* Gov. Pat Quinn and Mayor Rahm Emanuel have announced several new plant and corporate headquarter openings and expansions in recent months. But the state lost out to Iowa for a factory that would have employed 165 people. Our neighboring state paid dearly for that fertilizer plant…
The incentives grow to $251 million, with $133 million in property tax abatement that Lee County supervisors agreed to provide the project Wednesday.
That would mean the cost per job is more than $1.5 million
* Illinois actually offered a more generous package, but the offer was turned down in favor of the higher-tax Iowa…
Branstad and others blamed Iowa’s corporate income tax structure for driving higher the incentives Orascom Construction Industries received to bring the plant and its 165 jobs to Iowa.
“Even with (Illinois’) tax increases and poor fiscal management, Iowa had difficulty competing because our tax climate is worse for a project like this with substantial sales to farmers in Iowa,” Branstad said. “If that doesn’t wake us up, I don’t know what will.”
* From the Tribune editorial board…
“The promises we got in Illinois were extremely attractive,” Sawiris noted. But Illinois’ promised benefits, he went on to say, “are not sustainable in our view given the balance sheet of the state of Illinois.”
“Whatever tax regime exists today we have to take with a grain of salt,” Sawiris said. “The unfunded pension liabilities of the state of Illinois were a big concern to us, let alone the hypothetical situations that exist in doing business in Illinois and Chicago.”
That reference to public corruption got a big laugh from the Iowa crowd at the news conference. Gov. Branstad couldn’t resist grabbing away the microphone to point out that in modern times only two previous governors in Illinois were not led away in handcuffs.
“The difference is we have a history of clean, honest government,” Branstad boasted. “They have a history of corruption.”
Discuss.
*** UPDATE *** From an IL DCEO spokesperson…
To be clear—The state never put an offer on the table. We recognized early on that Iowa’s bid was excessive and we were not going to engage in a bidding war…
Representatives of the company started engaging with us very late in the game, and for a transaction of this size, we would have had direct contact with the company itself–that did not occur.
Due to Iowa’s offer, Iowa taxpayers are handing Orascom a very lavish tax incentive while Illinois taxpayers are spared.
The key benefit here is lower anhydrous ammonia prices for farmers in Iowa and Illinois. Our farmers obtain that benefit regardless of where in the Midwest the plant is located.
Illinois continues to be a great place for business, as is shown by the 140,000 private sector jobs that have been created since January 2010. We will continue to aggressively pursue every opportunity to bring more jobs and economic opportunity to the state.
From that statement, it looks like Iowa was stampeded into upping its price when the company made a phony feint toward Illinois. Very clever move. The company gets mega bucks from Iowa and the locals. And then Gov. Branstad gets bragging rights over Illinois. And the Tribune gets its editorial. And Illinois farmers get a better deal on fertilizer. And Iowans pay a very heavy price.
Sheesh.
LIVE session coverage...
- b - Tuesday, Sep 11, 12 @ 11:17 am:
LOL. Terry “career politican” Brandstad ripping on IL is comical. That guy was Gov. of Iowa when I was a kid. I grew up in Iowa. My dad was found of saying “Des Moines is a great place, but you are 5 hours from the world.” So true.
- Skirmisher - Tuesday, Sep 11, 12 @ 11:18 am:
Very good posting, Rich! This little story rather neatly sums up why Illinois is going to continue to have a very, very hard time improving its economic situation. Our reputation for poltical corruption, fiscal irresponsibility, and populist “stick it to business” tax history makes altogether a very considerably sized albatoss about our collective necks.
- Homer - Tuesday, Sep 11, 12 @ 11:21 am:
All we hear from Democrats are the jobs they luckily bring to Illinois. What about this potential loss and the closing of the shipping department at Champion Laboratories in Albion, IL. It will end of costing 100 job losses. Just wait, Champion will enventually move the balance of receiving and production to Kentucky, also. What about monies received to increase jobs by 250 at Champion, Mr. Governor?
- walkinfool - Tuesday, Sep 11, 12 @ 11:21 am:
Very interesting.
Both states offered completely ridiculous financial deals, ($1.5M per job?), and the company chose Iowa as more likely to be able to continue to pay it from taxpayer funds.
Sounds like Storage Wars TV show, where one guy bids up the other guy into a losing proposition.
