* This new law has been touted by several business groups and editorial pages as good government…
The law took effect immediately and extends [the enterprise zone program] that began in 1982 for another 25 years. Enterprise zones essentially give tax breaks to businesses within the designated areas. The breaks include an exemption from the retailers’ occupation tax paid on building materials and a tax credit for jobs created.
Quinn’s decision was timely, because the 97 enterprise zones around Illinois had been set to expire next year. Considering some of the bad publicity Quinn has received over the state’s image as being less than business-friendly — such as Peoria-based Caterpillar Inc.’s decision earlier this year to go to another state to build a new plant that will bring with it 1,400 jobs — the governor needed to do something to show that he wants businesses to stay and grow in Illinois.
The new law creates a board to oversee the process of determining which companies are eligible to participate in enterprise zones, and it will add a few of them. It also beefs up reporting requirements of companies receiving tax benefits from the program.
Quinn said enterprise zones have helped create and retain jobs. Businesses within enterprise zones have created more than 350,000 jobs, according to estimates from Quinn’s office.
Madison County’s experience with its enterprise zone has been more than positive. The Gateway Commerce Center is located at the intersection of Interstate 270 and Interstate 255/Illinois 255 and has convenient access to Interstates 55 and 70, as well as to airports, railroads and barge terminals.
The enterprise zone falls within the boundaries of both Edwardsville and Pontoon Beach, as well as unincorporated Madison County. Supporters say Gateway Commerce Center has added to the tax base of every taxing district that has property within the enterprise zone.
* I’ve driven by that Gateway Commerce Center. It’s huge. And it’s expanding…
An $80 million construction job and about 800 new, permanent jobs could be waiting in the wings if the Edwardsville City Council, Pontoon Beach Village Board and Madison County Board approve ordinances expanding the existing enterprise zone encompassing Gateway Commerce Center. […]
Besides the 800 new, permanent jobs at the new facility, the project represents 400 construction jobs over a 13-month period.
He said the warehouse would be twice the size of the 1.2 million-square-foot Hershey warehouse, one of the original developments in Gateway Commerce Center.
“It’s really quite amazing,” Towerman said.
* But sometimes, government incentives can go way too far. For instance, take the subsidies for Cabela’s and Bass Pro Shop..
An exhaustive investigation conducted by the Franklin Center for Government and Public Integrity found that the two competing firms together have received or are promised more than $2.2 billion from American taxpayers over the past 15 years.
“Retail is not economic development. People don’t suddenly have more money to spend on hip waders because a new Bass Pro or Cabela’s comes to town,” says Greg Leroy, executive director of Good Jobs First, a non-partisan economic development watchdog group based in Washington, D.C. “All that happens is that money spent at local mom and pop retailers shifts to these big box retailers. When government gives these big box stores tax dollars, they are effectively picking who the winners and losers are going to be.”
* The numbers…
* Cabela’s has received $551 million in local and state assistance during the past 15 years.
* Bass Pro Shops received $1.3 billion in local and state assistance during the same period.
* The federal government helped ensure liquidity for Cabela’s’ credit card division by providing $400 million in financing for the purchase of the company’s securitized debt.
* And check out the rationale…
Numbers don’t always tell the whole story, counters Larry Whitely, a spokesman for Bass Pro Shops, a privately held company based in Springfield, Missouri. Whitley argues the stores should be viewed as an amenity being added to a community — much like one might view a park or a library.
“These aren’t just stores – they are natural history museums,” he says. “Every store is designed to reflect the unique natural environment of the area in which it is located.” He adds that often a Bass Pro store is an anchor development that attracts additional retailers.
* But…
In fact, Ball State economist Hicks studied the economic impact of seven Cabela’s stores that opened between 1998 and 2003 and found that despite millions of dollars in economic development incentives given to the retailer, there had been no net gain in jobs detected in the communities one year after the stores opened.
“It’s not like folks suddenly have more money to spend on hip waders once a Cabela’s opens up. What generally happens is that instead of buying those hip waders from an independent business, they go to big box store,” says Leroy of Good Jobs First.
…Adding… And then there’s this disputed incentive…
Gov. Pat Quinn used his veto power Friday to reject a bill that would have required utility companies to purchase a synthetic natural gas to be made at a proposed plant that was to be built in the East Side neighborhood.
Quinn’s rejection of the bill puts the future of the plant in jeopardy because the agreement requiring companies to purchase the gas for the next 30 years was considered part of the guarantee making the plant economically viable. The plant is to be operated by Leucadia National Corp. on a portion of the former Republic Steel site near 116th Street and Burley Avenue.
