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A road-based tax on large warehouse distribution centers?

Tuesday, Apr 23, 2019

* Senate Transportation Committee Chairman Martin Sandoval has been holding hearings across the state about a new capital bill. Sandoval has demanded input at every hearing about how local officials would like the state to pay for these projects. Somebody finally came prepared for yesterday’s Elgin hearing

Sean Michels, board president of the Metro West Council of Governments, said there should be a variety of funding sources, such as increases to gas, alcohol and cigarette taxes; a portion of the recreational marijuana tax, if approved; and a tax on large warehouse distribution centers whose vehicles can damage roads the most, he said.

Those warehouse distribution centers generate tons of traffic, and many have cut tax-avoidance and incentive deals with local governments.

Thoughts?

- Posted by Rich Miller        

57 Comments
  1. - Former State Worker - Tuesday, Apr 23, 19 @ 10:53 am:

    I’m very much for it. Those large warehouses don’t create a lot of jobs and are because the location is attractive to these businesses.

    I’m assuming the breaks they are getting are property tax related so they should have to assist in helping pay for our crumbling infrastructure.


  2. - Anon E Moose - Tuesday, Apr 23, 19 @ 10:53 am:

    Shouldn’t those who do the most damage to the roads pick up a proportionate share of the cost?


  3. - I'm Just Anon - Tuesday, Apr 23, 19 @ 10:58 am:

    Not a bad idea but how many of those areas are chicken and egg, i.e. “build it and we’ll figure it out/get the state to pay for it later”? Revenue is absolutely needed from a mix of sources but the state should not and cannot reward lack of O&M by locals without something to show they understand they cannot differ infrastructure investment (not just transportation).


  4. - TheInvisibleMan - Tuesday, Apr 23, 19 @ 10:59 am:

    plainfield decided to take $6M from their school district to support building a warehouse.

    So there’s an example of what NOT to do for everyone else.


  5. - Al - Tuesday, Apr 23, 19 @ 11:01 am:

    Matching Iowa’s tax on Liquor would raise $80 million. It could be considered as part of an overall funding plan for Capitol Bonds. This is just the hard stuff, not beer or wine.

    Matching Kentucky’s beer and wine tax would raise considerably more.


  6. - Earnest - Tuesday, Apr 23, 19 @ 11:03 am:

    >and a tax on large warehouse distribution centers whose vehicles can damage roads the most, he said.

    How refreshing to hear realistic specifics on either cuts or increasing revenue. Well done Sean Michels. As far as the distribution center tax - I see the sense as good infrastructure is an important factor in making Illinois attractive to these businesses.


  7. - lolillinois - Tuesday, Apr 23, 19 @ 11:05 am:

    Yeah, there’s a model for encouraging business investment - we’ll woo you here, and then once you’ve spent the money and can’t leave we jack up your taxes.


  8. - IL Democrat Party - Tuesday, Apr 23, 19 @ 11:08 am:

    tax tax tax defer tax tax tax borrow tax tax tax tax borrow tax tax ….


  9. - Huh? - Tuesday, Apr 23, 19 @ 11:10 am:

    There goes Sugar Grove’s plan for a distribution center near IL 47 & I88.


  10. - Hippopotamus - Tuesday, Apr 23, 19 @ 11:11 am:

    Isn’t every farm a kind of warehouse that distributes its harvest? Let’s apply it to them as well.


  11. - DuPage Bard - Tuesday, Apr 23, 19 @ 11:12 am:

    Considering most of those warehouse deals were cut with large incentives from local taxing bodies, look at Centerpoint in Elwood, those locals gave away their share, the state might as well pick it up.


  12. - Not a Billionaire - Tuesday, Apr 23, 19 @ 11:14 am:

    Yes. Good idea. Sandoval also told a group from Monmouth if they want a project they better get their representatives to vote for they program.


  13. - Shamrockery - Tuesday, Apr 23, 19 @ 11:14 am:

    Sorry for the banned punctuation.


  14. - Colin O'Scopy - Tuesday, Apr 23, 19 @ 11:22 am:

    The distribution centers, just like data centers, are pursued by municipalities with incentives and tax cap schemes only employ relatively few people compared to the incentives they receive.

    They should pump the brakes on these incentives and tax the businesses appropriately.


  15. - City Zen - Tuesday, Apr 23, 19 @ 11:22 am:

    ==we’ll woo you here, and then once you’ve spent the money and can’t leave we jack up your taxes.==

    Tier 2 warehousing


  16. - Colin O'Scopy - Tuesday, Apr 23, 19 @ 11:24 am:

    =tax tax tax defer tax tax tax borrow tax tax tax tax borrow tax tax=

    Roads and bridges are crumbling, on the verge of collapse. The money has to come from somewhere to fund a sorely needed capital bill.

