Tag Archives: tax breaks

Former Dominick’s in Schaumburg vacant for ten years until a new grocery store opened this week

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The closing of Dominick’s stores in the Chicago region left a number of large vacant stores. One location in Schaumburg is now no longer vacant after ten years:

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When first elected four years ago, Dailly said negotiating an end to the vacancy was among his top priorities.

Tony’s bought the Town Center anchor site at 200 S. Roselle Road in 2015. But because of the Albertsons lease, work to prepare it for a new grocery store was stalled until 2021…

The village’s redevelopment agreement with Tony’s ensures the employment of at least 200 workers and a minimum $10 million investment in the building. The store is expected to generate more than $300,000 in annual sales taxes and food and beverage taxes for the village.

In addition to recommending approval of a Class 7b Cook County property tax break lasting 12 years, Schaumburg trustees agreed to provide $3 million in village funds for the expected $13 million renovation of the building.

The building’s vacancy potentially could have lasted until 2036 if Albertsons hadn’t stopped exercising its long-term lease options.

It is interesting to read about the tax breaks and agreements needed to help fill this vacancy. Is this standard fare in the difficult days of bricks and mortar business or is it that hard to fill a big, vacant site?

Ten years is a long time for an empty building to sit. Was Albertsons doing this to prevent competition with its own stores in the area or looking for a good payout from a new property owner or lessee?

In the long run, how many vacant properties can we expect in suburban shopping areas? If there are more coming, does this mean some retail space will be demolished or are there new uses for former shopping spaces?

Remembering the frenzy and promise regarding Amazon HQ2

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Amazon announced part of their HQ2 is coming along on schedule but the full project will soon go on pause:

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John Schoettler, Amazon’s real estate head, said in a statement the company is pushing out the groundbreaking of PenPlace, the second phase of the sprawling northern Virginia campus. The first phase of the campus, known as Metropolitan Park, is expected to open on time this June and will be occupied by 8,000 employees.

The move comes as Amazon CEO Andy Jassy has taken steps to curtail expenses across the company in the face of slowing revenue and a gloomy economic outlook. That’s led to the company announcing the largest layoffs in its history, totaling more than 18,000 employees, while also reevaluating its real estate portfolio and sunsetting some projects…

PenPlace encompasses three 22-story office buildings, more than 100,000 square feet of retail space and a 350-foot-tall tower, called “The Helix.” The development is larger than Metropolitan Park, which sits south of PenPlace, and includes two additional, 22-story office towers, as well as a mixed-use site featuring retail, restaurants and green spaces.

Amazon selected Arlington as the site of HQ2, in addition to the Long Island City neighborhood of Queens, New York, as part of a closely watched, splashy search for a second headquarters that kicked off in 2017. The company announced in 2019 it would halt plans to build its new headquarters in New York after it faced pushback from local activists and city council leaders.

Numerous communities across the United States submitted proposals to host this second headquarters and the company sought tax breaks. The promise of the new headquarters involved at least these two big features: the status of Amazon in your community plus the thousands of jobs in a corporate headquarters.

With the changes in the world, will these promises pan out for Arlington, Virginia and the D.C. metro area? It sounds like at least 8,000 employees will be onsite. However, the headquarters may never be as big as once envisioned. Does Amazon have the same status in 2023 that it did in 2017? This include everything from its financial outlook to its recent layoffs to changes in the everyday Amazon experience for customers.

On the whole, I would guess local leaders will still pitch this as a big win. We got Amazon and all these jobs (and implying that others did not). The long-term effects might be less clear, particularly if tax breaks for Amazon and opportunity costs and the longer-term fortunes of the company are factored in.

Chicago and the counties in the region agree to compete for businesses as a group and not explicitly against each other

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As part of a new Chicago region economic partnership, Chicago and seven counties agreed to this:

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The partnership agreement features a code of professional conduct that prevents members from soliciting businesses from other participants’ jurisdictions, or disparaging those communities when a business considers relocation. The agreement also calls for the participants to share information and produce 150 “pro-Chicagoland” decisions.

This addresses an ongoing issue: in a region with hundreds of communities and multiple joint interests, is it good for the city, suburbs, counties, and other groups to battle for businesses and growth in the region? Is the move of a company in the suburbs to Chicago a loss or gain? What about tax breaks from different communities that companies take advantage of?

This still ensures competition can occur between the Chicago area and other parts of Illinois, between metropolitan regions, and between Illinois and other states. Indeed, this regional partnership can help improve the Chicago region’s chances to compete with other entities:

Michael Fassnacht, president and CEO of World Business Chicago, said that after 23 years, the city’s public‑private economic development agency is becoming a regional operation. The region’s gross domestic product is not only the third-largest in the nation, but the size of some nations’, including Sweden and Poland, he added…

By getting investors to view the region as a whole, it has a better chance of landing valuable projects for the good of all, Conroy said…

Having traveled the world in search of foreign investment, Reynolds said potential partners speak of Chicagoland, not just Chicago. And so he was happy Wednesday to have heard local leaders use that term more in one morning than they had in decades.

