Shuttered Best Buy Puts Illinois Town $200K Deeper Into Debt

The impact of Best Buy’s years of over-expansion of its bricks-and-mortar stores and increasing competition from online retailers is being felt all over the country as the electronics chain closes dozens of stores. And for one town in Illinois, the loss of its local Best Buy translates into a $200,000 budget shortfall.

Until it closed a few weeks ago, the Best Buy store in the village of West Dundee had been the largest single source of tax revenue.

So to make up for the shortfall, village officials have cut hours for some part-time firefighters, which means that only one of the two fire stations in town will only actually be able to offer fire engine service.

“I never like to reduce manpower, but I also understand the reality of the economic times,” the village’s fire chief tells DailyHerald.com. “It was very difficult to do this, but we’ll make it work, one way or the other.”

Another $30,000 was saved by reducing hours for part-time and seasonal workers in the village’s public works department.

The loss of the Best Buy tax money also means village employees will be switching to a less-expensive health insurance provider, there will be one fewer village board meeting each month and the police department loses a community service officer.

Meanwhile, Best Buy’s interim CEO stands to make upwards of $3.3 million this year, which includes $2.2 million in “performance bonuses” that are not actually tied to how well or poorly the company performs this year.

On a Consumerist-related note, this Best Buy just happens to be the store where Executive Editor Meg Marco purchased her first computer.

Best Buy closure forces West Dundee to consider $200,000 in cuts [DailyHerald.com]

Comments

Edit Your Comment

  1. That guy. says:

    The $200k in debt is actually $210k, because Best Buy optimized the debt first.

  2. atthec44 says:

    This is not Best Buy’s fault, stop spending like a drunken sailor on shore leave and budget issues will start to go away.

    • FatLynn says:

      Yes, clearly two fire stations in town is “spending like a drunken sailor”!

      • shepd says:

        If I’m reading google maps right, most of West Dundee is about 1 mile wide and 2 miles tall. Seems likely to be correct considering the population is 8,000.

        1 fire station seems like plenty. 2 is overkill.

        • FatLynn says:

          I’m actually from that are, so here is some more information:

          What you see on google maps doesn’t include the unincorporated parts, that pay money to WD for emergency services. The entire service area is not only oddly-shaped, but the roads are long and winding in many areas, once you leave the downtown grid system. So, while it may seem superfluous to have more than one station, nobody wants to wait an extra ten to fifteen minutes in an emergency situation.

          • Rachacha says:

            While I am not from the area, if the fire stations are both deemed necessary to serve other townships and unincorporated areas, then if those areas want to maintain the same level of service they can pay (through additional taxes) for that service. I suspect that since the BB store was a major tax payer, residents were underpaying for the services they were being provided, so residents and local government have two options, cut spending or pay more in taxes.

            We had a land developer want to come in and add many new homes and commercial buildings. County guidelines required that a new fire station be built to serve the newly developed area, so the county approved the development only if the developer would foot the bill for the new station and subsidize the equipment.

            • FatLynn says:

              Right, they will likely have a referendum, or reallocate money among the township entities and all will be fine, but what I am saying is that you can’t simply say “oh, the population is small, they don’t need two fire stations”. The physical characteristics of the service area have a lot to do with response time.

              (FTR, when I was growing up, we had access to neither city water nor cable television because the population density was so low)

          • Budala says:

            So if that is the case then the town is now not providing adequate firefighters coverage to the townships around for what the townships are paying the town to do. Shame on that town for doing that, while at the same time the (insert mayors name and salary, fire chiefs name and salary, council members name and salary) is/are making and won’t take a paycut.

      • Hi_Hello says:

        i bet if one government official got early retirement , the fire station wouldn’t need to reduce their hours.

        but I”m bias.

      • milrtime83 says:

        For a population of 7300 is probably is.

        • FatLynn says:

          West Dundee provides services to other areas of Dundee Township, and population doesn’t matter when it comes to emergency response time.

      • Jawaka says:

        I’d curious what the town’s education budget looks like.