    What’s your solution, smart guy?


  17. - Last Bull Moose - Tuesday, Apr 23, 19 @ 11:26 am:

    Are the distribution centers the problem? The same tonnage hits the road whether it goes through a distribution center or not.

    Hippo- The bulk of farm tonnage is getting grain to elevators. This involves short trips almost entirely on Township and County roads. Not a strong tie to State funding issues.


  18. - NoGifts - Tuesday, Apr 23, 19 @ 11:30 am:

    Consumers get the benefit of lower priced goods. If you tax it, the cost will be passed on to shippers and consumers anyway.


  19. - Anonymous - Tuesday, Apr 23, 19 @ 11:31 am:

    “There goes Sugar Grove’s plan for a distribution center near IL 47 & I88.”

    Ok? Can you explain the benefits of having more distribution centers here if they are just going to add to our infrastructure problems without fixing them?

    If you were talking about a huge jobs generator then I could see the benefit since they would at least be employing residents who will pay property taxes, Illinois income tax, consume goods here, etc.

    Just look at what has happened to Elwood and why their community is so against these large industrial parks.

    https://www.southbendtribune.com/news/local/elwood-vs-new-carlisle-could-proposed-industrial-park-backfire-on/article_3e0cf7af-ad82-598a-8bf3-e7e356aca4af.html


  20. - NIU Grad - Tuesday, Apr 23, 19 @ 11:33 am:

    (Almost) similar to how trucks have to pay higher rates on the Tollway. Much more equitable…plus these companies are often paying those lower tax rates because of local incentives.


  21. - Bobby Beagle - Tuesday, Apr 23, 19 @ 11:35 am:

    “Consumers get the benefit of lower priced goods. If you tax it, the cost will be passed on to shippers and consumers anyway. ”

    Consumers pay the cost of horrible damage to the roads in the form of higher state or city taxes for re-pavement. This is in fact a zero sum situation, someone needs to pay for the road repairs. This seems like a fairly reasonable way to do it.


  22. - Minnie Pearl Jam - Tuesday, Apr 23, 19 @ 11:36 am:

    Hats off to Sean Michel’s for listening, hearing and directly answering the question.


  23. - Honeybear - Tuesday, Apr 23, 19 @ 11:36 am:

    Totally for it. They are low wage temp worker churn em and burn em plantations. They don’t help the local economy one bit. I maintain SNAP and Medicaid benefits for those poor temp workers all day long here in the metro east. Rarely does a worker make it past a few months. They literally bus these folks in from the poor areas to the warehouses. They aren’t allowed to work enough to get benefits or full time employment.


  24. - Anonymous - Tuesday, Apr 23, 19 @ 11:41 am:

    “Are the distribution centers the problem? The same tonnage hits the road whether it goes through a distribution center or not. ”

    A big part of the problem is that they are being clustered together, so the tonnage is not distributed across all sorts of roads but rather falls heavily on certain roads. Ashland and Western from about 290 to 55th street is a great example of routes that are being crushed by constant semi traffic as goods move from one intermodal facility to another, or from those intermodals to other companies.


  25. - Etown60120 - Tuesday, Apr 23, 19 @ 11:48 am:

    Love the idea. With the increase of online distributions centers this can bring additional taxes.


  26. - Big Jer - Tuesday, Apr 23, 19 @ 12:14 pm:

    ===whose vehicles can damage roads the most==

    Along the same lines, we need an SUV/Pickup Truck tax/ surcharge to help with road costs.

    Decades ago most vehicles including pickup trucks had passenger car tires. Also the pick up trucks were much smaller. Now, many SUV’s and Pick Up trucks are larger and have “truck” tires.

    I live in the far northwest suburbs and many of the Pick Up trucks out here have large off road tires which are harder on roadways. Also many people have full size Chevy Suburbans/GMC Yukons which also have large truck tires.

    If you want to drive a large pickup or SUV than you should pay a road infrastructure tax/surcharge. IMO, freedom does not mean doing whatever you want and expecting others to pay for the damage/consequences of your choices.


  27. - Responsa - Tuesday, Apr 23, 19 @ 12:17 pm:

    ==Isn’t every farm a kind of warehouse that distributes its harvest? Let’s apply it to them as well.==

    No, most Illinois farms’re not “kind of a warehouse”. Please read Honeybear’s comment @ 11:36 am for additional details.


