When Sears Holdings Corp. rattled Illinois last month by saying it was considering moving its headquarters out of state, Gov. Pat Quinn promised he would find a way to keep the retailer around.
It’s a potentially costly scenario that could be repeated more than 100 times over the next three years.
Tax-break deals with 107 companies will expire in 2012, 2013 and 2014, according to records obtained by The Associated Press through a Freedom of Information request. Those deals, worth more than $100 million, run out at a time when other states view Illinois as a prime target for poaching after this year’s tax increases stirred unhappiness in the state’s business community.
Illinois may have little choice but to offer bigger breaks to many of those companies or risk seeing them leave, even though the state already faces a budget deficit that could top $9 billion annually in coming years.
Dozens of the deals are with companies that employ hundreds or even thousands of people in the state, including J.P. Morgan Chase, Deere & Company, U.S. Cellular Corporation, Abbott Laboratories and Wells Fargo.
“If you get household name corporations appearing in news headlines (for leaving the state), that’s not a good thing,” Doug Whitley, president of the Illinois Chamber of Commerce, said referring to Sears’ threat and more recent news that both the Chicago Board Options Exchange and CME Group were considering leaving Illinois.
“When a company raises its hands and says ‘Look at me,’” Whitley added, “then you’ve got a government entity scrambling.”
A state spokeswoman said there is no set way for the Department of Commerce and Economic Opportunity to handle expiring tax incentive contracts. But she said the end of a deal isn’t a guarantee of a new one.
“This is not an automatic ticket for a company to get additional incentives,” Marcelyn Love said in an e-mail. “Our focus is on being responsive to companies so we can better assess their needs and make Illinois an attractive place to do business. If a company decides that they will be making additional investments and are interested in getting state assistance, then we would work with them.”
Tax breaks and the way states use them to compete with each other, particularly those offered to retain existing jobs, are often criticized. Many economists say they don’t creating anything new, but instead pay companies to maintain the status quo. But critics also tend to say they understand why states use incentives: few politicians would be able to stay in office if they refused to make deals to keep jobs that appear headed elsewhere.
The tax-break deals set to expire in Illinois in the next few years were made through the state’s Economic Development for a Growing Economy program, known as EDGE. It is Illinois’ primary tool to persuade companies with offers to leave the state to stay. The program also gives incentives to firms considering adding jobs to create them in Illinois.
Early last month, using the EDGE program, Illinois promised Motorola Mobility $100 million in tax breaks to keep the consumer electronics maker’s headquarters in Libertyville.
The companies that made deals that expire between 2012 and 2014 promised to keep more than 12,000 jobs in Illinois and create another more than 10,000 positions. In some cases, according to state records, those companies haven’t used the tax credits. Whitley and others said the most likely reasons are that the company didn’t add jobs as intended, or the company didn’t have profits to use the tax credit against.
Deals that expire next year include $34.7 million in tax breaks that J.P. Morgan Chase used after agreeing to keep 2,247 jobs at locations in Chicago, Elgin and Elk Grove Village, and $6.72 million in breaks provided to the Robert Bosch Tool Corp. after that company agreed not to move 444 jobs from a facility in Mount Prospect.
Deere & Company has used $7.28 million in tax credits as part of a deal expiring in 2013 that requires the company to keep 350 jobs in place and create 30 more at facilities in Moline, East Moline and Silvis.
In 2014, a deal with audio electronic maker Shure Inc. is set to expire. The company has cashed in $7.28 million in tax credits after agreeing to keep its headquarters and 570 jobs in state, in Niles, rather than look elsewhere. Also that year, a state deal with Abbot Laboratories to keep 260 jobs in Des Plaines and create another 50 expires.
Incentives are almost never the most important factor in where a company locates, experts say, only an important sweetener. But Illinois’ situation makes them potentially more important. Businesses are genuinely unhappy about the state’s tax increase and workers’ compensation costs that are higher than in many states, said Tim Monger, senior vice president at Cassidy Turley, an Indianapolis law firm that helps companies negotiate incentives.
