Tag Archives: Illinois

Experts suggest Illinois has no chance of landing Boeing plant

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The State of Illinois may be putting on a hopeful face but experts suggest Illinois has little to no chance of enticing Boeing to open a new plant in the state:

But Richard Aboulafia, a longtime aircraft industry analyst, is among industry watchers who don’t believe Illinois has a chance.

“Zero, zilch, nada. Worst (possible location) I’ve heard yet, apologies to Illinois,” he said.

The state, he said, has almost no aerospace production or workforce with industry experience and has a heavy, strong union presence unlikely to appeal to Boeing as it goes through tense labor negotiations in Washington.

Illinois is also short on several requirements Boeing wants any new home to provide, aerospace industry consultant Scott Hamilton of Leeham Co. said…

Those requirements include a site adjacent to a “major international airport,” one with a runway at least 9,000 feet long, according to a copy of the company’s site selection criteria obtained by The Associated Press…

The area around O’Hare has almost no available land, said Brent Pollina, vice president of Pollina Corporate Real Estate in suburban Chicago.

Boeing also wants 300-400 acres of land “at no cost, or very low cost,” and buildings totaling several million square feet under the same or similar terms.

Without offering details, the company says it would like its corporate income tax, property tax and other taxes to be “significantly reduced.”

While Boeing is asking a lot (leading to a very good question of how much states or local governments should give up to entice companies), it doesn’t sound like Illinois has much to offer for this new plant. In a global age, the headquarters of Boeing may be in Chicago but that doesn’t mean a new plant has to be anywhere near it.

This offer to Boeing should also lead to broader conversations about what Illinois does offer, not including tax breaks and financial deals, compared to other states. Chicago and the surrounding region is likely the biggest asset with a global city (particularly financially), plenty of educated employees, other important companies and organizations, and a central location in the United States with the necessary transportation infrastructure (airports, railroads, highways, and water access). Illinois has lots of space outside the Chicago area and some rich farmland. The whole state is centrally located and has access both to the Great Lakes and the Mississippi River. But, is Illinois perceived as good for business? How do its assets line up with those of other states?

Illinois revenue issue: “sin taxes” can’t keep pace

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Even as legislators raise “sin taxes,” it is difficult for the state to bring in as much revenue from such taxes:

While state lawmakers continue to increase taxes on liquor, cigarettes and gambling, revenues from the so-called “sin taxes” aren’t keeping pace. At $1.95 billion, 2012 revenue from those taxes was almost on par with that of 2003, even though most tax rates increased significantly, according to a Daily Herald analysis of Illinois Department of Revenue financial reports…

Since tobacco taxes were raised in 2002, revenues steadily have declined to pre-hike levels as cigarette purchases dropped in Illinois. Legislators last year doubled tobacco taxes, but revenue did not keep up. After getting $609 million in tobacco taxes in the previous fiscal year, the state generated $856.5 million from tobacco taxes in the fiscal year that wrapped up a few months ago, according to the state legislature’s Commission on Government Forecasting and Accountability…

While taxes on things like cigarettes and liquor are relatively easy to sell to many taxpayers, critics say a failure to maintain these revenue levels ultimately results in higher taxes for everyone. It’s no surprise to Illinois Policy Institute Executive Vice President Kristina Rasmussen that sales and income tax rates have also increased in recent years…

The state’s sales and income tax projections are also eroded by buyers going elsewhere for alcohol, cigarettes and similar products. Rasmussen said legislators are taking a shortsighted approach to revenue enhancements instead of solving long-term debt problems.

It is more popular politically to go after sin taxes than to look at larger spending or taxing issues.

But, what counts as a “sin” is also interesting to note – it is quite a social construction. Cigarettes are seen as a huge threat to public health but are not illegal. Alcohol was once banned on a national level and there were decades of temperance movements but it too is legal and brings in a lot of revenue beyond sin taxes – think what restaurants generate. Marijuana is a growing sin tax alternative as some places look to cut costs: instead of jailing users and sellers, why not just ticket them or tax them, making money off of behavior that is still seen as deviant. Thus, it isn’t surprising as more of these traditional “sins” fail to generate sufficient revenue that new sins are identified, from red-light cameras to speed cameras to soft drinks to junk food and beyond.

