A village-backed loan to Volvo of Oak Park would leave taxpayers on the hook for all or part of a $550,000 loan, if the dealership fails within the next five years.
The village board of trustees agreed last week to restructure a 2005 business retention agreement. The current pact splits the local portion of sales taxes --about $150,000 a year -- with the company through 2024, with the village receiving 60 percent and the car dealer receiving a rebate of 40 percent.
The dealership is located at Harlem Avenue and Garfield and is noted for the "tower of Volvos" seen from the Eisenhower Expressway.
Under the new agreement, the village will collect all of the local sales tax to pay off a private bank loan to the company of $550,000 over the next four or five years. Once the loan is paid, the village will collect 100 percent of the local sales tax revenue.
The loan is needed because the company has insufficient cash flow to purchase its 2015 line of cars.
Pete DiCianni, a Volvo of Oak Park spokesman, said the shortfall is due to a $2.2 million renovation of the dealership within the last couple of years. He said the company reached out to the village for a contribution through the Madison Street Tax Increment Finance District. The dealership was previously located on Madison Street.
"They missed an opportunity back then to take some TIF money for the renovation," DiCianni said in a telephone interview. "Now, because of that, they are in need of a short-term loan."
John Hedges, executive director of the Oak Park Economic Development Corporation, acknowledged in a telephone interview that there is a risk involved in backing the loan if Volvo were to go out of business in the next few years.
"It would not be a good situation if they closed up shop," he said.
He added, however, that he believes the renovation to the showroom will strengthen sales at the dealership and put them in competition with BMW and Audi.
Village President Anan Abu-Taleb, who voted in favor of the backing the loan, said in a telephone interview that he believes Volvo is a strong brand and the dealership is simply experiencing a short-term cash flow issue.
"They're committed to Oak Park, and they're here to stay; it's a good brand and it brings people to our community," Abu-Taleb said. "At the end of the day, we are basically giving them assistance to get through this hurdle."
The proposal also allows the company to defer payment on loans due to the village. The village loaned the company $669,999 in 1995, and a balance of $192,282 remains due. Roughly 70 percent of the amount due is owed to the Madison Street TIF.