It will be interesting to see what the first successful efforts of this partnership yields. Or, conversely, the first conflict where actors and municipalities in the region do not agree.

Proposed Illinois legislation would not allow communities to offer tax breaks to entice firms in other Illinois communities to move

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Companies can play communities off each other to see who is willing to offer tax breaks and other perks for moving to a specific municipality. A new proposed law in Illinois would aim to stop this practice among Illinois communities:

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It is long past time for Springfield to take municipal cronyism off the table, permanently. One of us, state Rep. Joe Sosnowski, R-Rockford, has introduced legislation in Springfield to that effect.The Local Government Business Anti-Poaching Act, HB0211, would prohibit local governments from offering special favors to Illinois businesses in exchange for relocating to their communities. It would end business incentives from politicians spending taxpayer dollars. It requires that businesses relocate based solely on their evaluation of a location and their ability to serve their customers with better prices, products and services rather than taxpayer funded special deals.Under this legislation, Illinois lawmakers and businesses would both refocus their energies on the state’s economic, education, law enforcement and infrastructure policies to put the state’s economy to work for everyone, not just the privileged few.Anti-poaching legislation will make Illinois’ economy as competitive as any state in the country, all year round.

My first thought in reading this: won’t Illinois companies then seek communities just over the border or in other communities if they cannot find better deals in Illinois?

A related thought: a municipal tax breaks seen as part of a freer market where companies and communities can compete for jobs, economic growth, profits, and more? If so, is an anti-poaching law limiting competition?

This may get into too many details but I wonder how the state or others might differentiate between moving because of a nice financial package and doing it solely for business reasons. There cannot be an announced deal in place? Are there penalties for Illinois communities who make offers and companies who ask for them or accept them?

Amazon was opening a warehouse every 24 hours…but not now

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Amazon was building warehouses at a rapid pace during COVID-19:

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When homebound shoppers stampeded online during the pandemic, Amazon responded by doubling the size of its logistics network over a two-year period, a rapid buildout that exceeded that of rivals and partners like Walmart Inc., United Parcel Service Inc. and FedEx Corp. For a time, Amazon was opening a new warehouse somewhere in the U.S. roughly every 24 hours. Jassy told Bloomberg in June that the company had decided in early 2021 to build toward the high end of its forecasts for shopper demand, erring on the side of having too much warehouse space rather than too little. 

But, now the opposite is happening:

MWPVL International Inc., which tracks Amazon’s real-estate footprint, estimates the company has either shuttered or killed plans to open 42 facilities totaling almost 25 million square feet of usable space. The company has delayed opening an additional 21 locations, totaling nearly 28 million square feet, according to MWPVL. The e-commerce giant also has canceled a handful of European projects, mostly in Spain, the firm said.

The scale of this is worth marking: a new warehouse every day.

Companies act in such ways given economic conditions. Yet, these are not just business decisions; they affect communities. As Amazon rapidly expanded, many communities sought out such a facility and/or offered tax breaks and incentives. This happened in the Chicago region. If Amazon contracts, this affects local decisions and revenues.

As conditions change, will communities operate differently toward Amazon or will they reassess their approach to attracting businesses, jobs, and revenues? Many communities would still probably prefer to have an Amazon facility in the long run but they may be harder to entice or the competition might be stiffer. Or, if Amazon facilities come and go, they might be inclined to look toward other firms or industries.

Tax breaks and suburban and Sunbelt growth

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Wells Fargo is seeking a tax break to construct a regional office in suburban Irving, Texas:

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The Irving City Council will vote Thursday on millions of dollars in economic incentives to support the huge campus that’s expected to house 4,000 workers…

The agreement with Irving calls for Wells Fargo to “occupy at least 800,000 square feet of office space in the newly constructed buildings by December 2026. The proposed new office development would serve as a regional hub for Wells Fargo.”…

Irving proposes in its economic incentive agreement to give Wells Fargo up to $19 million in tax increment finance district funds to build a 4,000-space parking garage and “to reclaim a portion of the lake between the two adjacent parcels on the south side of Promenade Parkway.”

A separate economic incentive of up to $12 million would support construction of the Wells Fargo offices.

The project will increase the city’s tax “property value by a minimum of $200,000,000,” according to the City Council filings.