  28. - Shrimp gumbo - Tuesday, Apr 23, 19 @ 12:17 pm:

    Roads are primarily damaged by freeze/thaw cycles, and also, if you have it, it came on a truck. So, no, the plan doesn’t make sense to me.


  29. - Dan Johnson - Tuesday, Apr 23, 19 @ 12:19 pm:

    Trucks should pay more. They break the roads. They are the ones that should pay a per-mile tax. Not light little hybrids.


  30. - MetroEast Bluedog - Tuesday, Apr 23, 19 @ 12:38 pm:

    This would be devastating to the metro east. 20 years ago there were just farm fields between Edwardsville and Pontoon Beach, and now there over 20 warehouses with 7,000 jobs. There was just announcement of another huge investment by Northpoint Development on 600 acres. Pontoon Beach set up a TIF and they will not be receiving tax abatement.
    Honeybear, I can guarantee you that your clients can find full time employment down there. They are begging for workers and cannot fill full shifts. Most of the warehouses pay $13-$14 an hour to start out with pay raises every 6 months.


  31. - Six Degrees of Separation - Tuesday, Apr 23, 19 @ 12:47 pm:

    Not all warehouses are created equal. One of my sons makes a fairly good living for a single guy, well above minimum wage, and his co-workers aren’t living in abject poverty from what I can tell. The place employs a few hundred, and is one of several in the area. I am not sure what singles out warehouses for additional taxation in comparison to other industries like agriculture, manufacturing and mining that attract large amounts of truck traffic.


  32. - Robert the 1st - Tuesday, Apr 23, 19 @ 12:51 pm:

    I worked in a warehouse in central IL ten years ago when I was in college. Starting pay back then was $16/hr to operate a forklift. I certainly didn’t feel taken advantage of.


  33. - Pot calling kettle - Tuesday, Apr 23, 19 @ 12:58 pm:

    The point is: there is no such thing as “free.”

    State and local governments give tax breaks to corporations, but the costs do not go away. Fiscal responsibility means finding a way to pay for costs incurred. User pays is about as libertarian as it gets.


  34. - OneMan - Tuesday, Apr 23, 19 @ 1:01 pm:

    Ok? Can you explain the benefits of having more distribution centers here if they are just going to add to our infrastructure problems without fixing them?

    Sure, I will give it a try, but first I am going to address one of the assumptions.

    if they are just going to add to our infrastructure problems without fixing them?

    A distrubtion center and/or warehouse truck may be more likely to purchase fuel (taxes) than a truck that just goes across the state on I-80 which may result in 170 road miles driven without paying anything to the state in Fuel taxes. So it would seem that virtually any truck that passes through the state would in your view ‘add to our infrastructure problems without fixing them’.

    These facilities are employing people now, perhaps not in the best way, but they are employing more people than undeveloped land was/is. These people drive cars, pay taxes, etc.

    So they are contributing to the costs of infrastructure repair, not as much as you might like, but they are contributing.

    Now to the rest.

    Lets say the magic transportation gennie shows up and moves all of these to Wisconsin, Iowa and Indiana.

    Some of these goods will still have to travel though Illinois and to Illinois. The advantages that other Illinois companies may have by having warehousing from suppliers close by will be reduced. JIT manufactoring will result in longer truck trips and higher risks (weather, traffic), there is an advantage of proximity of goods.

    That all being said, if the Internet isn’t missleading me it seems we have lower desel taxes than other states, so we should look at that.

    https://www.taxadmin.org/assets/docs/Research/Rates/mf.pdf


  35. - Wylie Coyote - Tuesday, Apr 23, 19 @ 1:02 pm:

    How about adding a transportation VAT to everything you purchase? You can blame the trucks and distribution centers all you want, but the reason they exist is to bring you the stuff you eat, the clothes you wear and everything else. The roads get torn up to meet the demands of you, the customer. Then maybe you ought to pay for the damage caused so you can exist in the modern world…..


  36. - Wylie Coyote - Tuesday, Apr 23, 19 @ 1:03 pm:

    VAT = Value Added Tax.


  37. - wondering - Tuesday, Apr 23, 19 @ 1:05 pm:

    There goes the I80 corridor. But what the hey, only rural jobs, right? Let ‘em eat cake.


