PEORIA — If you have never heard about a special service area before, chances are, after the uproar over Portillo's much-ballyhooed arrival in Peoria, you've heard of it now.
But the flap over the effort to add an extra 1 percent to the sales tax at the Italian-beef-and-hot-dog restaurant — now apparently in limbo — is only part of the SSA story.
The special service areas, referred to as business improvement districts in most states, are specialized tax districts used to fund expanded services and programs through a localized property tax or sales tax.
SSAs were first established in Toronto in 1970 in response to retail pressure from malls and shopping centers, said Michael Freilinger, president and CEO of the Downtown Development Corp. of Peoria.
Freilinger has proposed an SSA for Downtown Peoria that would provide additional services such as landscaping, sidewalk maintenance and marketing. Initially, the DDC had proposed a 1/4 percent sales tax increase as part of the SSA but decided against that in the wake of public resistance.
“Even though it was just 1/4 percent, there was a lot of sensitivity to that. We know that sales taxes are already pretty high in some places,” he said.
To compensate for the $135,000 that Freilinger estimated would have been raised by the sales tax hike, the property assessment for those in the SSA area would go from 58 cents per $1,000 of the assessed value of property to 65 cents per $1,000.
One of the biggest reasons for enacting an SSA is to stay competitive, said Freilinger, who points to downtown Des Moines where he once worked as an example of a city that has made good use of a special taxing district.
Other Midwestern cities using SSAs include Madison, Wis., Chattanooga, Tenn., and Dayton, Ohio, he said.
"The level of taxation is a consideration, but you will get a more vibrant downtown with an SSA. We need to attract millennials to Downtown Peoria. To do that, we have to learn from cities that have been successful," said Freilinger.
While the Downtown SSA won’t be submitted for approval to the Peoria City Council until early 2018, other SSAs of various kinds are in place in Peoria. They use a combination of increases to property, sales and hotel taxes to pay for the improvements or services they provide.
The East Bluff Neighborhood Housing Services community-support organization is funded by a property tax SSA that raises about $66,000 a year. At the Junction City shopping center, the SSA helped finance construction of an intersection that was recently improved to ease traffic patterns.
A combination of property taxes, sales tax, and hotel taxes paid for the construction of the Louisville Slugger sport complex, while another SSA finances the Holiday Inn complex through a property tax/sales tax/hotel tax SSA package.
Westlake Shopping Center enacted a property tax increase in 2014 with an SSA that also included a .75 percent increase in sales tax at Westlake businesses — not counting groceries at Westlake's Fresh Market because groceries are exempt from the sales tax hike.
Tax revenues went toward covering the $4.4 million spent on paver bricks, replacing asphalt in the Westlake parking lot and a variety of other facility and security improvements. Westlake owners are now asking for city approval to increase the current Westlake extra tax, from .75 percent to 1 percent, to cover additional development costs.
The sales tax increase that developer William Torchia sought was to recoup some of the costs of land acquisition and development estimated at more than $5 million in order to land Portillo's across the street from Westlake on Sterling Avenue.
Torchia's attorney, Bob Hall, has represented a number of developers on projects over the decades. In that capacity, he is a big believer in SSAs.
"I've tried to sell the city on SSAs for a long time. Look at the upgrade to Westlake Shopping Center. It couldn't have been done without the SSA," he said.
"The city needs money, and I've tried to tell the city that it could benefit economically from Portillo's 30-year SSA by letting Torchia recoup his money ($65,000 a year for 20 years). Over the last 10 years of the SSA, the city would get the money. I don't know why that idea didn't get any traction," said Hall in an interview Friday.
But the whole idea of an SSA for one developer has stirred some resistance on the Peoria City Council.
“We’re talking about passing a sales tax for a single-property owner that has a company with a billion-dollar portfolio behind it,” said At-Large Councilman Sid Ruckriegel last month. In 2014, Boston-based Berkshire Partners purchased the Portillo’s chain.
“There are 53 SSAs in the Chicago area — none are established with just a single-property owner,” added Ruckriegel, noting that no incentives were provided to Chick-Fil-A or Avanti’s when those restaurants opened outlets in Peoria. "What business is going to come here without asking for this?”
Those Chicago SSAs involve neighborhoods like Greektown, the Stockyards and State Street. The city contracts with local not-for-profits called service providers to manage SSAs. Chicago's mayor appoints SSA commissions for each SSA district to oversee and recommend the annual services, budget and service providers to the city.
SSAs have critics such as the Illinois Policy Institute think tank, which defines SSAs as "taxation without representation for pet projects throughout Chicago."
"Even though there are 53 SSAs in Chicago, virtually none of the residents or business owners within these vast swaths of the city know they exist," stated Illinois Policy's Chris Lentino.
But businesses in downtown Galesburg know that the SSA that's operated there for 40-some years exists, said Phil Dickinson, owner of the Landmark Café & Creperie on Seminary Street.
"It's an important tool in our tool box. It's a great tool to assist property owners to reinvest in their properties," he said.
"It hits you in the pocketbook a little bit," said Dickinson of the 1.5 percent increase in property tax for businesses in the SSA area. "But I know the extra money I spend will be well utilized."
Galesburg's SSA is administered by the Downtown Galesburg Council that provides assistance on business projects up to $30,000. "If it's a larger project, the city will take it up a notch further — up to $90,000," he said.
The Galesburg SSA doesn't just provide help on big projects but handles "a myriad of little things" like trash cans decorated by artists and receptacles for cigarettes that have recycled 140 pounds of cigarette butts to date, said Dickinson.
The Peoria City Council will convene a special meeting in January to formulate SSA policy, but Hall said there's no need for a lengthy list of rules.
"An SSA is designed to have a public benefit. Our SSA policy should simply be that we're an open-minded, business-opportunity municipality," he said.
Steve Tarter covers city and county government for the Journal Star. Contact him at 686-3260 or firstname.lastname@example.org. Follow him at Twitter@SteveTarter and facebook.com/tartersource.