When big corporations keep approaching Illinois about tax breaks

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ADM and other large companies in Illinois keep pushing the state to offer more tax breaks:

The company has called Decatur home for more than four decades but said it needs to relocate to make international travel and employee recruitment easier. ADM hasn’t said where its new headquarters will be, but Chicago is the preferred location for an operation that would employ about 100 people, according to knowledgeable sources. The company has said it would also create a technology center at its headquarters site that would employ an additional 100…

The ADM tax package is one of several bills introduced Friday that would give breaks to specific companies or industries. The bills seem likely to reignite the debate over targeted breaks that swirled in 2011 when the General Assembly gave tax relief to CME Group Inc. and Sears Holdings Corp. Both companies had threatened to exit the state…

The proposal also would let the company retain state income tax withholdings that employees would have paid the state. Motorola Mobility, Navistar International Corp. and Ford Motor Co. have received the same tax break to retain jobs…

Separately, two other companies are in line to receive tax incentives. Swiss insurance company Zurich plans to build its new North American headquarters in Schaumburg, where it employs about 2,500 people who would shift to the new facility.

More on the story from yesterday’s paper:

ADM, which said last week it is searching for a new corporate headquarters, wants $1.2 million a year for the next 15 to 20 years, company representatives told a State House Revenue and Finance Committee at a hearing in Chicago on Tuesday…

If lawmakers approve the bill, ADM would join a select number of companies that can retain their employees’ income tax withholdings. That group includes Motorola Mobility, Sears Holdings Corp., Navistar International Corp. and Ford Motor Co.

To get there, companies have lobbied lawmakers to amended the language of the state’s Economic Development for a Growing Economy tax credit program, or EDGE.

The print version also noted that about two-thirds of Illinois companies don’t pay corporate income taxes.

Such requests put politicians in a difficult position – which I suspect is one reason businesses make such requests. The politicians quoted in the stories sound fairly negative about the tax breaks; they think the companies are simply asking to avoid taxes they could afford to pay. At the same time, politicians don’t want to be the ones who are viewed as anti-business (which is related to being anti-growth or anti-jobs) and the ones who let big name companies get away. If other states or localities are offering better tax breaks, they have to compete with tax breaks or highlight other advantages (an educated workforce, access to a global city – Chicago, clusters of other nearby corporations and services, etc.). It can then become a race to the bottom as governments undercut each other to attract corporations which are then less valuable.

Determining how Illinois road money should be split between Chicago area, downstate

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The Chicago Metropolitan Agency for Planning argues Illinois needs to change its formula for how it apportions road money between the Chicago area and downstate:

A deal hammered out by the state’s top politicians in the 1980s means that 45 percent of all transportation revenues go to the Chicago metropolitan area and 55 percent is allocated to downstate Illinois.

CMAP wants to change the status quo with a performance-based system using population, congestion, pollution and economic impact as criteria when it comes to doling out dollars for significant projects such as new highways, bridges and interchanges or additional lanes…

The agency points out that the metropolitan region comprises 65 percent of the population and contributes about 70 percent of the state’s income tax and 65 percent of its sales tax revenues.

Yet, in IDOT’s 2014-2019 multimodal transportation improvement program, about $3.1 billion — or 45 percent — out of $6.9 billion goes to District 1 including Cook, DuPage, Kane, Lake, McHenry and Will counties, CMAP planners said…

“It’s a very bad idea,” said Republican Rep. Dwight Kay of Glen Carbon. “The needs of southern Illinois in terms of total miles is far greater than in the suburbs or in Chicago. I would be somewhat dismayed if not shocked to think anyone would propose changes. We have hundreds of bridges that either need to be replaced or are older and in disrepair.”

My first question is how lawmakers came to a 55/45 split in the first place. I would hope this agreement was based on some hard numbers but perhaps they were the only figures that everyone could agree on?