  38. - Honeybear - Tuesday, Apr 23, 19 @ 1:14 pm:

    OneMan
    “These people drive cars, pay taxes, etc.”
    Nope
    They are folks caught in bone crushing poverty.
    They don’t have cars
    They don’t pay taxes (except a bit of withholding)
    They don’t support the local community
    There aren’t lunch places there, they bring their lunches
    They live 20-50 miles away and take public transportation. Few have cars or vehicles
    They get Municipals/Counties to put in bus routes
    and stops.
    The jobs literally force them onto public benefits and towards multiple jobs.
    Temp Agencies find a continuous supply of bodies to throw at these places.
    I used the word plantation intentionally.
    These are just this side of work camps.


  39. - Blue Dog Dem - Tuesday, Apr 23, 19 @ 1:19 pm:

    I am guilty. Twice in my life I have ordered things on line. The last time being three years ago. No more. I have taken the pledge. Like my vow to boycott Oreos and buy all union made products and services , it is tough. Doable. But tough. But I sleep good at night.


  40. - brickle - Tuesday, Apr 23, 19 @ 1:21 pm:

    I’m not sure why so many cities seem enamored with these places and are willing to give them huge breaks and incentives to lure them in. All for a handful of low-wage jobs with a few decent front office staff and immense damage to our infrastructure.

    Remember, road damage isn’t linear. It scales roughly by the forth power. An 8,000lb SUV doesn’t do twice as much damage as a 4,000lb car, it does roughly 16x as much damage. An 80k lb semi truck does 10,000x as much damage for the same vehicle mileage. Inviting a non-stop stream of semi-trucks into your area to drive on roads that weren’t ever really built for that abuse is going to severely tax your roadways.


  41. - wondering - Tuesday, Apr 23, 19 @ 1:23 pm:

    Cute..Metro West Council of Government is Kane and DeKalb counties. That is I88 tollroad country with few if any warehouse operations. Could it be that this is what motivates Sean Michels to devastate the rural jobs along I80?


  42. - brickle - Tuesday, Apr 23, 19 @ 1:23 pm:

    whoops, that should be 160,000x (20^4) more damage for the semi, not 10,000x!


  43. - Honeybear - Tuesday, Apr 23, 19 @ 1:24 pm:

    Metro East Blue Dog
    “Honeybear, I can guarantee you that your clients can find full time employment down there. They are begging for workers and cannot fill full shifts. Most of the warehouses pay $13-$14 an hour to start out with pay raises every 6 months.”

    Dude, you have to understand. I’m looking at their paystubs to determine their income so that I can determine and maintain their foodstamp/Medicaid benefit.
    I’m looking at the paystubs
    I look at the paystubs from these warehouses
    Every
    Single
    Day
    Your comment is a flat out lie.
    There are not 7000 jobs there
    You got that from the promo literature
    The one truth you wrote was that
    “They are begging for workers and cannot fill full shifts”
    True
    But because they have burned through so many workers.


  44. - MetroEast Bluedog - Tuesday, Apr 23, 19 @ 1:48 pm:

    Honeybear, there is data that shows that many jobs there. The Southwestern Illinois Leadership Council did a study in 2016 that showed the massive economic impact those warehouses have. DB Schenker has a job fair next week with jobs starting out at $16.25 an hour for case pickers and fork lift operators. I of course wish some of the warehouses paid more. There a few down there that are not great, but there are plenty that are great places. Your clients should go through St. Clair County Intergovernmental Grants Department or Madison County Employment and Training. There are plenty of great opportunities down there. They just need to be placed in the right one.
    Example: World Wide Technology is building two 1 million square foot facilities there now. They pay much better than most and have an on-site health center for their employees at their current Lakeview location. To say that these warehouses have little economic impact is massively ignorant. I have met some of the managers down there who started out on a forklift and who now have a great career.


  45. - Blue Dog Dem - Tuesday, Apr 23, 19 @ 1:58 pm:

    I have nothing against the distribution centers. They dont deserve a penny more in incentives than the tens of thousands of mom/pops trying to survive in this state. Govt picking winners that dont pay into the system is unsustainable economic development.


  46. - Whatever - Tuesday, Apr 23, 19 @ 2:33 pm:

    A tax on distribution centers is not a good proxy for wear and tear done to the roads. If bigger trucks on the road and more trucks on the road cause more damage, a tax based on the size of the truck and miles traveled would be a better match between who is damaging the roads and who is paying for the roads. A tax on distribution a distribution center as such might be a good way for a local government to raise funds to pay for improvements and maintenance for local roads, but for the state to pay for statewide improvements and maintenance.