And companies almost certainly will at least look to see if they have better options elsewhere, Monger said.
“The closer you get to that end of that commitment, the question always is do we do it here or do we do it in another location,” he said.
Neighboring states, sensing an opportunity in Illinois, have launched campaigns to lure businesses away. Indiana Gov. Mitch Daniels and Wisconsin Gov. Scott Walker repeatedly tout their state’s business climates, and New Jersey Gov. Chris Christie flew to Illinois in February to meet with business leaders.
Sears employs 6,200 people in the Chicago suburb of Hoffman Estates. When the company said it was considering options elsewhere, Quinn quickly said Illinois would work on a deal to keep Sears in place.
“I’m sure that we will work out something that will work for the company, but most importantly, work for the common good, for the workers, for the jobs,” Quinn said.
Instead of waiting for companies to make threats, the chamber’s Whitley said, Illinois should be working its way down the list of companies with expiring deals and initiating the conversation. He doubts that’s happening.
“That’s a proactive approach that takes time and energy and effort; inertia is most likely to be the case,” he said. “Furthermore, the state does not have a lot of resources to devote to this.”
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A list of Illinois’ expiring tax incentives deals
Tax-break deals the state of Illinois made with 107 companies to either keep jobs in the state or create new jobs are set to expire in 2012, 2013 and 2014.
Some of the larger deals are listed here, with the company name and location, along with the jobs the companies agreed to try to either retain or create and the amount of their tax credits used.
2012
ArcelorMittal Riverdale Inc., Riverdale/Hennepin, 300 jobs to be created, $4.3 million in tax credits used
J.P. Morgan Chase, Chicago/Elgin/Elk Grove Village, 2,247 jobs to be retained, 125 to be created, $34.7 million
Land O’Frost Inc., Lansing, 250 jobs to be retained, 25 to be created, $2.2 million
LTD Commodities, Naperville, 187 jobs to be created, $397,000
Manchester Tank & Equipment, Quincy, 45 jobs to be retained, 150 to be created, $1.7 million
North American Lighting, Paris, 162 jobs to be created, $2.38 million
Robert Bosch Tool Corp., Mount Prospect, 444 jobs to be retained, 25 to be created, $6.72 million
Service Master Holdings Corp., Downers Grove, 200 jobs to be retained, $1.96 million
Takeda Pharmaceuticals North America, Lincolnshire, 266 jobs to be created, $18.5 million
2013
Aisin MFG, Illinois LLC, Marion, 140 jobs to be created, $2.99 million
Deere & Company, East Moline/Silvis/Moline, 350 jobs to be retained, 30 to be created, $7.28 million
Genco Inc., Pontoon Beach, 190 jobs to be created, $486,883
Lanco International Inc. Mi-Jack Products, 325 jobs to be retained, 25 to be created, $3.59 million
Menard Inc., Plano, 230 jobs to be retained, 150 to be created, $206,396
Sterling Steel Company, Sterling, 200 jobs to be created, $2.66 million
Sysco Food Services, Des Plaines, 355 jobs to be retained, 110 to be created, $7.5 million
Wahl Clipper, Sterling, 310 jobs to be retained, $2.77 million
Wal-Mart Stores East, Spring Valley, 600 jobs to be created, $6.44 million
William Wrigley Jr. Company, Chicago, 155 jobs to be retained, 30 to be created, $5.71 million
2014
Abbot Laboratories, Des Plaines, 260 jobs to be retained, 50 to be created, $2.83 million
CDW Corporation, Vernon Hills and Mettawa, 142 jobs to be created, $1.9 million
Holten Meat Inc., Sauget, 214 jobs to be retained, 29 to be created, $742,581
Shure Inc., Niles, 570 jobs to be retained, 65 to be created, $4.19 million
Terrace Holding Company, Cicero, 153 jobs to be retained, 91 to be created, $1.9 million
U.S. Cellular Corporation, Bensenville, 150 jobs to be created, $2.08 million
Wells Fargo Bank, Springfield, 548 jobs to be retained, $2.18 million
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Source: The State Journal Register - The Oldest Newspaper in Illinois