry, didn't think that through Bradley. Holsten is a corporation and pays income taxes like everybody else... except that money is going to state and federal, not helping our local tax base directly.
ReplyDeleteThis is based on if Target was not there people will not shop some where else.
ReplyDeleteDo the taxes paid the now employed employees count? Particularly the ones that live in the city, which is most. If they were still unemployed they would be spending less.
ReplyDeleteIf so I have no idea how to quantify the contribution.
It looks like the consensus here is break even in 4-325 years.....wonderful.
On a positive note... now that a milliionaire is moving his office to Uptown, maybe some of our money will be spent in Uptown. S'pose he'll be lunching in the hood? Getting his hair did?
ReplyDeleteThe income taxes paid by the residents of the apartments at Wilson Yarks are irrelevant in any calculation of what the project generates in taxes, since the income taxes (very little in any case) go to the state and the federal government, and do NOT go to the TIF.
ReplyDeleteSo why mention them?
The TIF is a massive loser for the taxpayers, and mostly funded the apartments, which cost over $400,000 a unit to build. The sickest part is that, while they were being built, the housing market was tanking, and there were scores of recently rehabbed condos available in the area for much less than $400K. The condos at Leland& Winthrop, in the rehabbed Victorian building hard by the el tracks, were available, briefly, for as little as $20K a unit, with about $40K in work necessary to correct damage done to the units while they were vacant.
Government-directed "economic development" is usually a massive waste of money. At best, it might restore a few significant buildings, but more often it foists inappropriate development on the area. There is no guarantee that the businesses it lures will stick around long enough to generate significant payback- look at Borders Bookstore, or Brickyard Mall. Since this location is very advantageous for Target, methinks they would have located there without the TIF.
At least the Wilson Yards TIF gave us a reasonably attractive apartment building, but it shouldn't have cost anything like $440K a unit to build, for tiny, featureless apartments. The developer made out like a bandit on a project for which there will be no profit for the city at all.
I'm glad to see he is moving his office here!
ReplyDelete