    • Jawaka says:

      I agree.

      Also, the CEOs salary has nothing to do with this story. But of course since every Best Buy story has to be a negative one I suppose posting his salary in a story about a town that has to cut costs can possibly make Best Buy look to be the bad guys to some.

  3. homehome says:

    What does what the best buy CEO make have anything to do with the situation.

    • That guy. says:

      He should totally just give his money to the town.

    • axolotl says:

      He clearly doesn’t deserve any of it since the company is having financial difficulties.
      He is also responsible for anyone who dies in this town because emergency services couldn’t get there in time.

    • Michael Belisle says:

      When people complain about high pay for people taking over struggling companies, I like to compare the situation to the Titanic, except that it already hit the iceberg. How much would they have to pay you to take the helm?

      (“I would shut it down and give the money back to the shareholders” is not a valid answer.)

    • j2.718ff says:

      Because he’s personally responsible for paying firefighters’ salaries in all cities where Best Buy closes. I assume that’s how it works.

    • Akuma Matata says:

      I was thinking exactly the same thing. It just seems like the OP tried to use a BB closing as an excuse to attack BB and their interim CEO for what he perceives is overcompensation.

  4. FatLynn says:

    I grew up in Dundee Township, and I can remember what a big deal this was when it opened. Anybody who was anybody worked there in high school.

  5. TheMansfieldMauler says:

    Meanwhile, Best Buy’s interim CEO stands to make upwards of $3.3 million this year, which includes $2.2 million in “performance bonuses” that are not actually tied to how well or poorly the company performs this year.

    What does that have to do with anything? Part of the CEO’s job (that he’s getting paid all that money to do) is to make decisions about shuttering stores that aren’t profitable enough (because as evil as it is, profit is how a company stays in business).

    It isn’t Best Buy’s corporate responsibility to provide this or any other town with tax revenue.

    • shepd says:

      Yes it is. I mean, if you expect the citizens to do it, why not everyone and everything else? ‘Tis only making an unfair system fair, no?

      • TheMansfieldMauler says:

        This is sales tax, not property tax. The property tax will still be paid if the store is closed.

        • shepd says:

          Nowhere near the same level would be paid, and for a permanently closed store with no future prospects, likely the owner will stop paying taxes and let the land lapse into the government’s hands once the city uses court action to take it from him.

          In the end the city is left with the worthless land and no taxes, still.

          • StarKillerX says:

            So, your saying once a store opens it should be forever required to maintain the current level of taxation even if the store closes?

      • Rachacha says:

        I remember back in my home town, the local grocery chain had a store downtown that was connected to a shopping mall that was 90% vacant. The grocery store for years was not performing anywhere close to the level of the second least profitable store. The company announced plans to close the store at the end of the year, and the citizens were outraged, so the grocery chain basically replied that they would keep the store open a while longer to reassess the stores performance, and the company encouraged citizens who wanted to keep the store open to shop there frequently to boost the store’s income and profits (residents of the city were going to larger stores from the same chain located outside of the city). Sales continued to decline and the store was ultimately closed.

  6. Salesman! says:

    So Best Buy should keep an underperforming or unprofitable store open because the town needs the money? That makes no sense. And the CEOs salary has precisely dick to do with the situation. Theres a line between social responsibility and stupidity.

    • FatLynn says:

      How could an unprofitable store be paying that much in taxes?

      I’m not saying that they should have kept it open, but doesn’t the very nature of paying taxes imply a net income?

      • Doubting thomas says:

        No it doesn’t. Local taxes usually come in the form of property tax. Profit doesn’t matter, just acreage and perceived value.

      • YouDidWhatNow? says:

        No…there is no correlation to whether or not you’re profitable and whether or not you’re paying lots of taxes.

      • bhr says:

        Nope. Sales tax is on gross receipts, not net income. The local sales tax rate here is 8%, but I am not sure how much of that goes to the local jurisdiction.