I can imagine the argument from Irving and similar communities about why the tax breaks are worth it:

  1. Such a move helps entice national and international brands to your community.
  2. Such a move brings jobs to the community.
  3. The tax breaks will be outweighed by the tax and physical improvements to the property in question.

All of this helps boost the status of the suburb and the economic prospects in the community.

On the other hand, tax breaks have downsides:

  1. Lots of communities offer tax breaks. The company may be less interested in this specific community and more interested in how much money they can get from a community.
  2. Less money will come into the community than if no tax breaks were offered.
  3. At some point, the tax breaks run out and then what happens to the company and the newly developed property?

As the title of this post asks, how much development in suburban areas like Irving involves tax breaks? Would Wells Fargo locate in Irving or in the region without tax breaks?

Chicago is a global leader in data centers

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The Chicago region is a world leader in data centers:

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The Chicago area is tied with Atlanta as the fourth-largest data center market in the world, behind Northern Virginia, Silicon Valley and Singapore, according to a new study by Cushman & Wakefield. The study cites low cost of land, a robust development pipeline and lower power costs than most large data centers as advantages for Chicago.

The study also notes that Chicago-area sites come with “sizable incentives,” a factor that helped bring Facebook/Meta to DeKalb.

In 2019, Illinois created the Data Center Investment Program, offering an exemption from state and local sales and use taxes for companies that invest at least $250 million and create 20 new operational jobs in a data center. The program also requires the data center to be carbon-neutral.

In other words, there is money to be made by putting data centers in the Chicago region.

But, what do data centers offer back to the community? They might sit in buildings that the public does not know are data centers. They may not offer that many jobs; the data center under discussion in DeKalb in the article cited above is a more than 2.3 million square foot facility on 505 acres that will employ 200 people. They are getting tax incentives.

Of course, this is the way the development game is played in the United States. If these deals are not cut, companies will claim they will go elsewhere and they can find more favorable conditions elsewhere. The new data center will end up in Iowa or a “business-friendly climate.” The tech companies are desired by many communities so they will get good offers.

More positively, part of Chicago’s strength over the decades is its position in key infrastructure. The center of important railroad routes. Busy airports. The convergence of commodities from the whole Midwest. The creation of financial instruments. And now data centers.

Bears stadium at Arlington Park? Just keep the taxpayers out of it

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With the announcement that Arlington Park will be for sale, ideas are swirling about how the land could be used. I have heard a few times already the possibility of the Chicago Bears constructing a new stadium there. Here is one example:

The Loop from the North End of Soldier Field

Now it is urgently incumbent upon regional politicians and civic planners to begin a campaign to get a global-class Chicago Bears stadium built as a profitable symbol of the rebirth of the 326-acre site.

Fulfillment of such a bold and visioned plan would bring about a marriage of an NFL team and a suburb that was first discussed between “Papa Bear” George Halas and then-AP empress Marje Everett in 1968…

The question of “How?” can only be answered if there is an enormously creative and concerted joint effort put forth by such potential game changers as Bears chairman George McCaskey, Arlington Heights Mayor Tom Hayes and Gov. J.B. Pritzker…

Said Mayor Butts: “From my experience — and I’m talking about my suburb, which is 52 percent Hispanic, 47 percent Black and 1 percent ‘other’ — if you have an inspired plan, proper financing that does not put the host municipality at risk and a resolute ‘will-get-done’ attitude, toss in hard work and you can make a great thing happen.”

On one hand, this is a unique opportunity. It is rare for parcels of land this large to open up in suburbs developed decades ago. Filling a large parcel can be difficult; what can add to the existing community without threatening the current character? This particular location provides easy access to highways, easing travel for thousands of fans. The surrounding area is already used to sporting events on the sites. A suburb could become home to a major sports stadium.

On the other hand, the “creative and concerted joint effort” required to pull this off could become an albatross to taxpayers who often fund large stadiums for wealthy team owners. This is a tax break of massive proportions for a feature economists argue does not necessarily bring added economic benefits to a community. The stadium may provide status to a suburb but this does not always translate into financial gains. And Illinois has a history of this already: just see the state deal where taxes are still funding the White Sox stadium.

How to balance these competing perspectives? Many suburbs would jump at the opportunity as growth is good, having a pro sports teams is an important status symbol, and hearing the Bears are playing in Arlington Heights could be part of a branding strategy. But, I would recommend leaving the taxpayers out of this: they will likely not benefit economically from a new stadium.

Companies moving out of California – yet continuing offices and operations in California

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I have read several news stories discussing the move of companies out of California. Such news feeds chatter about companies and residents leaving places because of politics, taxes, discontent, etc. But, the details in this one story suggest some companies are shifting some workers and activity while retaining operations in California.