It sounds like the current debate would shape up like this: downstate lawmakers argue they have plenty of road miles and infrastructure to maintain while Chicago area politicians argue they put in a majority of the money and have a majority of the population. Do Illinois lawmakers even have the ability to discuss something like this even in the midst of other major money woes? Wouldn’t this simply inflame the ongoing Chicago versus downstate debate? I suspect this won’t be on the front burner even if infrastructure is a growing conversation piece around the country.

Texas governor not the only one after Illinois businesses; also Florida, Wisconsin

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The Texas Governor campaigned for Illinois businesses and he spoke earlier this week at a conference. But, he is not alone – other states also want Illinois businesses:

Perry is not the only governor out to siphon commerce this week. Wisconsin’s Scott Walker on Tuesday attended the same Chicago conference, touting his state’s business environment and standing as a bioscience leader. A day earlier, Florida’s Rick Scott sent a “Wish you were here” letter to Illinois business owners, noting that his state is “nipping at the heels of Texas every day” as a place to do business and pointing out that “Illinois’ formula of more taxing and spending ISN’T WORKING.” (Never let it be said Scott is undercapitalized.)…

Perry isn’t just selling Texas in a state weighed down by budget crises and the lack of political will to make the tough choices that solutions will require. He is on a trip financed by a public-private partnership to sell the concepts of lower taxes, less government interference, “a legal system that doesn’t allow for oversuing,” lower workers comp rates…

In this, pitting one state against another is good, Perry argued, in “the same way that it’s good for the White Sox and the Cubbies to compete against each other. If you don’t have competition, you’re not going to get pushed out of your comfort zone. That’s the simplest form I can put it in. I think our Founding Fathers understood that you had these laboratories of innovation and the ones that were good at it would be successful.”

Perry ignores one area of competition present in the Chicago area: between cities and suburbs. There have been numerous discussions in recent years about the tax breaks offered in different communities (here is an example in Hoffman Estates) or Chicago attracting headquarters and businesses back to the city and whether this harms the suburbs. Granted, all of these communities have to deal with the issues and regulations of the State of Illinois. But, it appears a number of businesses have still found places they like including in the Loop, Schaumburg, Northbrook, Deerfield, Naperville, Oak Brook, and other places. Between these localities, businesses can look for favorable settings and take advantages of the peculiarities of each place.

There was also one issue that highlighted a possible problem in Texas that may have been highlighted by a recent tragedy:

Take a good look at how close the fertilizer factory that blew up last week was to a middle school and nursing home in West, Texas, and decide for yourself whether you endorse Texas’ stance on zoning (“We respect local control,” Perry said) or think the state should intervene. Laissez faire isn’t always the way to go.

I assumed Illinois provided for local control over zoning as well…though I’m not sure what happens when it comes to potentially dangerous fertilizer plants.

Rahm Emanuel fires back at Texas Governor Rick Perry

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Texas Governor Rick Perry tried to entice Illinois businesses to Texas with recent radio spots but Chicago Mayor Rahm Emanuel fired back yesterday:

Emanuel made pointed reference to a campaign gaffe Perry committed while running for president. At a Republican debate late in 2011, Perry said he had plans to eliminate three federal departments, but could remember only two.

Asked about Perry’s visit at a Monday news conference, Emanuel used the opportunity to tout Chicago’s infrastructure improvements and wealth of well-educated residents thanks to its universities, both of which he said were lacking in Texas.

He pointed to the 14 major businesses that have moved their headquarters to Chicago during his administration, and also drew attention to Texas’ drought.

“In the City of Chicago, we don’t have to measure our showers like they do in Texas,” said Emanuel, a Democrat who served as President Barack Obama’s chief of staff…

After a similar effort earlier this year in California, that state’s governor, Jerry Brown, called Perry’s $26,000 ad buy there “not a burp…it’s barely a fart.”

“If they want to get in the game, let them spend $25 million on radio and television,” said Brown, according to the Sacramento Bee.  “Then I’ll take them seriously.”