        They don’t mention it in the article, but that $200,000 could also include the local jurisdiction’s take of payroll taxes too.

      • TheMansfieldMauler says:

        The loss is in sales taxes, not property taxes.

      • TheUncleBob says:

        Easy – taxes are paid based on things like sales and property – not profit.

        If I have a billion dollars in sales, but I sell everything at a loss, I still have to pay sales tax on that billion in sales.

        • GoldVRod says:

          No, you have to collect sales tax from the purchaser based on the purchase amount and then pass it on. A business doesn’t ‘have to pay’ it out of their own pocket.

          Aside from a small amount of tax-deductible admin duty, sales tax costs the business nothing.

  7. j2.718ff says:

    … so what you’re saying is, Best Buy is Too Big to Fail ™?

  8. Nigerian prince looking for business partner says:

    A business closing is always a big deal in municipalities that are reliant on business taxes. When our mill shut down, my city lost somewhere in the ballpark of $600,000/year in B&O taxes. This was a huge deal for a town of 50,000.

  9. bhr says:

    Wait, we want Best Buy to go out of business, but are mad at them for closing a store?

    And what the hell does the CEOs paycheck have to do with local tax revenue?

    Seriously Chris, unless you think no CEO deserves to ever make a paycheck I have no idea how you would connect those two things. You complain that the salary has nothing to do with how the company performs, openly root for the company to fail, then blame the CEO when he closes a failing store. That is his job. Would you have preferred that they kept a failing store open, providing overpriced items and poor customer service, just so the local jurisdiction can collect taxes?

    How can we hold companies accountable for the things they actually do wrong when you are just making shit up to be mad about?

    • StarKillerX says:

      Another case of once the writers here get a hard on for a company nothing that company ever does will be written about without a negative slant.

    • vastrightwing says:

      I remember similar stories in Detroit, “Oh the big box stores and grocery chains are pushing the mom and pop stores out of town.” Ten years later, all the big box stores and chains are gone. “Oh my God! The locals have nowhere to shop except more expensive small stores.” Wa wa wa. Talking about having your cake and eating it too. Which way do you want it?

  10. Upthewazzu says:

    Poor planning and overspending put this town in debt. Best Buy had absolutely nothing to do with it.

    • TuxthePenguin says:

      While you’re probably right, it is not necessarily the case. Just by simply losing that tax revenue means that they have to cut their budget.

      • MrMagoo is usually sarcastic says:

        If they’re that dependent on a single revenue source, they should have recognized that and planned ahead by implementing a rainy-day fund.

        • The Twilight Clone says:

          A rainy day fund wouldn’t have done a damn thing for a long-term problem. It sounds as if they have/had a structural deficit. They cannot be fixed with one-time funds.

  11. Budala says:

    “The median income for a household in the village was $62,540, and the median income for a family was $78,007. Males had a median income of $54,338 versus $36,111 for females. The per capita income for the village was $30,674. About 2.9% of families and 3.7% of the population were below the poverty line, including 1.4% of those under age 18 and 9.6% of those age 65 or over.” (from Wikipedia about the village)

    This place of 8k people does not have an income problem, this place has a spending problem. I’m sure there are other options to cut the spending, but people are usually more inclined to approve tax increases when they hear that firefighters have lost jobs and there isn’t enough fire protection coverage. Cities acros America have done the same for years.

  12. ThinkingBrian says:

    I feel sorry for the town, but this isn’t Best Buy’s fault. The company is downsizing because less and less people are shopping at there stores especially that one. Its part of a tough economy and a tight budget for that town.

    But the message here shouldn’t be Best Buy leaves, it should be hopefully the message gets out to other retailers that they have some open retail space and someone will move in that can make a business work there. Of course they aren’t the only town in the US that is having this issue neither.

  13. jrwn says:

    Um, Best Buy didn’t put anyone into debt. The city believed they would keep getting money and they could keep spending more. Then BB left and the city realized they couldn’t get the money anywhere else.

