Quick Hit Ellyn Fortino Wednesday September 4th, 2013, 11:13am

Elwood Takes Legal Action Against CenterPoint Over Prevailing Wage Dispute

The Village of Elwood wants CenterPoint Properties Trust to prove that it is complying with the state’s prevailing wage laws as part of a heavily-subsidized tax increment financing (TIF) agreement to construct a massive multi-use industrial park in Will County.

Elwood officials filed a complaint in Cook County Circuit Court August 28 asking that a judge require the Oakbrook-based real estate developer to hand over records that would show workers at the Deer Run Industrial Park redevelopment site have been paid according to state law.

According to Elwood’s complaint, CenterPoint has refused to provide any payroll documents to the village that would confirm that the company is adhering to the Illinois Prevailing Wage Act, which requires a minimum wage and benefits threshold for workers associated with publicly-financed projects. Under state law, developers of taxpayer-subsidized projects are required to keep such compliance records.

“We find it troubling that CenterPoint refuses to hand over public documents that would reveal if prevailing wage laws have been violated,” Elwood Mayor William Offerman said in a statement. “Because taxpayer dollars and public records are at issue, the village has a duty and obligation to ensure that prevailing wage statutes are enforced and that local workers are getting paid what they deserve and what is required by law.”

The recent court filing is the most recent addition to the village’s ongoing legal action over the project against CenterPoint, which is owned by the California Public Employees’ Retirement System (CalPERS), the nation’s biggest pension fund.

In February, the village filed a lawsuit in Cook County Circuit Court as a means to compel CenterPoint to detail how it spent $110 million thus far that the village has promised to pay back with public funds as part of the TIF agreement. Elwood officials filed the lawsuit after CenterPoint reportedly failed to release the information after multiple requests from the village.

Elwood, a small, far southwest suburb of Chicago, first entered into the TIF agreement with CenterPoint back in 2000 for the redevelopment of 1,820 acres of property at the former Joliet Arsenal site as part of the Deer Run Industrial Park project.

The village promised to give CenterPoint Properties a public subsidy of up to $150 million to construct the industrial park, including an intermodal train facility and a water and sewage treatment plant. The plan also called for a regional power plant and other industrial, retail and commercial facilities, including a hotel, the village’s suit reads.

CenterPoint said it would use $840 million of its own money for the project, which was expected to create up to 12,000 jobs and generate more than $20 million in annual tax revenue that would go back into the TIF fund, according to the village.

But Elwood officials claim that CenterPoint never built any hotel, retail or industrial facilities, and only 3,800 jobs have been created to date. According to Elwood’s suit, the project was supposed to be a mixed-use development, but CenterPoint has only built the intermodal facility and warehouses with lower-wage jobs. Truck traffic near the site is also three times greater than initially projected, the suit reads.

The real estate developer had previously estimated that Deer Run would generate between $20 million and $40 million per year in TIF tax revenue, according to the village. But Deer Run produced just $7.7 million in new tax revenue for the TIF fund in 2012, according to the village. Deer Run was supposed to generate more than $21 million in incremental tax revenue in that one year, according to the village's complaint.

“Less than one-third of the more than $20 million per year of projected TIF increment the developer promised has ever materialized,” an August 28 statement from the village reads.

As a result, the village hasn’t yet been able to reimburse all of the $110 million in public funds it says CenterPoint has spent thus far.

And the Bank of New York Mellon Trust Co. N.A., which administers the Deer Run project's TIF fund, has declared Elwood in technical default on its repayment obligations under the TIF agreement.

The village maintains that it has paid CenterPoint more than $45 million in available public tax dollars over the past seven years, but there’s simply not enough tax revenue being generated at the moment to fully pay back the developer, let alone the annual interest on the TIF notes it issued to subsidize the Deer Run project.

At its current pace, the industrial park is on track to produce $261 million less than projected in incremental tax revenue between 2012 and 2023, when the project’s TIF district expires. As such, Elwood alleges that it shouldn’t have to make any more TIF payments as part of the deal.

But the bottom line, Offerman said, is that CenterPoint has received public tax money. Therefore, the developer is obligated to tell the village how all "the money was spent and why the promises of economic development, jobs and revenue never followed,” the mayor said.

“Prior to filing the lawsuit, CenterPoint steadfastly refused to produce any records or information that showed its own financial contribution to the project, what investments were made and if the public money was properly spent,” he noted.

CenterPoint didn't comment for this story regarding Elwood's prevailing wage dispute, but it did send Progress Illinois the court document it filed back in April responding to the village's February lawsuit.

In its court filing, CenterPoint said Elwood brought the lawsuit “out of whole cloth” apparently because city officials are upset over the town being declared in technical default. CenterPoint went on to say that the case has “no merit” because the company did nothing wrong, and the village has not suffered any harm due to the default, which is simply a technicality.

CenterPoint also stressed that it alone is at risk for nonpayment of the TIF notes if Deer Run doesn’t create enough new tax revenue.  

Additionally, the developer noted that it provided the village with 44 pages of documents years ago detailing every invoice for how $88 million in TIF notes, which Elwood issued from 2000 to 2003 to reimburse the company, was spent. CenterPoint also maintains that it provided Elwood with other detailed information regarding the TIF financing.

"Even if Elwood were correct that CenterPoint has not provided a proper accounting for the monies spent, and Elwood is dead wrong on that point, Elwood's remedies do not include stopping payment on TIF notes that have already been issued," the company's court filing reads. "The redevelopment agreement does not provide such a remedy for the harm that Elwood is claiming to suffer ... The village cannot wait over ten years to ask CenterPoint to scour its records for receipts that were incurred between 2000 and 2003."


Log in or register to post comments