Illinois Gov. Pat Quinn lashed back at Perry last week, telling reporters “We don’t need any advice from Gov. Perry.”

If Perry’s main goal was to draw the fire of Democratic leaders, he seems to have succeeded. I’ve seen some experts suggest ads like those Perry was in do little to attract businesses. At the same time, they might help insert Texas into conversations in a way that often don’t happen in the Chicago area.

It is interesting to note Emanuel’s defense: Chicago has well-educated residents and well-regarded colleges (the University of Chicago and Northwestern are a pretty good pair), has plenty of corporate headquarters, has spent on infrastructure, and don’t have droughts (but apparently does have flooding). Is this the best case for Chicago? I could imagine adding Chicago’s standing as a global city, transportation advantages, central location in the United States, continued leadership in commodity trading, beautiful parks along Lake Michigan, tourism, and well-developed metropolitan region.

By the way, it is fair to compare a state to a city or region? Sure, Chicago may be the center of Illinois life but there still is the rest of the state that may take exception (and vote with Perry to boot).

Texas Governor Rick Perry advertising for Illinois businesses to move to Texas

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There is a new radio spot running in the Chicago area featuring Texas Governor Rick Perry suggesting Illinois businesses should move to Texas. Listen to the radio spot here and check out the associated web site texaswideopenforbusiness.com. Here is what the website says:

If you’re a business owner in Illinois, I want to express my admiration for your ability to survive in an environment that, intentionally or not, is designed for you to fail.

With rising taxes and government interference on the upswing, your situation is not unlike a burning building on the verge of collapse. If you’re thinking of “just riding it out” you might want to reconsider.

There is an escape route to economic freedom… a route to Texas. The Lone Star State has proven that limited government, low taxes, and a pro-business mindset work wonders when it comes to job creation and a robust economy. If you’re ready for a fresh start in a place that appreciates job creators like you, it’s time to check out Texas.

This echoes the glee in Indiana and Wisconsin when Illinois raised taxes several years ago.

Texas is indeed growing at a rate that a number of states, including Illinois, can only envy. Texas is known for warmer weather (actually, quite hot weather), lower taxes, and is a Republican-dominated state in recent decades. Metropolitan areas like Dallas, Houston, and Austin are booming. And yet, there are still businesses that are willing to locate in and near Chicago. Perhaps it is the world-class city with international connections as well as unique character. Perhaps it is the base of human capital with both high-skill and low-skill workers. Perhaps Chicago’s location in the middle of the country and at the center of transportation networks still matters to some.

I imagine many businesses are already aware of the business climate differences between Illinois and Texas. Is this just an attempt to trumpet the successes of Texas and poke Illinois in the eye?

Illinois Governor suggests freezing money provided to local governments from Illinois income tax

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Economic times are tough so Illinois Governor Pat Quinn has floated the idea that the state limit how much income tax is shared with local governments:

Gov. Pat Quinn has proposed that the state bolster its own troubled finances by freezing the amount of state income taxes shared with local governments at 2012 levels, which could cost some towns hundreds of thousands of dollars.

Quinn estimates the plan would generate an additional $68 million for the state budget. Because income taxes are disbursed on a per capita basis, the impact to local budgets would be $5.30 per resident, according to the state.

But the Illinois Municipal League estimates the impact would be more than twice that — a $148 million payday for the state, but an $11.50-per-resident cut to local budgets…

Illinois’ income tax, enacted in 1969, was meant to be a shared venture between the state and local municipalities, said Larry Frang, executive director of the Illinois Municipal League. Both the state and local governments alike felt the effects of any dips or spikes in revenue, he said.

This is not a huge surprise given the issues of tax revenue facing various levels of government. To some degree, local governments should get used to this. Plus, if local government is at least partly about local control, then how much do some communities want to rely on money from higher levels of government anyway? On the other hand, raising property taxes and introducing new fees is not attractive to local governments.

Thinking more broadly about the connections between local and state government, does these ongoing economic issues suggest the relationships between the two bodies are more fragile than we might think? When times are good, this probably doesn’t come up much. What recourse do communities, or lower levels of government, have to fight back if the higher level of government, like the county, state, or federal government alter the existing relationship?

