Through rebate program, City plans to support McGrath Kia’s expansion

A sales tax rebate agreement between a car dealership and the City of Highland Park appears likely after the City Council’s initial review on Monday.

The potential agreement with McGrath Kia was the focus of the council’s Committee of the Whole session on Jan. 12.

City Manager Ghida Neukirch said the city has offered a tax rebate program for more than 20 years “as an economy development tool to support our largest sales tax generators,” which include car dealerships and grocery stores. The program has multiple purposes, including “to support their increased economic investment in their property, to retain them in Highland Park, and also as a business attraction tool to attract other high sales tax generators to the community.”

In the case of McGrath Kia, located at 250 Skokie Valley Road, the business is planning an addition and remodel, according to Jamie Elder, the city’s business development manager.

Elder explained that the Kia corporation is mandating the upgrade for all of its dealerships. Locally it includes the addition of a showroom and sales offices totaling 7,158 square feet, and the addition of a service reception area and shop at 3,887 square feet — a project the City approved in December.

“The new showroom will have more glass, offer more vehicles, newer model cars,” Elder said. “I’d also anticipate new sales offices, which will allow for more sales staff, which also will lead to more sales of vehicles and also parts and materials.”

He added that the new service center will allow customers to drive in. Reportedly the project will result in approximately 68 new parking spaces.

The showroom is expected to cost $3.2 million, while the renovation is approximately $540,000, for a total of $3.75 million.

To receive that rebate, Assistant City Manager Erin Jason said McGrath Kia would have to cross at least $500,000 in sales-tax revenue every year — a number that will be adjusted for inflation. All sales tax collected above $500,000 would be split 50/50 between McGrath Kia and the City.

Under the program, city staff project a $300,000 total payout to McGrath Kia over the 12 years and are recommending a total rebate ceiling of $2 million, or 12 years, whichever comes first.

“We feel 12 (years) is an accurate amount of time for them to reach their maximum potential for this particular project,” she said, adding that the rebate program is only used for projects that will significantly increase the sales tax base in Highland Park.

It was also noted multiple times on Jan. 12 that if McGrath Kia does not hit its $500,000 goal in any year, the city is not responsible for any payments.

Speaking to the rebate program, Jason said it’s important to help retain car dealerships in particular, because she said they will often move to other communities that offer similar incentives. She said most of Highland Park’s neighbors offer a rebate program.

The City also has rebate agreements with Lexus of Highland Park, Gregory Hyundai and Muller Honda, among others.

“Being able to keep your car dealers in town, being able to have them reinvest in confidence in the community, that the community wants them to stay (and) the longevity that this represents is very important,” she said.

Mayor Nancy Rotering agreed.

“This is a highly competitive market,” she said. “We know that there are other communities that are offering similar incentives. This is not a grant, this is not a loan. This is an, ‘OK, you did a great job. You reached your threshold, now we’ll give you a little bit back to keep you here.’”

Neukirch added that the last tax rebate agreement Highland Park had was with a Lexus dealership in 2015, which reached its goal in nine years.

Councilmembers voiced support for the program and approving the agreement with McGrath Kia.

Councilmember Anthony Blumberg called it a “traditional way of helping to retain car dealers.”

“I think it’s very important to show our love, if you will, but it is, I think a reasonable economic commitment because it’s carefully calculated,” he said. “It requires that they generate the kinds of tax that they are expecting to generate. It does require certain minimum limits both in terms of initial generation of sales tax and initial outlay for the expansion of their facilities and a reasonable cap.”

Blumberg also acknowledged his opposition to the city’s restaurant incentives, including his vote last month against rewarding them to an applicant. But he explained that he sees the tax rebate differently.

“I think it’s a reasonable economic incentive program that, to me, differs from my complaints about the restaurant issue, where I feel that the city is making loans in an industry that is far more volatile than the car dealership industry, which has been pretty stable over the years,” he said.

Neukirch said city staff will work to put the agreement on the council’s agenda as soon as possible, likely at the Jan. 26 regular meeting.

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