- Skirmisher - Tuesday, Sep 11, 12 @ 11:28 am:
This is a very thought provoking posting, Rich, and is a story that deserves wider media play. With the current tax advantage in Illinois’ favor, we still lose out because of our unsavory reputation for political corruption, fiscal irresponsibility, and a penchant for populist “stick it to business” tax increases. There isn’t the slightest evidence that this will ever change in the forseeable future, so why should big business take the risk? Illinois is going to have a very, very difficult time improving its economic condition without major political changes that are not likely to occur through the normal political process.
- Skirmisher - Tuesday, Sep 11, 12 @ 11:29 am:
Oops! Sorry about that. I thought my first posting had been lost. Hence the redundancy.
- Carl Nyberg - Tuesday, Sep 11, 12 @ 11:35 am:
If states have to pay over a million dollars per job as incentives to the “job creators”, we ought to be talking about going to a full blown socialist economy.
We live in a society governed by insane policies.
- QC Transplant - Tuesday, Sep 11, 12 @ 11:38 am:
When I read the story, I believe the most critical point was found near the end where the CEO of the company states, “he was torn between Iowa and Illinois, where he sees a better tax environment. But the company lacked confidence that Illinois could deliver on its promises, given its debt and pension burden.” This is the point that needs to be addressed.
- Cutler Fan - Tuesday, Sep 11, 12 @ 11:45 am:
Theres a sneaky little caveat in the deal the Trib forgot to mention. If Iowa doesn’t cut its corporate property tax rate, the incentives grow exponentially. That’s on top of what they promised them up front from the state AND the abatements.
- Secret Square - Tuesday, Sep 11, 12 @ 11:45 am:
“the company lacked confidence that Illinois could deliver on its promises given its debt and pension burden”
The moral of that story is that it isn’t just CURRENT tax rates that matter; it’s also the likelihood that those tax rates will change in the future. If a company has to choose between a state with a medium to high tax rate that’s not likely to change vs. a state with a currently low tax rate that’s likely to go up, which do you think they will choose? Stability will win the day.
- wordslinger - Tuesday, Sep 11, 12 @ 11:46 am:
–That would mean the cost per job is more than $1.5 million–
How about we just pay half a million a job and they can dig a hole one day, and fill it in the next? Or write a John Kass column. Same thing.
More lectures on business and ethics from the Trib edit board. Like they have any credibility on either subject.
Tell us, Wise Bruce, how’s your ESOP doing? What brilliant business moves wiped out your retirement fund? Was there a hint of corruption in Zell using your stock to crash the company?
What happened with the Blago/Zell deal for Wrigley? Was that an example of sound government and business practices?
- cermak_rd - Tuesday, Sep 11, 12 @ 11:46 am:
Lee County is in a dirt poor part of Iowa. The best employment right now is the prison in Ft. Madison. There is a new Siemens plant that makes windmill blades, so perhaps this will be located in a similar area. Ft Madison is reliably blue, I’m not sure about Keokuk (the county has 2 county seats, for some reason).
- Jimbo - Tuesday, Sep 11, 12 @ 11:49 am:
Hey Rich, can you pass along that I’ll hire 30 people at that price. I’m off to SOS to file my LLC right now.
- DeKalb Dragon - Tuesday, Sep 11, 12 @ 11:50 am:
Why doesn’t Iowa just give 165 unemployed Iowans $1.5 million each with the promise they’ll spend the money in Iowa? According to trickle down theory, that should provide a big boost to Iowa’s economy.
- Jimbo - Tuesday, Sep 11, 12 @ 12:03 pm:
Or the state could directly hire 10000 people at 25000. I know I’m not counting benies, but… Sheesh!
- Thoughtless Penny - Tuesday, Sep 11, 12 @ 12:03 pm:
–Why doesn’t Iowa just give 165 unemployed Iowans $1.5 million each with the promise they’ll spend the money in Iowa?–
Because that would deny some needy bank in the Cayman Islands the opportunity to stash Iowa tax money that would be transferred by a patriotic American businessman.
- Bill White - Tuesday, Sep 11, 12 @ 12:04 pm:
Perhaps Iowa having higher tax rates contributes to Iowa having lower levels of unfunded pension liabilities.
- Crime Fighter - Tuesday, Sep 11, 12 @ 12:11 pm:
==“The difference is we have a history of clean, honest government,” Branstad boasted. “They have a history of corruption.” ==
And the tradition of corruption continues under the Quinn adminstration.
- western illinois - Tuesday, Sep 11, 12 @ 12:12 pm:
Here is some more background. This is an EGYPTIAN compnay-not little Egypt so their corruption concerns are bogus. They first considered Davenport but Davenport didnt want it because I guess Scott County stinks enough from mega hog farms.