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“Oracle is implementing a more flexible employee work location policy and has changed its corporate headquarters from Redwood City, California to Austin, Texas,” the filing said. “We believe these moves best position Oracle for growth and provide our personnel with more flexibility about where and how they work.”

The company already has a significant presence in Austin, opening a five-story, 560,000 square-feet campus overlooking Lady Bird Lake. It also has employment hubs in Redwood City, Santa Monica, Seattle, Denver, Orlando and Burlington…

Oracle follows a handful of similar moves by California companies and high-profile business leaders leaving the state. Tesla CEO Elon Musk announced he had moved to Austin last week at The Wall Street Journal’s CEO Council summit. His exodus followed months of bashing California for its handling of the pandemic. The billionaire CEO said he is maintaining company operations in California, but also has significant operations for Tesla and SpaceX in Texas…

HP Enterprise also announced its decision to relocate its headquarters from San Jose to the Houston suburb of Spring earlier this month. Palantir Technologies relocated from Palo Alto as well this year, landing in Denver. Tech giants Google and Apple have also been expanding their presence in Austin over the last several years.

Headquarters are important, particularly for cities. Attracting the headquarters of a major company is a big status symbol for any big city. See the interest in trying to attract Amazon’s second headquarters. The implication is that the new location has a favorable business climate and is on the rise (with the opposite assumed of the previous location).

But, headquarters are just part of a company. They may be the nerve center and the physical home of company executives. Yet, large companies today can have offices and plants all over the place connected to a headquarters elsewhere.

Another way to read the moves out of California above is to suggest that these companies are hedging their bets by being located in numerous advantageous locales. Having multiple locations can help take advantage of local tax breaks for particular purposes, build on local work forces, maintain their place in local social networks, and provide points to pivot around when conditions change. The headquarters may have moved but they may move again and the companies still see some value in keeping operations going in California (even if some of this is simply due to inertia).

This suggests a different future reality than one where cities serve as anchors for major corporations. Instead, major multinational corporations keep offices and facilities all over the place, ready to move when needed or when an opportunity arises. Austin and Houston might be attractive now, Miami or Denver in a few years (just sticking to US locations). And as cities continue to look for an edge over their competition, attracting another big company is important…even as that company is actually rooted in multiple locations.

$741 million in tax incentives for Amazon in NE Illinois – with a bigger price tag for economically challenged communities

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Amazon has constructed 36 facilities in the Chicago region since 2015. And they got a lot of help from taxpayers in disadvantaged communities:

WBEZ

To help pay for its vast expansion, the company and its developers have won at least $741 million in taxpayer-funded incentives in northeast Illinois alone, according to a Better Government Association/WBEZ investigation…

Amazon collected less than $100 million in public incentives for the 15 warehouses it built in predominantly white communities but won more than $640 million in taxpayer incentives for the 21 projects built in communities with larger nonwhite populations, the examination found. Many of those communities are either mostly Black, mostly Latinx or have higher concentrations of low-income residents, and with municipal budgets already short on cash.

Records show the three largest incentive packages Amazon received — totaling $512 million — all came from predominantly Black suburbs. By contrast, the company built warehouses in at least seven mostly white communities that reported offering no public incentives at all…

While many of the communities may get more jobs, experts interviewed say the lost revenue from taxpayer incentives will strain public resources to rebuild crumbling roads from the truck traffic, mitigate pollution from the exhaust fumes and noise and to pay for other services such as police protection and fire prevention.

That big companies seek out tax breaks and local incentives is not new. Amazon played the game on a grand scale with its proposed second headquarters.

But, this illustrates one of the problems with tax breaks in general: it is a race to the bottom. Companies look for communities that will have a hard time saying no. What mayor or local official wants to turn down local jobs? Or, turn away a big company with the status like Amazon? Once they have such a company in town, communities often build on this when marketing land and facilities to other firms by saying they are home to Amazon.

Yet, the deal may not be a good one. Jobs are not the only factor that matters in a community. As the story above notes, traffic, pollution, noise, the strain on local budgets and services, and the quality of the jobs also matter. Does the addition of Amazon or another large company make the community as a whole better down the road?

The system could be improved in multiple ways. All the communities in a region could stop competing in this way; that Amazon locates within one municipality could also have spillover benefits for other communities. One community’s gain is not necessarily one community’s loss; the region operates as a whole. If revenue was shared across a region, then tax breaks in a particular community would matter less. Or, communities could just commit not to offer tax breaks at all. If companies cannot play the game, they would have to locate places for other reasons.

These possible solutions do not solve the underlying issues: jobs and capital in a metropolitan region are not evenly distributed. Patterns by race and class continue for decades as companies, residents, and other seek out particular locations and not others. That some communities have to pay more for Amazon to locate there just compounds the problem.

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