Tom Shepherd, a spokesman for the Hegewisch-based Southeast Environmental Task Force, said his group is not willing to proclaim the plant dead – even though it led lobbying efforts during the summer to encourage Quinn to reject the bill.
“There’s no simple answer,” Shepherd said. “This plant has some serious business interests that want it built, and they may try to resurrect it in the future.”
- Leroy - Monday, Aug 13, 12 @ 11:27 am:
Most of those jobs at the warehouses are Temp jobs paying about $11 per hour. The net increase in real estate taxes has been minimal.
- walkinfool - Monday, Aug 13, 12 @ 11:28 am:
Enterprise zones do work, if the right kind of businesses are targeted. Manufacturing, logistics, international trade, technology, and agribusiness are all relative strengths for Illinois, and should be the focus.
The last time I was shopping at Cabela’s, I was approached three times for donations to the NRA, with forms for membership on the counters. They are impressive stores, but I wonder if that link impacts some politicians who support them with taxpayer money.
- Anonymous - Monday, Aug 13, 12 @ 11:52 am:
Golly, is it possible bribery/corruption is involved? I sure hope not
- 1776 - Monday, Aug 13, 12 @ 12:23 pm:
Kudos to the IMA for finally getting the enterprise zone extension passed and signed into law after three years of effort. It’s a great tool for our community. Other towns and economic developers are thrilled that it’s finally done.
- wordslinger - Monday, Aug 13, 12 @ 12:27 pm:
The Bass Pro Shop Museum of Natural History? I dig the stores, but c’mon.
Those guys must be pretty smooth. They know that some politicians will give away taxpayer money to produce a press release that says “jobs.”
- Cincinnatus - Monday, Aug 13, 12 @ 12:45 pm:
You mean the government is bad at choosing incentives for the private sector? Really?
Thank God Grand Poobah’s are their direct our tax dollars to private businesses.
- Cincinnatus - Monday, Aug 13, 12 @ 12:46 pm:
*there
- Debbie Reynolds - Monday, Aug 13, 12 @ 12:46 pm:
You know dear…Gov. Quinn seems to have a schizophrenic approach to public policy & economic development.
Just last month he signed the bill authorizing the development of that southeast side energy plant, and this week he decides to veto a bill which would ensure its development.
I’m neither in favor nor against the energy plant, but this man’s stands change with the direction of the winds.
- Third Reading - Monday, Aug 13, 12 @ 1:02 pm:
On a related subject - whatever happened to STAR bonds?
A few years ago, they were the Next Big Thing for economic development. In their first application, they were going to save Marion. Or something.
But now? Nothing. Zip. Nada. So says The Southern:
http://thesouthern.com/news/local/where-s-the-action-on-star-bond-land/article_7536bec6-bdb5-11e1-bd37-0019bb2963f4.html
And look-look-look. Who’s being all coy about setting up shop in Marion but Larry Whiteley. Yup, the same Larry Whiteley of Bass Pro Shops.
As a matter of public policy, STAR bonds are an outrage. Fortunately (at least for the present), there’s a perverse saving grace: for whatever reason, we’re completely fumbling in our efforts to give away the figurative store.
Hat tip: if memory serves - two years ago, Rich called the enabling legislation for STAR “the worst legislation ever.” Right you are, sir.
I’m outta here.
- Sueann - Monday, Aug 13, 12 @ 1:14 pm:
Many of the temporary warehouse jobs that were moved to the enterprise zones rather than being created have been eliminated. For example fork truck drivers have been replaced by laser guided fork trucks. Its just typical much ado over nothing…makes nice photo ops for the incumbents handing out tax giveaways though
- Allen Skillicorn - Monday, Aug 13, 12 @ 1:20 pm:
I tend to agree that TIF’s for retail big box stores are just a play for sales tax. Municipalities can only spend TIF funds on economic development, but sales tax can be wasted any way the politicians can imagine.
Hick’s from Ball State uses a meanigless metric. Who measures job increases only after 1 year? Sounds like he’s cherry picking the nunmbers to validate his hypothesis to me…
- Endangered Moderate Species - Monday, Aug 13, 12 @ 2:19 pm:
Were Enterprise Zone funds part of the government incentives received by Cabela’s and Bass Pro Shops? I was not aware that retailers were eligible for EZ funds.
- Plutocrat03 - Monday, Aug 13, 12 @ 3:02 pm:
Local government units will do almost anything to corral more sales tax dollars. Unfortunately they slept through math class and can’t figure out that they are giving away more money than they get back.
