The pressure for Kankakee and Channahon to end their improper tax avoidance agreements increased with four municipalities signing on to the Regional Transportation Authority (RTA) complaint in the Circuit Court of Cook County. The villages of Lemont, Forest View, Stickney and Tinley Park joined the RTA as plaintiffs, citing the need to maintain a level playing field for all businesses and a desire to end the detrimental practice of Kankakee and Channahon’s tax avoidance agreements on economic development throughout the region.
The suit alleges the two municipalities are working with tax consultants and businesses to divert sales tax that properly belongs in the RTA region. Consultants utilize shell offices in Kankakee and Channahon to represent dozens of businesses, and then the municipalities kick back almost the entire amount of their local share of the statewide sales tax to the participating companies.
Lemont mayor Brian K. Reaves, Forest View village president Richard Grenvich, Stickney village president Daniel O'Reilly and Tinley Park mayor Edward Zabrocki released the following joint statement: “It is unfortunate that today we have to join litigation in which our municipalities are suing another municipality. As municipal executives, we all face difficult budget issues and are sympathetic to the challenges facing Channahon and Kankakee. However, because we feel so strongly that these tax avoidance agreements are the wrong answer to these challenges, we have joined the RTA’s lawsuit. This is an issue of fairness. Our region requires a level playing field for businesses to compete with one another and for municipalities to use economic development tools as the law intends. Businesses that utilize municipal services because their company and their employees are located in our jurisdictions should pay their proper share of taxes. We have no intention of bankrupting another municipality and sincerely hope that this dispute will end as soon as possible and that we can find a legislative solution to end these practices.”
The lawsuit is in part based on legislation passed in 2004 that forbids any municipality from entering into a tax sharing agreement with a company if that company isn't engaged in any legitimate business within the municipality and should be rightfully paying its taxes to another local government. The 2004 legislation provided the RTA and the new plaintiffs with the right to sue to force repayment of lost revenues.
“It is with great reluctance that we filed this lawsuit, but we have a fiduciary obligation to our riders to collect all money owed to the RTA,” said Joe Costello, executive director of the RTA. “The municipalities that are joining the lawsuit today represent just a fraction of the communities across the state that is being hurt by sales tax avoidance. It is our hope that we can avoid drawn-out litigation and work with the General Assembly to pass legislation to stop sales tax avoidance agreements.”
