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home : news : news   April 30, 2016

5/14/2014 5:43:00 AM
Property tax money on hold for three years as lawsuit unfolds


Business traveler Ernie Stacey of Detroit checks out of the Holiday Inn Express & Suites hotel Tuesday morning in Peru. The hotel has been at the center of a Tax Increment Financing district lawsuit for three years, placing property taxes from this parcel in limbo until the legal challenge is resolved.NewsTribune photo/Chris Yucus
+ click to enlarge
Business traveler Ernie Stacey of Detroit checks out of the Holiday Inn Express & Suites hotel Tuesday morning in Peru. The hotel has been at the center of a Tax Increment Financing district lawsuit for three years, placing property taxes from this parcel in limbo until the legal challenge is resolved.

NewsTribune photo/Chris Yucus
Jeff Dankert
NewsTribune Reporter



A Tax Increment Financing district in Peru has generated $246,414 in new property taxes since it was formed in 2010 but the money is being withheld until a lawsuit is resolved.

Recent activity in this case hasn’t moved the line in the sand and attorneys are preparing for trial.

In 2011, Dimmick school district and La Salle County filed a lawsuit asking the court to invalidate the Peru North Commercial TIF, arguing that the new Holiday Inn Express & Suites hotel did not qualify for TIF.

The lawsuit was filed against the city of Peru and the county’s treasurer and clerk. These officials are named only because of their capacity in administering property taxes, said Mike Reagan, an Ottawa attorney representing the city of Peru.

The attorney for Dimmick school district, Christopher Petrarca of Oak Brook, last month filed a motion for a default judgment for failure of the clerk and treasurer to appear, Reagan said.

“Meaning the order prepared by Dimmick’s attorney directed the officeholders, the clerk and treasurer, to act as if the TIF had never been created,” Reagan said.

Last week Reagan, on behalf of the city of Peru, filed a motion to vacate the order. This week, on Tuesday, a hearing was held before Judge Lance R. Peterson in Grundy County Circuit Court. Attorney Petrarca agreed with Reagan’s motion to vacate, Reagan said.

The $246,414 being withheld would normally be distributed to Peru and other overlying taxing districts — La Salle County, Dimmick school district, Peru school district, Illinois Valley Community College and La Salle-Peru Township High School. All but Dimmick grade school and the county have agreed to the TIF.

Most of the $246,414 incremental tax funds were generated by the increased property value of the Holiday Inn Express & Suites hotel. A portion of these funds, if unencumbered by the lawsuit, would cycle back to the developer — the main reason TIFs are attractive to developers.

The district is just north of the Interstate 80-Route 251 interchange. It extends east and west along May Road and up the west side of Route 251. The hotel was developed by Peru Hotel Group, whose managing member is Janko Financial Group, and was constructed across from the Wal-Mart and Kohl’s stores.

The Janko group loaned the city $45,000 to study if the area qualified for a TIF, and agreed that if no TIF formed, the city did not have to pay back the loan. Once the TIF formed in late 2010, it soon faced the legal challenge from Dimmick and the county.

Central to the agreement and lawsuit is an inducement resolution issued by the city, said Larry Bianchi of Janko Realty & Development. This allowed hotel development to begin in 2010 before the TIF was formed, a seemingly awkward arrangement that also invited the lawsuit.

“The reason we went ahead with the project is that we received the inducement resolution from the city of Peru that allowed us to go forward with the hotel project with the understanding that if the city were to form a TIF in that area, our parcel would be included,” Bianchi said. This was amenable because of the Janko group paying for the TIF study.

TIF districts presumably prompt development to overcome barriers such as pollution, dilapidation and declining property values. One of the impediments of the hotel property was storm runoff and flooding, Bianchi said.

TIF law hinges on a principle that says without TIF, development is unlikely. As a TIF district is developed, property values (and taxes) rise and a portion of the taxes, usually over 20-plus years, are invested back to the developer and the TIF district for certain qualifying improvements. The base property taxes of the district prior to the TIF are paid out as usual.

Critics, in this case, La Salle County and Dimmick schools, argue that the north part of the district, including the new hotel, needs no financial assistance, that there is no impediment to development, and it preceded formation of the TIF.

Dimmick school superintendent Ryan Linnig says there is excessive reliance on TIF. The school district’s website said there are seven TIF districts within Dimmick school’s boundaries that diverted nearly $450,000 in property taxes away from the district as of 2010.

One area of Peru’s North Commercial TIF District prompts virtually no dispute. Along May Road, several commercial properties have idled and disintegrated. In the case of the former Holiday Inn banquet hall and Kings Inn properties, even the TIF didn’t attract developers. The city bought these properties and is now demolishing them and removing asbestos. Once the TIF lawsuit is resolved and if these properties are developed, the city would be eligible for reimbursement form the TIF funds, said City Clerk Dave Bartley.

Jeff Dankert can be reached at (815) 220-6977 or perureporter@newstrib.com.












Reader Comments

Posted: Wednesday, May 14, 2014
Article comment by: Anonymous44309

How greedy is the Dimmick school district? They get nearly all their tax money from property owners in Peru. They should be thanking their lucky star, not ringing up lawyer bills for both sides trying to grab more money that they don't deserve.


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