- Tommydanger - Monday, Aug 13, 12 @ 4:18 pm:
I can’t blame the municipalities for offering the incentives since local sales taxes are returned to the host muncipality. Imagine what would happen if local sales tax dollars were returned on a per capita basis like MFT dollars. Then cities would not likely offer the same level of incentives or try and poach a retailer from a neighboring community. The developers would have to pay for the extension of improvements themselves instead of the taxpayers footing the bill.
- Judgment Day - Monday, Aug 13, 12 @ 4:39 pm:
“Were Enterprise Zone funds part of the government incentives received by Cabela’s and Bass Pro Shops? I was not aware that retailers were eligible for EZ funds.”
Yes, they are.
In fact, as far as Enterprise Zones go, the only rule (practically speaking) is that “there are virtually no rules”, at least operationally speaking.
The most basic rule for most Enterprise Zones is that they work (pretty much) as follows:
1) A boundary area is established for the Enterprise Zone. Counties like Marshall County (and I believe Franklin, and certainly there are others) are Countywide.
2) Any property within an Enterprise Zone can be eligible for an abatement (Commercial, Industrial, Residential, even Agricultural - it wouldn’t even surprise me if it was applied to wind towers in some places). In fact, with the wind towers, I’m pretty sure that may be the case in places like Livingston County.
3) You can only get Enterprise Zone abatement(s) off for improvments to the property. It can be new construction or remodeling, but the abatement can only be equal to the amount of increase in the assessed value of the improvement.
4) If there are local and/or state equalizers applied to the property’s assessment, these same factors need to be applied to the abatement value (thank you, IL DOR!)
5) You can do all sorts of fancy calculations. Boone County (home of the Chrysler plant) does some really screwy ‘recapture’ provisions on any follow-up improvements to the property. IMO, the federal tax code covering AMT (Alternate Minimum Tax) is considerably less complex than that formula.
6) The abatement percentages are set by each of the affected tax districts. The abatement schedules vary by tax district, year, percentage, and can vary per individual fund (don’t ask) within a tax district. Nightmarish record keeping, and hopefully nothing goes wrong, because you better be an expert in Excel to figure what you have to back to back out.
7) Enterprise Zones can cross County lines. For example, DeWitt County is ‘attached’ to the Logan County Enterprise Zone. I believe the property is in Farmer City, so the corridor attaching to the Logan County Enterprise Zone runs all the way
across DeWitt County.
Having first hand experience with those wonderful beauties, glad I’m not working in that area any longer.
Btw, currently (It’s been a while since I checked), I believe there are 92 separate Enterprise Zones statewide, 6 of which are located within the City of Chicago.
If you really want to get solid numbers statewide, you need to get a copy of the PTAX 255-EZA report (1 per Enterprise Zone) from each County Clerk in the state.
- Judgment Day - Monday, Aug 13, 12 @ 4:56 pm:
Also, as I remember, you get a ‘pass’ (think it’s a refund provision) on any state sales taxes charged for materials used for the construction. There are a number of non property tax breaks put in place for development/construction being done within an Enterprise Zone.
Wherever you see a Walmart distribution center, you can have pretty good odds it’s either in, or was in an Enterprise Zone, and had an abatement.
- Excessively Rabid - Monday, Aug 13, 12 @ 5:06 pm:
People don’t suddenly have more money to spend on hip waders because a new Bass Pro or Cabela’s comes to town,
No. But jobs are temporarily created in the union trades - a core Democratic constituency, and money is made by builders and developers - a core Republican constituency. Could the situation be any clearer? Public money is used to buy support and if services or other public needs suffer as a result, well, tough. (rest of rant self-censored in advance).
- Shemp - Monday, Aug 13, 12 @ 5:53 pm:
Local government thrives on sales tax. Lord knows cities can’t count on income tax or replacement tax and all the property tax is being consumed by police and fire pension costs. If handing out half a million in sales tax rebates over 10 years and the project adds one million gross, you’ve netted $500,000. It’s pretty simple. If they use TIF and build the store on an otherwise unused lot, you haven’t lost anything in property tax, you’re still getting the base. It’s not hard to explain why this happens.
- KurtInSpringfield - Tuesday, Aug 14, 12 @ 7:38 am:
Re: Leucadia
Any business model that has to use government to force customers to purchase a product or service is not economically viable. If Leucadia thinks this plant is such a great idea, let them build the plant with their own money, no guarantees or government subsidies, and sell their product on the open market. That’s what economically viable businesses do. Disclosure: I am an AmerenIllinois customer that would be forced to pay more for Leucadia’s gas.