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Chicago-area RTA: United running 'sham' business

Published on NewsOK Modified: January 14, 2013 at 9:20 pm •  Published: January 14, 2013

United, though, said the allegations are untrue.

"We buy fuel in Sycamore," spokeswoman Megan McCarthy wrote in an email to the AP.

In fact, she said in another email, "The operation of our fuel subsidiary in Sycamore has been examined by tax authorities in the past and has been determined to comply with all applicable laws."

The RTA alleges that American Airlines is engaged in a similar "sham" business out of an office it rents in Sycamore's City Hall.

But Matyas said American was not included in the lawsuit because the airline remains in bankruptcy, and suing American would require litigating the case both in federal bankruptcy court in New York and in Cook County Circuit Court. He added that the RTA does plan to pursue legal action against American at some point.

American defended its office, too, with spokeswoman Mary Frances Fagan saying in an email that the operation "is permitted under Illinois law."

And Sycamore, which is also named in the lawsuit, issued a brief statement defending the agreement, saying it has been "examined by tax authorities in the past and determined to comply with state law."

The RTA alleges that in 2012 alone, the two airlines spent approximately $1.2 billion on fuel for jets at O'Hare International Airport. The RTA said that since 2005, the "sales tax dodges" have cost Chicago $133 million, Cook County $60 million and the Chicago Transit Authority another $96 million.

According to the RTA, the total sales tax rate in Sycamore is 8 percent, compared to 9.5 percent in Chicago. But the RTA contends the airlines are getting an even better deal: The two companies have entered 25-year agreements that call for Sycamore to "kick back" most of its share of the sales tax on jet fuel — as much as $14 million a year — in exchange for payments of at least $300,000 a year from each airline.

The lawsuit is part of a larger effort by the RTA to combat similar deals between various communities and companies.

The RTA, the city of Chicago and Cook County in 2011 filed lawsuits against Kankakee and the village of Channahon, alleging those communities' tax incentive programs are costing other government agencies millions of dollars.