Tag Archives: Hoffman Estates

Who won with a massive tax break affecting a major corporation and a Chicago suburb?

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This story is from 2020 but I found it interesting: what happened when the State of Illinois gave Sears large amounts of money to relocate to suburban Hoffman Estates? From ProPublica and the Daily Herald in 2020:

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The deal cemented that day would permanently change Illinois, as politicians embraced the use of taxpayer funds to stop a growing exodus of jobs from the state. Since 1989, state and local officials have given $5.3 billion in government incentives to corporations, according to Good Jobs First, a non profit which compiles data on tax deals.

In Sears’ case, state and local officials awarded the company subsidies and tax deals worth more than $536 million over the past three decades — the largest package of governmental incentives ever given to a single company in Illinois.

The tax breaks and credits would transform Hoffman Estates, then a suburb of 45,000 that lay among cornfields 30 miles northwest of Chicago. Sears worked with state and local politicians to build a sprawling corporate headquarters, new roads, tollway interchanges and other infrastructure in the growing village.

Was it a “success”?

ProPublica and the Daily Herald wanted to know whether the investment paid off. Where has the deal succeeded? Where has it failed? What did Illinois and Hoffman Estates taxpayers get for the half billion dollars awarded to Sears?

The review of the Sears deal shows that 30 years of spending public money on private interests failed to deliver the economic bonanza envisioned by corporate, state and local officials.

Reading through the report, it seems that a few parties might claim victory decades later. Local officials attracted a major corporation and jobs. Illinois officials could claim they saved jobs and promoted economic development. And Sears got lots of money (even if the company’s long-term trajectory was not good).

Was it worth more $536 million? Could the money have been better invested elsewhere? Would the story be any different if Sears went to a different community or a different state and got similar amounts of money?

Offering these kinds of incentives is now common across American communities. It may have been Sears in the late 1980s but more recently it was Amazon and a possible second headquarters and Foxconn and Samsung and many others. If communities do not participate, they will “lose out” as other places claim a victory.

Do local residents win in the long run? How do the fates of the communities who got the spoils versus those who did not and/or those who did not compete? Is this the only way to play the game to lead to flourishing suburbs and metropolitan areas?

Sears in decline leads to another large available suburban office campus

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Sears recently closed its last department store in Illinois and just announced that their large suburban campus will soon be up for sale:

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The Hoffman Estates campus features a 2.3 million-square-foot corporate office and 273 acres, including 100 acres of undeveloped land. It was home to more than 4,000 Sears employees as recently as 2017, according to company filings…

When Sears Tower opened in 1973, it was the world’s tallest building, a fitting corporate home for the nation’s largest retailer. Sears left its namesake home in 1992, moving its corporate headquarters to Hoffman Estates and selling the tower two years later. In 2009, the name of the building was changed to Willis Tower as part of the deal for the London-based insurance firm to lease office space there.

Sears is not the only corporate mainstay to pull up stakes recently and put its suburban campus on the market.

Last month, insurance giant Allstate reached an agreement to sell its longtime headquarters in unincorporated Northbrook for $232 million to an industrial developer that plans to turn the 232-acre corporate campus into a massive logistics facility.

And what will happen to these properties? There are multiple options including:

  1. Staying as office or corporate space. Could there be another company or organization who would want this property? A suburb can spend a long time looking for a comparable replacement.
  2. Redevelop the land as a mixed-use development. See “The Metroburb” not too far way created from a former Bell Labs facility. This is a trendy approach that mixes commercial or office uses with residences.
  3. Convert the property to housing. There is demand for new housing in attractive suburbs and large tracts of land do not come open often.

Making this choice will require negotiation and conversation between the parent company of Sears, potential buyers, municipal leaders, residents, and others (which could include regional officials and actors in the real estate world). The whole process could take years and the outcome might retain some hint of the Sears headquarters or it might not.

When a suburb doesn’t support the big tax break supported office park

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An interesting story is brewing in Hoffman Estates where the State of Illinois wants to keep the Sears headquarters by continuing a major tax break but the local school district and some in the community don’t want to live with the reduced tax revenue for years to come. Central to the story: the tax break didn’t help fill up the 780 acre office park, leading to less tax revenue than expected even with Sears located there.

Instead, two decades after the special taxing area was created, some 200 acres remain undeveloped in the 780-acre park anchored by Sears Holdings Corp.’s headquarters. A swath of land that was supposed to generate $50 million in property taxes in 2012 raised only $25 million in the past tax year…

The ambitious project’s inception came at the pinnacle of “euphoria” over a booming commercial real estate market, said John McDonald, who teaches land economics and real estate at Roosevelt University. But that party ended with the economic slowdown of the early 1990s, and the market, he said, has not rebounded. There is no “desperate need for office space anywhere right now,” he said…

The inability of the park to pull in the predicted revenues underlies the battle over Sears’ future. The fight has largely centered on Community Unit School District 300, a financially strapped taxing body whose officials claimed it stood to lose more than $10 million in revenue per year under the original plan to extend the taxing area’s term.

The parties and legislators are continuing to discuss whether Sears would be required to keep some 4,000 of the roughly 6,100 jobs at its headquarters well into the future. The potential consequences should the company not meet that condition remain unclear, said Hoffman Estates Corporation Counsel Arthur Janura.

Typically, suburbs are thought to be in favor of these tax breaks as it helps lure new businesses to town. However, this situation is a cautionary tale about tax breaks: just because one is granted doesn’t necessarily mean that businesses will necessarily move in. If everyone is building big industrial or office parks and offering tax breaks, can everyone win? And in an era of falling tax revenue and rising costs, suburbs need to maximize their assets.

Of course, the State of Illinois will look really bad if Sears leaves as it will feed a (growing?) narrative that Illinois is generally bad for business. It will be fascinating to see how the State and Hoffman Estates come to some sort of agreement that everyone can live with.