Regional Transportation Authority - Chicago

Kankakee Continues to Deny Public Access to Tax Rebate Agreements

The city of Kankakee has filed court documents refusing to provide the Regional Transportation Authority (RTA) with the information necessary for it to determine the full extent of the tax avoidance schemes that have cost local governments across Illinois millions per year in lost revenue.

In court filings on Nov. 23, Kankakee argued that it was not required to produce most of the documents requested by the RTA because to do so would be unduly burdensome and the requested documents are irrelevant. “Kankakee is simply stalling for time by preposterously claiming that the tax rebate agreements at the center of the lawsuit are irrelevant,” said RTA Executive Director Joe Costello. “We believe that the reason they don’t want this information shared with the public is that it will demonstrate the truth of the allegations we have made about the city’s role in aiding and abetting a scheme to shortchange taxpayers in the six-county RTA region.”

In its objection filed in the Circuit Court of Cook County, Kankakee also requested that if compelled to produce the tax rebate agreements, the court should order the RTA not to share them with the public. In addition to the tax rebate agreements, the city refused to produce: any documents that illustrate the amount of revenue Kankakee received through the rebate agreements; any correspondence it had with third parties promoting its tax sharing scam; a list of employees involved in administering the agreements; a list of the tax rebate consultants and the location and physical size of those consultants’ offices; and a list of the retail businesses operating from the various consultants’ offices.    

Kankakee also refused to produce any board meeting notes or records that relate to the tax sharing agreements. In response to a separate Freedom of Information Act request filed by the RTA earlier this year, Kankakee had previously denied that any such board meeting notes or records exist. Now, the city is arguing that it should not be forced to turn over the materials because it would be too much of a burden.

“Kankakee’s desire to stonewall the public is deplorable and its contradictory answers about the existence of documents that taxpayers have a right to see is alarming,” said Costello. “We intend to work to force the disclosure of all of the requested documents and we will fight any attempts to hide the true nature of these schemes from the public. Without an open government, citizens cannot hold elected officials accountable for their actions.”

The sales tax rebate agreements at issue are entered into by either Kankakee or Channahon with tax consulting firms representing businesses in jurisdictions where sales taxes are higher than the state sales tax. The agreements allow such businesses to source their sales as occurring at sham storefront offices in those municipalities. In exchange, those jurisdictions take a small cut of the sales tax and rebate the rest to a consulting firm. The consulting firm, in turn, takes a cut and then rebates an unknown, but likely significant, amount of the sales tax to the businesses. The result is that the businesses pocket most of the money themselves and avoid paying sales taxes to the local governments that are providing services, including transportation, to the businesses, their customers and employees in the place they are actually located. Kankakee and Channahon benefit by reaping a tax windfall without having to provide any additional services.

To ensure that the public has access to these records in the future, State Representative Carol Senate (D-Vernon Hills) recently filed House Bill 3859, which would require municipalities to publicly disclose all of the details of their tax rebate agreements—including the names of retailers and the terms of each deal.

A copy of the filing is attached or can be viewed by visiting www.RTAchicago.com.

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