Arlington Heights Considers Innovative Biz Loan Program

Arlington Heights’ Economic Alliance committee is researching an innovative idea that could help the village offer zero interest loans to small businesses, but it would be at the expense of big business.

The idea behind the Small Business Zero Interest Loan program involves funding it through a tax abatement program offered to industrial businesses. Currently, 16 to 18 businesses received a Class 6B Tax Incentive, which gives the businesses a reduction in their property taxes.

Class 6B businesses have their property assessed at 10 percent of the market value rather than usual 25 percent, said John C. Melaniphy,  Arlington Heights Business and Development Coordinator.

Under the Small Business Zero Interest program, the 10 percent business save on property tax assessment would go to a special fund, which would be used to provide the loans, Melaniphy said.

For example, if a business is saving $129,000 a year in the tax abatement, the savings would go to the village for the small business loan. Business owners would have to agree to pay the monies.

“It’s a double edge sword,” Alliance member Michael O’Connor said at a meeting this week. “It’s attracting new business but for the people who have their savings reduced, it may sting a bit in this economy.”

Alliance weighs effect

The Alliance, a committee made up of local business owners focused on economic development, is being cautious about its options.

There is concern about the Class 6B businesses if some of their savings is taken away, he said. If the alliance recommends the change to the village board, it would be a significant change for the companies that have grown accustomed to the property abatements, he said.

“The purpose of the Economic Alliance’s analysis of the program is to look at all the different variables,” Melaniphy said.

The Class 6B Tax Incentive was created by Cook County as a way to lure industrial and manufacturing businesses to the area because many were fleeing to the collar counties where there is a significant differential in property taxes, Melaniphy said. The tax rebate was meant to level the playing field, he added.

And, it has worked, Melainphy said. The tax abatement program has worked very well to help Arlington Heights lure manufacturing companies with the high paying jobs they provide to the village, he said.

Class 6B “is one of our most important business attractions and business retention tools in our economic development toolbox. The Economic Alliance and the village will need to weigh very carefully any changes in this program,” he said.

Doing what’s fair

One issue is deciding what is fair for both existing companies with a Class 6B and new companies that would use the small business loan.

An idea the Alliance could consider having businesses contribute the 10 percent to the fund for three to five years then it would receive the full abatement amount for the rest of the 12-year term.

“It would take a few years for the fund to grow up,” said Charles Witherington-Perkins, director of planning and community development. “If we have a business we are trying to keep in town or attract to town, we could do a zero interest loan.”

The program could be evaluated every few years to see if it is working. There are no other models for this program, it would be a one of a kind, Witherington-Perkins said.

“How do we create this program? I think its innovative but we are potentially going to upset people,” O’Connor said.

The Alliance has been discussing the idea since last July but still have more questions and issues to resolve before making any recommendations to the village board, he said.