Westfield Old Orchard shopping center sells gold watches at Rolex, diamond necklaces at Tiffany & Co. and fabulous purses at Coach. Luxury cars cruise through crowded parking lots, and shoppers stroll past more than 100 stores while wearing pricey parkas and furs.
The site seems to be thriving. Yet “blighted” is the legal designation the village of Skokie is giving it, in order to qualify for a 1% sales tax hike at Old Orchard businesses to pay for improvements to the outdoor mall.
Monday, the Skokie Village Board will consider whether to give final approval to the plan. Some residents strongly oppose the idea, but only one trustee voted against it in a preliminary vote. With the mayor’s support, the measure is likely to pass.
Shoppers around the Chicago area should expect to see more such public-private partnerships to update malls, one industry leader said, because without them, shopping centers won’t survive.
“It’s being done or contemplated at every mall and lifestyle center in the Midwest,” said Richard Spinell, principal of Mid-America Real Estate Group, which represents shopping centers across the Midwest. “A lot have become functionally obsolete, and you need to reinvent them.”
Skokie’s proposal would bring the sales tax rate to 11.25% for retail and 13.25% for restaurants at the mall.
People walk by an ad for Chanel at Westfield Old Orchard shopping center in Skokie on March 3, 2022. (Erin Hooley / Chicago Tribune)
The village would disburse the money to the owner — the international, billion-dollar, Paris-headquartered Unibail-Rodamco-Westfield — for upgrading elements such as heating and air conditioning, fire suppression, electrical and data service, facades, common areas, landscaping and lighting, and for demolition for new construction.
The advantage to a such a business district sales tax is that, unlike tax increment financing, or TIF, it doesn’t take property taxes from other taxing bodies, and therefore is supported by local school districts.
Despite its chic image, Old Orchard faces the problems of all retailers in losing sales to online shoppers and due to recent COVID-19 restrictions. In 2018, Lord & Taylor left the mall, and its store remained vacant. Barnes & Noble recently departed, and Amazon plans to close its two stores there.
The mall typically generated about $50 million a year in sales tax, but that fell to about $36 million in 2020 due to COVID, village officials said, and sales have not fully recovered.
The site also is hit with property taxes in Cook County that eat up 38% of its tenant occupancy costs, consultant Grant Thornton LLP reported, far more than the industry average of 12%.
Mayor George Van Dusen warned that the tax plan is crucial to keeping the area successful.
“Westfield Old Orchard is an important asset to the village of Skokie,” the mayor said, “with direct financial benefits that not only support village services, but also the Skokie Public Library, Skokie Park District, school districts and other taxing bodies.”
The plan provides for more than $100 million over 23 years, officials say.
The lone trustee to vote against the proposal, James Johnson, said it was unfair to other businesses to play by different rules. Since the measure is likely to pass, Johnson proposed a compromise of raising the sales tax by increments of 0.25%, rather than 1%, which is the maximum legally allowed.
“There is a need for rehabilitation at the mall,” Johnson said. “It’s a question of whose responsibility it is.”
The village’s general counsel noted that “blighted” is a legal term and doesn’t fit common usage. Under state law, the consultant concluded that the site would qualify as “blighted” due to improper or obsolete design, and deterioration of the site. Any expenditures would be subject to an annual audit by the village.
Typically, property owners must pay for their own maintenance. Without the village’s help, officials say, Old Orchard doesn’t generate enough cash to support more than basic leasing and maintenance.
Most shoppers at the mall whom the Tribune asked about the proposal recently were not aware of it or preferred not to comment. Some opposed higher taxes, while one favored it if it improved the mall.
People walk by an Amazon 4-Star store at Westfield Old Orchard shopping center in Skokie on March 3, 2022. (Erin Hooley / Chicago Tribune)
One sales associate called the proposal “kind of ridiculous,” considering that the mall seems to be thriving, with high rents and new tenants. But, she added, its clientele probably can afford the 1%.
Old Orchard General Manager Serge Khalimsky said the new tax “will help modernize and revitalize the center to ensure it continues to thrive and provide benefits to the community.”
While the company did not specify what work would be done there, Khalimsky said, “We plan to invest in the center’s infrastructure, customer experience and merchandising to create a best-in-class experiential destination on the North Shore that is filled with the region’s finest shops, restaurants, amenities and ambience.”
Old Orchard is fighting a battle that other shopping centers have lost. The Chicago area once had 35 malls. It now is down to 22, and will likely be reduced to six or seven by the end of the decade, Spinell predicted, unless they reinvent themselves as unique destinations with experiences that get shoppers of their homes.
Closed shopping centers include Lakehurst Mall in Waukegan, much of Charlestown Mall in St. Charles — despite a $70 million renovation — and most famously, the Dixie Square Mall in Harvey, where “The Blues Brothers” crashed cars through stores before the place was demolished.
Across the suburbs, local officials are working to repurpose their malls, which function similar to larger cities’ downtowns, creating jobs and attractions. Spring Hill Mall in West Dundee, largely empty from vacancies, has local redevelopment plans involving TIF property taxes. Hawthorne Mall in Vernon Hills already has begun major renovations with funding from a TIF. Orland Square Mall completed a makeover in 2013, and the village has worked to help redevelop the surrounding area.
Skokie’s neighboring village of Niles recently unveiled plans to save the struggling Golf Mill Shopping Center by transforming it from an indoor mall to outdoors, tearing down its office tower in favor of high-end apartments, adding a water wheel and outdoor movies, and redeveloping the adjacent park. Once again, TIF property taxes could be used to pay for the work.
