McHenry agrees to $1.5 million tax rebate for shopping center improvements

McHenry officials agreed Monday night to rebate up to $1.5 million over 20 years to the owner of the McHenry Town Center shopping center on Route 31.

Because of the deal, Ulta Beauty and Five Below plan to relocate from the The Shops at Fox River commercial hub to vacant space in McHenry Town Center, preventing them from leaving the city, according to city documents.

McHenry Town Center already houses an Aldi grocery store, Michaels arts and craft store, and Petco pet retailer.

The McHenry City Council voted Monday, 6-1, to approve the agreement, with 2nd Ward Alderman Andrew Glab opposed.

Under the agreement, the city will annually provide $75,000 plus 50% of the amount of sales taxes received in excess of 2020 baseline sales taxes generated from the section of the center owned by Advance Real Estate Management, which excludes Kohl’s. That baseline figure is $195,744.

The landlord will receive the rebates, and so far plans to spend much more than $1.5 million on renovations to accommodate the two relocating retailers, Ulta and Five Below, a representative of the company told city officials.

“They would leave the market area altogether,” McHenry Mayor Wayne Jett said of those retailers, had the agreement with the landlord not been approved.

Glab, who disagrees with the assessments of city staff and Jett more frequently than any other alderman, raised concerns with the state of the Town Center’s parking lot and questioned whether staff is taking code enforcement steps to prevent it from staying degraded.

“How did the parking lot ever get into the condition it’s in? Don’t we have ordinances that address this?” Glab said. “It’s like a roller coaster in there.”

The parking lot is set to be improved as part of the agreement, which was struck weeks after a 288-unit apartment complex was approved by the council for the property adjacent to the shopping center.

The landlord communicated it had a difficult time keeping tenants in place through the COVID-19 pandemic, and wasn’t able to amass funds to address the issues with the parking lot, which will be repaved and restriped as part of the deal with the city.

“There are actually multiple parking lots in the city of McHenry that are in very poor shape, and we are currently working with owners,” McHenry Director of Community Development Ross Polerecky said.

City staff noted sales tax incentives should be analyzed carefully by elected officials before approval, but recommended this one move forward.

“Rebates should be considered very closely and on a case-by-case basis which has been the policy of the City Council. Staff believes the proposed agreement is justified due to the extraordinary circumstances surrounding the proposed relocation,” city staff said in a memo. “The tenant buildouts are costly. Additionally, this will bring more traffic to the center and make the center more vibrant.”