  14. bben says:

    Once again a CEO gets rewarded with a bonus for poor performance. I can understand a bonus for going above and beyond, but not for being below and behind.

    • dpeters11 says:

      Give him a little credit, he’s only been (interim) CEO since April 10. From everything I’ve seen, he was a Board member, but not actually an executive with Best Buy.

  15. One-Eyed Jack says:

    Sounds like the town needs more eggs in its tax basket. Or something like that.

  16. wellfleet says:

    So wait a minute. Consumerist readers and editors have been rooting for Best Buy to fail, touting the Best Buy Death Watch, and watching with glee as the company struggles to adapt to competing with online-only sellers, but suddenly the consequences of a store closing are important?

    If/when Best Buy goes under, there will be a loss of 50,000 jobs, and millions in tax revenues to municipalities. Since very few readers here support Amazon charging tax, this is money gone completely from the tax base.

    Which is it, Consumerist? Do you want them to go away or want them to get better?

    • miguelggarcia says:

      Bravo! You hit it exactly. Well said.

    • Dagny Taggart says:

      Exactly! I am guessing this Best Buy went out of business because area residents read all the stories on Consumerist about what a terrible place it was to buy electronics, and therefore, decided to shop elsewhere.

      Ergo, it is CONSUMERIST’S fault that the West Dundee is out the $200K and the town had to lay employees off.

  17. PBallRaven says:

    And they probably could have let a couple of city “managers” go and saved as much. But no, it’s always the low level firefighters, cops and teachers. Never the top level admins.

    • StarKillerX says:

      The reasoning is simply, people are more likely to support a tax increase to keep police, fire and/or schools at current staffing levels but not to keep a few more overpaid people in offices at city hall.

  18. Rod Rescueman says:

    We’re dealing with a similar situation here except it’s with Circuit City stores. When CC moved into the area and build their stores many palms of the local commission were “greased” to make sure, during road construction, many medians and rights of way were built to be “CC Friendly”. In other words, make it as inconvenient as possible to patronize other stores, but make it EXTREMELY easy to reach the CC parking lot. Now all of the CC stores are shuttered and even being torn down. So in order to turn around and get into another store, you can’t drive into the CC parking lots since many are now fenced off or just piles of dirt.

  19. impatientgirl says:

    omg parks and rec should be cut before firemen when you have a two station town :(

    • StarKillerX says:

      But people wouldn’t support a tax increase to restore parks and recreation workers, but if city hall can convince people they are all going to burn to death in fires unless they increase taxes and restore the positions in the fire department they would support it.

  20. voogru says:

    Wow, so you mean this best buy couldn’t make a profit? I wonder if the local astronomical taxes might have had anything to do with it.

  21. dush says:

    With the Best Buy gone they only need one firestation now anyway.

  22. Torchwood says:

    Shhhh….. it’s a trap to demonize CEOs. Because big bad CEO closed this town’s Best Buy, the town is having the make $200,000 in cuts. Meanwhile, the big bad CEO is making $3.3 million dollars. It’s all a plot to help a CEO on Pennsylvania Ave keep his job in November.

  23. NotATool says:

    Spring Hill Mall, which is partially in West Dundee, is right across the street. Surely that provides some major tax revenue too?

    • Dagny Taggart says:

      Spring Hill mall is a practically a ghost town. Most of the national chains have moved out. My kids and their friends refer to it as “The Ghetto Mall.”

      Several years ago, a major retail area was developed several miles to the west of this area (in a different municipality) which siphoned off much of the retail business in West Dundee.

      • djudd says:

        Yup the “Randall corridor” which was a better path to elgin than 31 ever was. Ironically enough the built a Best Buy up there too which is why West Dundee got the axe.

        Heck even up there in the new area stuff gets closed. Circuit City, Borders, don’t even get me started about The Barley House *sniff*. The whole area got overdeveloped way to fast back in the 2006ish time line.

  24. DonnieZ says:

    I understand to a regular guy like me that $200K is a lot of money, but all the woes that are listed in the original article are way beond the scope of what $200K can make or break.