  47. - wondering - Tuesday, Apr 23, 19 @ 2:38 pm:

    Honeybear…What does the payscale have to do with road tax? Trying to get even? Vengence is mine sayth….And while we are at it, how does negating local incentives and applying road taxes prompt these companies to pay higher wages?


  48. - Anonymous - Tuesday, Apr 23, 19 @ 2:45 pm:

    Al,

    Illinois state sin taxes on liquor are outright higher than Kentucky’s already. Iowa’s only appear higher because it’s a control state where the state is much more involved in the retail sale & distribution of alcohol than other anidwest states.

    https://taxfoundation.org/state-spirits-taxes-2018/

    If somebody wants to propose Illinois get state run liqquor stores as a revenue source I raise my glass of heavily taxed whiskey and toast you with “What could possibly go wrong?”

    Cheers!


  49. - Bobby Beagle - Tuesday, Apr 23, 19 @ 2:48 pm:

    Wow, look’s like a lot of antecdotal support for these distribution centers.

    Maybe the real solution is we should tax them for their road damage in Cook County and Chicago, and the collar counties and rural areas can have meccas of solid job creation all to themselves. I know we won’t be missing them here on the Southwest side of Chicago. Please, take them.

    Heck, by all measures its working great in Elwood:

    https://newrepublic.com/article/152836/elwood-illinois-pop-2200-become-vital-hub-americas-consumer-economy-its-hell


  50. - Da Big Bad Wolf - Tuesday, Apr 23, 19 @ 3:09 pm:

    ==Like my vow to boycott Oreos and buy all union made products and services , it is tough. Doable. But tough. But I sleep good at night.==
    How do you do both? You can find union made products but they won’t necessarily be in local stores. You can find products in stores but they won’t necessarily be union made.


  51. - Lefty Lefty - Tuesday, Apr 23, 19 @ 3:14 pm:

    ** That is I88 tollroad country with few if any warehouse operations.**

    Menard’s has a huge distribution center on Eldamain Road in Plano (in Kane County).

    Nestle has a huge distribution center in DeKalb on DeKalb Court.

    I know about those without even doing any research. They’re popping up all over the region.

    The idea that Kane and DeKalb Counties are all corn and beans is…not correct.


  52. - California Guy - Tuesday, Apr 23, 19 @ 3:50 pm:

    Logistics centers are simply the destination point of freight trucks all over the State, many of which pay the diesel fuel tax which is slightly higher than gasoline.

    The State could just simply raise the diesel fuel tax to accomplish this goal. Logistics is extremely competitive and inelastic, so the majority of the costs of this tax are already pushed onto the consumer. The effective result is everyone paying a little bit more at the grocery store, online shopping, etc. and more money goes to roads.

    I’m ok with it.


  53. - Denise - Tuesday, Apr 23, 19 @ 3:54 pm:

    Absolutely. Where ever trucks go they need to pay. They do 10x the damage as light vehicles and whenever an increase comes up they scream the most and legislators listen. It has to stop. If we want better infrastructure we all have to pay for it.


  54. - Blue Dog Dem - Tuesday, Apr 23, 19 @ 3:57 pm:

    DaBig. You are correct. Buying union made electronics (or even partially assembled) is impossible. I make trips to Target when i can for purchase. I am more into buying union built or serviced over buying local.


  55. - Boone's is Back - Tuesday, Apr 23, 19 @ 4:00 pm:

    Those large warehouse distribution centers also get heavily ticketed for having their trucks over the weight capacity all the time. There are certain municipalities (some in Sen. Sandoval’s district) who instruct their cops to park outside of the distribution centers and ticket them at will for the revenue.

    You’re attracting businesses into these jurisdictions and then trying to get them on the back end with this new tax? Here’s a thought…how about we address the systemic problems that are driving our taxes up rather than dreaming up new schemes to “get people.”


  56. - Bobby Beagle - Tuesday, Apr 23, 19 @ 4:17 pm:

    “how about we address the systemic problems that are driving our taxes up rather than dreaming up new schemes to “get people.” ”

    The “systemic problem” is that intense use of roadways by semi trucks full of goods is causing a disproportionate amount of damage to roads, which then increases the cost on the government to fix the roads.

    The proposed way to “address” this systemic problem is to make the companies which attract, and then profit off of, such heavy semi-traffic to pay more money so that it doesn’t fall on everyone else to pick up the tab.


  57. - Chicago Bars - Tuesday, Apr 23, 19 @ 4:27 pm:

    Anonymous at 2:45pm was me.

    And as for beer & wine sin taxes of Kentucky that’s a whole different tax structure than Illinois too as it’s driven by wholesale price rather than gallonage.


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