Decrease in young people in Illinois; how might suburbs be different with less children?

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The Chicago Tribune leads today with a story of demographic change in Illinois: along with some other states, Illinois has experienced a drop in its young population.

Demographers have long known that the baby boom of the 1950s was giving way to a baby bust nationwide. Now Illinois and the Chicago area are providing a vivid example of the trend: According to data from the U.S. Census Bureau, from 2000 to 2010, Illinois had a 6.2 percent drop in children under 10, among the biggest declines in the country.

The impact is being felt in declining school enrollments and refashioned youth programs, officials say. In coming years, it will be felt in a workforce with fewer workers to replace retirees and help replenish pension coffers.

Changes in the youth population are especially pronounced in Chicago, which lost one-fifth of its young residents, particularly along parts of the lakefront, in Hispanic neighborhoods and in places where public housing high-rises once stood. But the trend is also under way in suburbs in Cook and DuPage counties…

Even suburbs such as Naperville and Winnetka — traditionally magnets for families — saw relatively sharp declines in their populations of children.

The impact of this could last for quite a while. I’m most interested in the bits about suburban communities. Since the post-World War II suburban boom, suburbs have been generally regarded as the best setting for children. With more space and good schools, kids could be safe and experience the middle-class life. This image coincided with a baby boom where lots of young families, including those of military veterans who had returned from the war, moved to the suburbs. So how would suburbs be different without as many children?

To start, as the article suggests, this would have a big influence on school districts. Communities that once had to build multiple schools to keep up with new developments might now have to contract schools. What will happen to the old buildings? Might this lead to smaller school district budgets which could then lead to less money from property tax bills going to school districts? I imagine a number of suburban residents would be happy at the thought that schools would cost less. Even as communities like Naperville were expanding, some existing residents were pushing for fewer houses so that their tax bills wouldn’t increase.

Going beyond schools, this could lead to changes for other taxing bodies such as park districts and libraries. But, even more broadly, this could change the character of many suburbs. Without as many children, the main focus of suburbs might change from familialism to something else. One big trend in American life today is the rise of single-person households, which could also become the plurality in the suburbs. There have also been rumblings about older suburbanites whose kids are growing up or have already left the house wanting to move to denser areas. Neighborhoods and communities that once revolved around children and their activities would have to shift their focus elsewhere. Imagine a Chicago suburb that becomes known as a haven for the 50+ crowd. Or a suburb where young professionals have a hopping cultural and entertainment scene.

Highlights from the “Illinois’s 33%” poverty report

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A new report from the Social Impact Research Center, “Illinois’s 33%,”  looks at poverty in Illinois. Here are a few highlights:

1. Something I did not realize: the preamble to the Illinois Constitution mentions “eliminat[ing] poverty” (p.1).

“We, the People of the State of Illinois…in order to provide for the health, safety and welfare of the people; maintain a representative and orderly government; eliminate poverty and inequality; assure legal, social and economic justice; provide opportunity for the fullest development of the individual; ensure domestic tranquility; provide for the common defense; and secure the blessings of freedom and liberty to ourselves and our posterity—do ordain and establish this Constitution for the State of Illinois.”

2. The report is not just about poverty; it is also about people in near-poverty. The income thresholds for this are here (p.5):

This methodology of measuring people with low incomes or near poverty seems to be growing. The Census reports the median household income in Illinois is $56,576.

3. There is definitely some geographic disparity in these figures. Here are the numbers for the Chicago region which clearly shows wealthier and less wealthy counties and Chicago neighborhoods (p.7):

I did not see any calls for metropolitan approaches to poverty. In the Chicago region, it would be difficult to deal with a particular problem, say affordable housing, in just Chicago or a few of its neighborhoods without cooperation and input from others in the region.

4. The report has more figures and possible solutions in five areas that could help people move out of poverty: employment, education, housing, health & nutrition, and assets (p.3-4, 15-17).