Capitol Fax.com - Your Illinois News Radar

Thursday, Jun 8, 2023 - Posted by Rich Miller

Illinois’ efforts to lure a major electric vehicle battery plant here finally may be close to striking gold, as Gov. J.B. Pritzker is personally negotiating with multiple companies to come here.

Among the lures: hundreds of millions of incentives, in part coming from a recently authorized state “deal closing fund,” and in part a willingness by local municipalities to consider the type of long-term property tax breaks that factory owners are demanding. […]

Much of the chatter is about a site just off of Interstate 80 in Morris, 24 miles southwest of Joliet and 62 miles from downtown Chicago in Grundy County.

The deals are serious enough that Pritzker interrupted leadership talks in Springfield on a new state budget a few days ago to travel to Morris and meet with executives of the interested company to tour a site on the east end of town, multiple sources with direct knowledge report. It’s not known if Pritzker joined in the helicopter tour of the land, but he reportedly offered more than $600 million in potential incentives for the plant.

Fingers crossed, but not counting on anything.

* As you’ll recall, Stellantis’ Belvidere plant was idled months ago. From January…

Illinois has submitted what could be its best offer to keep the Belvidere Assembly Plant operating and save what could be thousands of jobs.

U.S. Sen. Tammy Duckworth, D-Illinois, said during a visit to Rockford that her office is supporting local and state officials in their efforts to keep the Stellantis plant open in Belvidere where 5,000 people worked a few years ago. Although details are unavailable because talks are on-going, Duckworth said the state submitted its latest offer Friday night.

Almost five months later and still no word on Illinois’ “best offer.”

* And this is ominous news from Ford…

Ford Motor Co (F.N) on Monday unveiled an ambitious strategy to profitably ramp up electric vehicle sales but faces a challenge to slash $7 billion in costs and regain credibility on Wall Street. […]

Ford, whose shares fell 1% at midday, estimated its total costs are $7 billion higher than its competition.

Also…

One way is to reduce investment in hypercompetitive market segments such as two-row smaller SUVs, [Ford CEO Jim Farley] told industry analysts.

Uh-oh. Ford’s Chicago plant, the oldest factory the company operates, assembles the two-row Ford Explorer. It does, however, assemble the three-row Lincoln Aviator.

And, of course, Rivian is having its own problems. Oy.

* Remember this column I wrote in February?…

Volkswagen filed a federal lawsuit in December describing a bill that overwhelmingly passed both Illinois legislative chambers and was signed into law in 2021 as “crony capitalism at work: redistributive legislation that takes hundreds of millions of dollars from some (but not all) motor vehicle manufacturers and, for no public purpose, deposits that money directly into the pockets of politically favored Illinois [car] dealers.” […]

The manufacturers say the law is costing the industry $240 million a year. Yes, you read that right. $240 million. Per year. They claim Illinois has the highest warranty repair costs in the nation. By far. […]

The subsidies the state can offer simply don’t compare with the gigantic annual cost of that 2021 law. Couple that with our high local property taxes (these electric vehicle plants take up huge amounts of space) and other costs and hurdles (Ohio, like Illinois, is not a “right to work” state but has a new concierge system to quickly clear red tape), and you can see why the state hasn’t yet convinced a national or international corporation to construct an electric vehicle-related facility here.

If Pritzker can lure a big, jobs-rich EV-related plant here, convince Ford to keep its plant open and prod Stellantis into reopening its plant, then he’s a hero. But color me skeptical on all three.

I try hard not to be a negative Nellie, but this state has a well-deserved toxic reputation with the auto industry.

…Adding… According to this article, Georgia gave Hyundai a $1.8 billion incentive package for an electric vehicle plant. North Carolina used $1.2 billion in incentives to land VinFast, a Vietnamese electric vehicle manufacturer. And South Carolina’s $1.3 billion state incentives package for Volkswagen included a $200 million loan from the state. Illinois’ $600 million kinda pales in comparison.

13 Comments

*** UPDATED x1 - COGFA: Scenarios “are not budget predictions” *** Here we go again

Thursday, Jun 8, 2023 - Posted by Rich Miller

* Jim Nowlan in the Tribune…

Gov. J.B. Pritzker and state lawmakers have recently been trumpeting the great financial shape of Illinois. Balderdash. And they know it. There will almost certainly be state tax increases by 2025. […]

The state legislature’s own budget forecasting agency predicted in March that by one reasonable scenario, the state’s operating funds in calendar 2025 will run at a deficit of more than $3 billion annually, with a whopping $18 billion in unpaid bills (from a total budget of around $100 billion).

A “reasonable scenario”? Balderdash.

I can’t believe we have to do this again, but here we go.