    That’s 2-3 salaries for full time skilled labor positions.

    Will the city miss $200K? Sure. However this isn’t Best Buy’s fault, nor are these probblems solely the fault of the Best Buy closing.

  25. Extended-Warranty says:

    Best Buy is demonized if it stays opens or closes. Classy consumerist.

    Anyways, I suppose I see why Best Buy chose this location. If closing it affected the town THAT much, it probably wasn’t in that big of a market.

    Oh and the CEO has been in position for what, no more than 2 months now. Should he work for free?

  26. TerpBE says:

    It’s the town’s fault for not buying the extended warranty.

  27. suburbancowboy says:

    I wonder how many mom and pop stores were put out of business by that Best Buy. Was there a record store in town that shut down? An electronics store? Game store?

    • StarKillerX says:

      The whole “they put mom & pop stores out of business” humorous, as Best Buy, Walmart, or any other large chain doesn’t cause mom & pop stores to close.

      Mom & pop stores are suffering the same fate that US manufacturing did in the 70’s, 80’s and 90’s, and for the same reasoning. The US consumer has shown, time and again, that we will not pay a premium to support small local stores or US manufacturing and as such our actions have resulted in manufacturing moving overseas and large chain stores taking over most markets.

      • StopGougingMeThere! says:

        I lived in a town where a Walmart moved in and that was the hue and cry. Fast forward 25 years and that town doesn’t have a single vacant storefront in it. And EVERYONE shops at Walmart. if your store has a solid business plan you should be able to survive competition.

        • StarKillerX says:

          Yep, in my area we have a Walmart but we also have a store that just sells tvs and it’s been in business over 50 years, the last 20+ with a Walmart within a couple miles of it.

          It’s true they can’t compete with Walmart on price so they do compete by providing better service.

  28. rlmiller007 says:

    Bye Bye. Best Buy. Your customer service sucks and has always sucked. Even as the last large electronics retailer you can’t keep your stores open. Improve your customer service and we’ll pay higher prices.

  29. MrEvil says:

    200k is easily the amount of sales tax revenue that store generated. Now that sales tax revenue is moved to another city that still has a Best Buy.

  30. Cooneymike says:

    I don’t see this as Best Buy’s fault at all. All businesses close someday. All towns have some vacancies. It’s not like this one was a big surprise anyway. The Interim CEO needs to make tough decisions and that should include reorganizing the company, an act that will almost inevitably lead to closing some stores.

    I guess I knew it would happen. If I read consumerist long enough something would happen that would leave me defending Best Buy. I ought to quit now before something ever happens that makes me feel like defending Bank of America.

  31. psikic says:

    Contrary to popular belief, businesses do not exist to employ people or to provide tax revenue to their local governments.

  32. zandar says:

    And to think all of the money from an electronics store would have stayed in the area if it had been a mom and pop.

  33. Cacao says:

    Could be worse. Could be a state, a video game studio and $112 million. http://money.cnn.com/2012/05/28/technology/38-studios/index.htm

  34. Latentius says:

    Man, we went a few days without any irrational Best Buy hatred stories here on Consumerist. I was starting to get worried!

  35. necrosis says:

    “On a Consumerist-related note, this Best Buy just happens to be the store where Executive Editor Meg Marco purchased her first computer.”

    How old are they? I’m 33 and I never even heard of Best Buy when I bought the first computer I could call my own.

  36. gman863 says:

    West Dundee should go on a treasure hunt to find a replacement tenant (or tenants) for the building. In order to lure them in, they could offer a tax credit (spread over ten years, to be sure the new tenant stays put) to entice a business in.

    Although I have no idea what’s already in West Dundee, here’s a partial list of companies that might be able to reuse the building “as-is”, expand it, or tear it down and rebuild on the property:

    Home Depot, Lowes, Menards, Meijer, Dominick’s, Jewel/Osco, hh gregg….

  37. Moniker Preferred says:

    How is a city budget issue a consumer issue?