Terry Branstad is getting both his pension and his salary Which is legal in “pure” Iowa
- Cincinnatus - Tuesday, Sep 11, 12 @ 12:12 pm:
Please… PLEASE stop bidding for companies using corporate tax breaks. Pretty please with sugar on top.
Let’s instead look at the corporate rate structure and decide what flat rate is needed after we eliminate all breaks.
- Whisperer - Tuesday, Sep 11, 12 @ 12:13 pm:
This is may be a backwards win for Illinois…the plant is only four miles from the border. We can collect income tax from any Illinois citizens who works there with having to provide the infrastructure and tax abatement…
- Anyone Remember? - Tuesday, Sep 11, 12 @ 12:18 pm:
Does anyone remember Jim Thompson having trouble with economic development recruiting due to Illinois Power and Commonwealth Edison rates being so high? When you’re Illinois, its always something.
- cermak_rd - Tuesday, Sep 11, 12 @ 12:19 pm:
Whisperer, True enough. You should see the line of cards headed over the border when the prison shift changes in Ft Mad.
- Secret Square - Tuesday, Sep 11, 12 @ 12:26 pm:
Something else to consider: just because the plant is located in Iowa doesn’t mean that only Iowa residents can work there. Lee County borders on Illinois and Missouri. Assuming the plant is reasonably close to a bridge across the Mississippi, is there anything preventing IL residents from getting jobs there?
- Fed up - Tuesday, Sep 11, 12 @ 12:46 pm:
What is worrisome is Illinois put together a better package. But the company comes out and says Illinois future is just to bleak to locate there.
- Cheryl44 - Tuesday, Sep 11, 12 @ 12:47 pm:
It’s a fertilizer plant. It smells and people who work there don’t make very much money. The residents of Illinois are probably better off that this went to Iowa.
And for the record, I agree with Cincinnatus on this one. Which does not happen often.
- Angry Chicagoan - Tuesday, Sep 11, 12 @ 1:07 pm:
$200 million plus for a FERTILIZER PLANT??? Be thankful, ye politicians of Illinois, that Iowa “won” this. Then, don’t ever lay out that kind of tax “incentive” again.
- Plutocrat03 - Tuesday, Sep 11, 12 @ 1:14 pm:
Can someone please explain how the incentives running over 1.5M per middle class job can work?
Illinois has some of the top business minds in the world. Why no one ever taps these resources to stop digging toward the bottom is a mystery.
- TJ - Tuesday, Sep 11, 12 @ 1:17 pm:
They may not be nearly as corrupt as us, but at least Illinois is talked about nationally more than once every four years, unlike certain other worthless except for a caucus states.
- cermak_rd - Tuesday, Sep 11, 12 @ 1:31 pm:
TJ,
Oh come on, Iowa’s not that bad. Yes, I agree the way we do primaries is rotten and massively privileges the Iowa and New Hampshire economies, but Iowa also grows a lot of grain; makes windmill blades, which judging from I88 and I39 out west in IL is useful to IL; has an IA made wine and beer promotion in their state gov such that a business can get a very cheap IA only liquor license, which helps the state beer and wine industry; it has lovely state forests and riverland and lots of nice boating opportunities. And it’s rural class is not yet angry and resentful of its more successful urban/suburban class.
- TwoFeetThick - Tuesday, Sep 11, 12 @ 1:35 pm:
$1.5 million per job? Iowa shouldn’t be bragging about this, they should be ashamed of themselves. What a colossal waste of money. I’d be PO’d if Quinn and/or the GA had done this.
Good luck, Iowa! With “leaders” like this, you’re going to need it.
- The Sting - Tuesday, Sep 11, 12 @ 1:37 pm:
Thank you for not closing the deal, Illinois. Iowa just got stung big time.
- What planet is he from? - Tuesday, Sep 11, 12 @ 1:46 pm:
One thing I think is interesting, $233M in tax breaks (i.e. money that doesn’t get repaid) for a fertilizer plant and people are up in arms about losing. Contrast that to selling $233M in bonds (i.e, money that *does* come back) to build/renovate a sports arena. . . I’m not saying either (or any of them) is right, but seems to me if you’re going to complain about using public money for a private enterprise, you need to complain about using public money for a private enterprise.
- Endangered Moderate Species - Tuesday, Sep 11, 12 @ 2:29 pm:
This story has no good news.