* From COGFA…

Scenario 3 assumes spending increases similar to the spending rates seen over the last five years of 7.1% per year on average. This scenario has the highest expenditure growth rate analyzed and leads to the least favorable results for the State. Expenditures grow to just over $61 billion by FY 2026. This scenario reflects deficits in all three years forecast and has the worst outcome when considering the aggregate accounts payable. After a surplus of $1.9 billion in FY 2023, a deficit of $3.1 billion occurs in FY 2024. This deficit grows to almost $6.4 billion in FY 2025 and $9.2 billion in FY 2026. Under this scenario, the accounts payable rises to $18.2 billion. This example shows that spending patterns seen in the past few years cannot continue without a comparable increase in revenues which is not seen in the Commission’s current estimates.

And this is what I wrote about that very same scenario in April…

Trouble is, that particular COGFA scenario is pure fantasy, likely included merely as a “what if.” Nobody is advocating that. Revenue and spending in that five-year average included huge amounts of one-time federal money to deal with the massive COVID pandemic, which is no longer with us. The spending also included billions of dollars in one-time approps to pay down gigantic amounts of debt, including for pensions and the unemployment insurance trust fund, rather than put the money into the spending base.

That scenario projected FY24 revenues of $50.41 billion and spending of $53.54 billion, for a deficit of $3.13 billion. In the real world, actual projected revenues are $50.6 billion and spending is projected at $50.4 billion.

The current projected spending for FY24, by the way, is lower than all of COGFA’s scenarios, which as I’ve pointed out before were just numbers games played by accountants who should know better than put that stuff into publication.

That current projected spending is even lower than COGFA’s most optimistic scenario, which predicted $50.9 billion in spending and a $495 million deficit with a tiny $37 million accounts payable this coming fiscal year. Accounts payable would rise to $1.455 billion by the end of Fiscal Year 2026. However, a $3 billion accounts payable level is considered a “normal” 30-day payment cycle. Accounts payables of $1.455 billion would mean the state’s bills would likely be paid within a couple of weeks.

* First, he cherry picked the worst possible fantasy scenario, and then he goes on to predict what taxes will have to rise to fill a budget hole that will not exist…

Let’s say Democrats decide they need to raise $3 billion a year to fill that projected deficit. Where to find the money? […]

But we won’t likely tax services and pensions, nor will we abandon the effort, unnecessary in my mind, to build up the pension nest egg — all are too hot to handle politically.

So, I fear Illinois policymakers will revert to the tried, true and simple; that is, raise the income tax rate. This would, unfortunately, encourage further flight of job creators and their wealth from Illinois.

Look, I’m not saying that a revenue enhancement of some sort is not in the future. Subscribers were told about one possible tax reform effort yesterday.

All I’m saying is that using an obviously way-out-there fictional scenario to make bold predictions about the future is not sound reasoning.

*** UPDATE *** Clayton Klenke at COGFA…

Like most of the publications that we do at CGFA, the 3-year budget forecast is driven by a specific state mandate. […]

We had internal discussions when the report was written on whether we should continue to use the same scenarios as we have in the past and in the end we chose to present the same scenarios – which is exactly what they are – scenarios. They are not budget predictions. They are examples of what would occur given certain scenarios. We recognized that scenario (3) included a higher growth rate than we would normally predict, and that is why we included the text to explain why that rate was higher than normally seen. Although we wouldn’t expect those circumstances to occur again, those spending levels were driven by actual needs to pay down a backlog of bills after a multi-year budget impasse, and also to deal with a worldwide pandemic – items not too many would have deemed plausible a few years ago.

As with all of our publications, we will continue to review our methodology as we develop future reports.

19 Comments

Pritzker to use reduction veto to correct “inadvertent” pay raises above legal limit

Wednesday, Jun 7, 2023 - Posted by Rich Miller

* From the governor’s office…

Reporters—

As the Daily Public Schedule informed you, Gov. Pritzker will sign the FY24 budget today (Senate Bill 250). When he signs the budget, the Governor will make a few technical corrections to language from SB 2541 that was included in the bill. These line-item reductions will ensure the FY24 budget complies with current state law that prevents raises of more than 5 percent.

The annual cost of living increase is capped by law at 5 percent or the rate of inflation, whichever is lower. The budget bill increased the COLAs for legislators and statewide and top executive officers by 5.5 percent. Oops.

The House Republicans caught the error during floor debate. Kudos to them.

…Adding… From House Republican Leader Tony McCombie…

“While Illinois families struggle, Governor Pritzker decreased the politician pay raise a paltry .5%. While this change may make it constitutional, it does not make it right. House Republicans will continue to hold the majority party accountable to not only our constitutional rights but also to Illinois taxpayers.”

* From the governor’s veto message…

Today, I return Senate Bill 250, entitled “AN ACT concerning appropriations,” with reductions in the amount of $192,700.

