Zurich Settles Tax Incentive Suit with Schaumburg Over Remote Work

Schaumburg ended its battle with Zurich North America over a remote work policy that local officials claimed flew in the face of a tax incentive agreement, with a $20 million settlement.

The agreement ends a three-year legal dispute between the village and the Chicago-based insurance company over financial incentives tied to Zurich’s 783,800-square-foot headquarters at 1299 Zurich Way, the Daily Herald reported. The deal requires Schaumburg to hand Zurich $20 million in tax increment financing funds, at least some of which had been withheld from the company, while lowering the maximum that Zurich can collect from the incentives deal to $80 million, from $100 million previously.

The lawsuit stemmed from the village’s decision to stop making tax increment financing reimbursements when concern arose about whether Zurich had met workforce requirements of the deal, after remote and hybrid work schedules were implemented. The original incentive package allowed Zurich to receive up to $100 million in TIF funds if it maintained a workforce presence at its 11-story building.

Zurich opened its Schaumburg headquarters in 2016 on land formerly part of Motorola’s corporate campus. The company, led by CEO Kristof Terryn, became the focus of the dispute when village officials became dissatisfied with the number of employees physically working in the building.

The settlement now clarifies that Zurich and its subtenants must maintain an on-site workforce to qualify for future incentives. The agreement would apply to Wheels, which became a tenant last summer when it subleased more than 200,000 square feet in the building. The suburban sublease was a major win for Zurich and Stonemont Financial, the building’s Atlanta-based landlord.

Zurich initially filed suit against Schaumburg in early 2022 after the village stopped TIF payments. Before the dispute, the company had received $18.6 million in reimbursements. The lawsuit focused on differing interpretations of the workforce requirement, with Zurich arguing that employees assigned to the headquarters fulfilled the agreement, while Schaumburg insisted on a physical presence.

Reinforcement of in-person work for the government payouts comes as there’s still a grim backdrop for the office market. Vacancies within the sector in Chicago’s suburbs rose over the past year, pushing the rate to a record 32 percent by the end of last year. That figure marks a rise from 30.2 percent the year before and a steep increase from 22.1 percent at the start of the pandemic, according to JLL. It also marks the fourth straight year of rising vacancies.

Schaumburg Village Manager Brian Townsend welcomed the resolution, stating that the agreement provides a clear framework moving forward. The village continues to manage other TIF-related matters, including a separate case concerning Motorola’s remaining presence in Schaumburg, the newspaper reported.

— Andrew Terrell