1) $1.5M/ per job. These are our (IA or IL) tax dollars. Where is the outcry from our “smaller government” friends?
2) The company takes a shot at IL’s reputation. That hurts!! Is the CEO a native Iowan?
3) A neighboring Governor throw’s us under the bus. Economic development is regional, neighboring State’s should be working together, but that is not going to happen.
4) This is fertilizer plant! They more than likely were going to locate on a Mississippi riverbank in one of the Midwestern State’s regardless of incentives. They simply played one fool against another fool.
- redrum - Tuesday, Sep 11, 12 @ 3:05 pm:
Iowa is a tiny little state that wouldn’t make a pimple on Chicago’s face. My advice, pop Iowa!
- Doing it for the Children - Tuesday, Sep 11, 12 @ 3:15 pm:
Oftentimes people make the mistake of seeing “tax breaks” as costing the taxpayers money. The “break” is in essence not collecting a portion or all of the tax normally required by statute. In return, the state is able to gain tax revenue through the income tax by the employee and all of the other sales tax and fees that come out of consumer side spending.
In all reality, most corporate and business taxes are shifted the consumer regardless of where it is administered on the corporation or business.
When a new business wants to open it’s doors in your state, then all of the tax revenue, regardless of where you get it, is a net gain. This is how the interstate competition will be happening until total tax reform, a streamlining of the tax code is done. Corporations will gladly stay the villain; obtaining there tax breaks and paying minimal corporate tax rates as long as it doesn’t affect their profit margin. Who is really losing in this game of finger pointing though? I would venture to guess it is the state gets a zero net revenue gain, rather than a minimum net revenue gain.
- 47th Ward - Tuesday, Sep 11, 12 @ 3:17 pm:
Rubes.
- Shemp - Tuesday, Sep 11, 12 @ 3:20 pm:
It’s not like Iowa is handing over that cash. A good chunk of it is foregoing future property tax payments that the county wouldn’t be getting without the development anyway. But it is very telling when a less competitive tax state still wins out the day. I would also bet it will cost them far less to build in Iowa. That has to be factored in, and I am sure the cost of employees would be cheaper as well given the 2 States. It’s not rocket science, and it isn’t as expensive as it appears.
- Shemp - Tuesday, Sep 11, 12 @ 3:28 pm:
“From that statement, it looks like Iowa was stampeded into upping its price when the company made a phony feint toward Illinois. Very clever move.”
That’s the same way Illinois works, only Illinois acts 20x slower and loses out to other states that are more nimble. People looking to locate in Illinois are encouraged to look elsewhere to make DCEO improve their offer. DCEO has a cap, and their is a trigger if you show you are looking out-of-state, that will increase the incentive offer DCEO makes. It’s all part of the game as the Midwest fights within itself. The only problem is DCEO is about the worst of the Midwest eco devo offices. If not for the intangible benefits of Chicago as the center of trade and capital, this State would be infinitely worse. It’s all we have to offer compared to other States. Ask anyone in local development what it’s like to compete against our neighbors that are more nimble and less politicized.
- Michelle Flaherty - Tuesday, Sep 11, 12 @ 3:28 pm:
to say nothing of Iowa now corning the Midwest meth market. Kudos Branstadt.
- Endangered Moderate Species - Tuesday, Sep 11, 12 @ 3:46 pm:
Shemp, “If not for the intangible benefits of Chicago as the center of trade and capital, this State would be infinitely worse.”
Without Chicago, we would be Iowa. I think we are better off with Chicago leading our State. International business can relate to Chicago. Travel to Europe and Asia and ask about Des Moines. You will receive a “where?” Travel to those places and ask about Chicago. They identify Chicago as the heart of the Midwest.
- western illinois - Tuesday, Sep 11, 12 @ 5:34 pm:
Actually I think downstate would still be wealthier than some neighboring states(i am not suggesting the separtist nonsense). The NYY did a feature on top 1% of income earners. The threashold was for top one in Peoria was exactly the national average. It was higher than any Iowa metro. Lots of Doctors and corporate execs is what gets the high income earners. Chicago followed by Minneapolis topped the midwest. No suprise there
Illinois underates ITSELF. We have been a low tax high service state for a long time. We have to balance that out a little more .
Maybe its because we are all being productive we get stuck with so mnay weak and corrupt leaders
- Sideliner - Wednesday, Sep 12, 12 @ 9:04 am:
Lower ammonia pricing, coupled with reestablishing a reliable local source, is a big deal. This is good news.