Sales tax incentive for iMotorsports stalls with City Council, goes back to committee

Questions regarding the extent of the clawback clause caused concern among aldermen

This rendering shows the proposed new look for iMotorsports. (Rendering courtesy of iMotorsports)

ELMHURST – A sales tax incentive agreement between the city of Elmhurst and motorcycle dealership iMotorsports that was being discussed by the City Council was pulled back to committee after confusion arose regarding the extent of the agreement’s clawback clause.

Development, Planning and Zoning Committee Chairman Michael Honquest pulled a report recommending a sales tax incentive agreement with iMotorsports not to exceed $500,000, with a 12 years duration and split equally with the city. In addition, the agreement included a $100,000 initial loan for iMotorsports that must be paid back in full before any sales tax incentive kicks in.

iMotorsports approached the city regarding the sales tax incentive after Polaris Industries offered the motorcycle dealership the opportunity to be a full Indian Motorcycle point of sale. Polaris Industries, which owns Indian Motorcycle, required that iMotorsports expand its showroom at 334 W. Grand Ave. and improve the building, renovate parts and service department, enhance its technical assistance, as well as hire and train additional employees to carry the brand. To be eligible, the dealership has to be completed and open by next spring.

Because of the short timeline, iMotorsports lacks the necessary cash flow and faces competition from other locations being considered in Rosemont and Villa Park, according to documents provided to the city. They approached the city for help with the $1 million project.

The sales tax agreement being considered, if approved, would be the second one between the city and iMotorsports. Back in 2014, both parties entered into a sales tax incentive agreement so the dealership could move to Elmhurst and open its first brick-and-mortar location. Before opening at 334 W. Grand Ave, iMotorsports was only doing online sales. Since then, the business has grown, with more than $12 million in gross sales last year, according to the application from iMotorsports.

“They have built what is now a very successful business, I think it’s one of the top – probably – incentive deals we’ve done as a city,” Honquest said. “They are up to $12 million right now, and they will pay off that original sales tax assistance early.”

In 2014, the city agreed to a sales tax incentive agreement not to exceed $250,000, with a 10-year duration and split equally with iMotorsports. That agreement is still in effect. The new deal being considered would be in addition to the $250,000 incentive.

Alderman Michael Bram emphasized that he was in support of a sales tax incentive agreement that would help iMotorsports gain the Indian Motorcycle brand, but he took issues with the structure of the deal.

He said that he was unsure iMotorsports fit the criteria to receive an incentive in this case, because he could not see extraordinary costs or superior quality of the development that would merit it.

Bram was also concerned that the agreement would have a duration of 12 years because policy sets a limit of a decade. He said the half and half distribution of the sales tax wasn’t ideal for taxpayers, and that at $500,000, the city was paying for too much of the total project costs.

“I want Indian to be here, I want Indian to be at iMotorsports, but $500,000, or 50 percent of the total buildout, is unacceptable in my perspective,” Bram said. “It’s too rich, it’s against our policy. I don’t understand how we can be going against our own policy, to me at least, and nobody here tonight has even voiced on how it meets the policy to begin with.”

A motion from Bram to change the duration from 12 to 10 years failed, and another motion to reduce the amount of the incentive to $350,000 didn’t get a second.

Bram then motioned to include in the clawback clause language stating that if Indian Motorcycle left iMotorsports for whatever reason, the agreement would be voided. A second from Alderman Marti Deuter prompted discussion as to whether the language as it already was written covered that event. Alderman Scott Levin voiced his support for an amendment to the agreement that would specify that if Indian Motorcycle left, the deal would be off, but he said he was confused as to where the current agreement stood. Alderman Noel Talluto said she was comfortable with the clarity of the current language, but was in favor of any clarification if it helped the City Council.

In the end, Honquest requested that City Council allow the Development, Planning and Zoning Committee to resolve that issue before a vote.

iMotorsports report by The Elmhurst Titan on Scribd