Local Government

Quincy Mall wants additional sales tax funds to help renovate vacant J.C. Penney space

JCPenney

Michael Kipley
By Herald-Whig
Posted: Apr. 26, 2016 8:45 am Updated: Apr. 27, 2016 7:53 am
QUINCY -- The owner of the Quincy Mall is asking the city to increase the percentage of the nonhome-rule sales tax it receives to help with renovation of the vacant J.C. Penney space to attract a new national retailer.

Peoria-based Cullinan Properties would receive 75 percent of the 1 percent non-home rules sales tax generated by retailers in space it leases, instead of 50 percent in select space if an amended mall redevelopment agreement is approved by the City Council.

The Finance Committee recommended the proposal for adoption by a 3-2 vote Monday night.

Aldermen Mike Farha, R-4, Tony Sassen, R-4, and Jack Holtschlag, D-7, recommended approval of the agreement, with aldermen Paul Havermale, R-3, and Jennifer Lepper, R-5, dissenting.

Lepper asked whether Cullinan reviewed converting the mall to an outdoor property as the firm has done with other properties.

"Are we just putting money into a dilapidated building that's not working?" she asked.

The J.C. Penney space has been vacant since April 2015, and Cullinan says it has a potential tenant interested in the space.

Chuck Bevelheimer, director of planning and development, said the amended agreement would assist the mall in a $4.2 million redevelopment of the 90,000-square-foot J.C. Penney space. The amended agreement would not take effect until the mall has a lease signed with a new national retailer.

"Some of the existing tenants have clauses in their leases which will allow them to vacate if an anchor is not found," Bevelheimer said. "That's making it tough for Cullinan to secure long-term leases for the retail shops at the mall. Adding a new anchor would obviously build confidence amongst those small retail shops and obviously boost our sales tax receipts."

Under the agreement approved in 2006, the company recoups 50 percent of the 1 percent non-home rule sales taxes generated by stores in new leasable space, such as the Starbucks, Petco, and the building that previously housed TGI Fridays. In 2011, the deal was modified to included the three anchor stores and five "chronically vacant" spaces.

The agreement, which expires in 2029, has a cap of $6 million. So far Cullinan has received $687,000 in rebates.

Michael Norbutas, chief financial officer for Cullinan, said similar sales tax reimbursements are common with many of the firm's properties.

"As a consequence, major retailers are very focused on return on investment, and very particular where they put their dollars to get their best return," Nortbutas said. "What we're trying to do is entice them to the Quincy Mall location, and try to make that location as attractive to them as possible."

Bevelheimer said the city returns $126,000 a year to the mall in sales tax reimbursements.

If the amendment to the agreement is approved, $415,000 is expected to be generated annually, with some generated from the new retailer. A new tenant is projected to have sales between $4 million and $8 million annually.

The mall had $58 million in taxable sales in 2015, creating $1.3 million in sales taxes for the city. The mall also generates $480,000 in property taxes, and its stores employ 668 people.

If the council denies the request, Norbutas said Cullinan would continue seeking a tenant for the space.