This bill, among other things, appropriates funds for the salaries of the State’s Constitutional Officers (Article 33, Section 35), Appointed Officers of the Executive Branch (Article 33, Section 40), and General Assembly members (Article 33, Section 45). In Public Act 102-1115, effective January 9, 2023, the salaries for the Constitutional Officers (Article 30), Appointed Officers of the Executive Branch (Article 15), and the General Assembly members (Article 35) were set before their terms of office began, as required by the Illinois Constitution of 1970. See Ill. Const. 1970, art. V, §21; art. IV, §11. However, the appropriations to the State Comptroller in this bill exceed the amounts necessary to compensate the State’s Constitutional Officers, Appointed Officers of the Executive Branch and members of the General Assembly in accordance with Public Act 102-1115 and the members of the State’s boards and commissions in accordance with the levels currently authorized by Illinois law. See, e.g., Public Act 102- 1115, Article 30, Section 30-5 (providing that the Constitutional Officers shall receive a specified annual salary or as set by the Compensation Review Board, whichever is greater, resulting in a maximum salary for Fiscal Year 2024 of $168,945 for the Lieutenant Governor, Comptroller and Treasurer and $192,465 for the Attorney General and Secretary of State); Article 35, Section 35-5 (providing that General Assembly members shall receive an annual salary of $85,000 or as set by the Compensation Review Board, whichever is greater, setting a maximum salary of $89,250 for Fiscal Year 2024); Article 15, Sections 15-5 through 15-40 (providing that Agency Directors shall receive a specified annual salary and an annual increase in salary based on a cost of living adjustment as authorized by Senate Joint Resolution 192 of the 86th General Assembly).

It is evident that the errors in the amounts to compensate all of these officers were inadvertent and that the General Assembly intended for the amounts set forth in Senate Bill 250 simply to implement the salaries provided by law.

Therefore, pursuant to Article IV, Section 9(d) of the Illinois Constitution of 1970, I hereby reduce the appropriation items listed below and approve each item in the amount set forth in the “Reduced Amount” column below […]

In addition to these specific item reductions, I hereby approve all other appropriation items in Senate Bill 250.

* From the Illinois Legislative Glossary…

Veto, Reduction

The Governor reduces the amount of an item of an appropriation bill. The General Assembly may do nothing and the reduction stands, or the General Assembly may restore the item to its original amount. In either event, the remainder of the bill becomes law.

…Adding… The “technical corrections to language from SB 2541 that was included in the bill” line is interesting. The bill drafters essentially copied and pasted language from the comptroller’s approp bill, which is SB2541. Click here to see it yourself.

11 Comments

Bears stuff

Tuesday, Jun 6, 2023 - Posted by Rich Miller

* The Bears appear to be trying to play DuPage against Cook. NBC 5…

With tax woes at the center of the Chicago Bears’ decision to explore new options for a stadium outside of Arlington Heights, Cook County’s tax assessor said “the facts speak for themselves.”

“Our office’s mission is to assess property based on market value,” a spokesperson for the Cook County Assessor’s office said Friday. “The 2022 assessment of the former Arlington Racecourse site is consistent with both the 2023 purchase price of the property and the price per square foot of other similarly sized land in the area. The facts speak for themselves.” […]

“The stadium-based project remains broadly popular in Arlington Heights, Chicagoland and the state. However, the property’s original assessment at five times the 2021 tax value, and the recent settlement with Churchill Downs for 2022 being three times higher, fails to reflect the property is not operational and not commercially viable in its current state,” the Bears said in a statement to NBC Chicago. “We will continue the ongoing demolition activity and work toward a path forward in Arlington Heights, but it is no longer our singular focus. It is our responsibility to listen to other municipalities in Chicagoland about potential locations that can deliver on this transformational opportunity for our fans, our club and the State of Illinois.”

* Rep. Marty Moylan (D-Des Plaines), who is sponsoring a bill to help the Bears move, said this to WTTW…

“Remember that Cook County won’t get any sales tax if it (the team) moves to Naperville. (Cook County Board) President (Toni) Preckwinkle’s going to be saying ‘where’s mine?’ if all of a sudden it’s going to Naperville,” Moylan said. “Rockford threw their hat in the ring, and other cities are going to be throwing their hat in the ring. Because this is a multi-billion dollar proposal. A domed stadium. We can have Super Bowls here.”

Moylan said he knows Rockford is making a pitch, though he has not seen the offer.

Rockford?

…Adding… A Rockford-area legislator said there was “no pitch” from the city. “I told Marty we would love to have the Bears if they can’t make a deal with anyone else. That’s it.”

Marty gonna Marty.

* More on the play…

Most were quick to say this was nothing more than a negotiating tactic by the franchise. However, not everybody thinks it is a total bluff. Marc Ganis is widely regarded as one of the best stadium experts in the business. He’s consulted on several projects during his career and knows the politics involved. He explained the situation on Mully & Haugh for 670 The Score. It comes down to the Bears being trapped in the bureaucratic mess that is Cook County.

“This is unfortunately what happens in Cook County and Illinois with our political system, our wonderful politicians, far too frequently. What you have is a bunch of parties that are trying to make their bones on the backs of the Bears politically. They’re saying, ‘Well, if the Bears wants this we’re going to charge them through the nose for that and we’re going to take the property taxes and this thing that Churchill Downs was paying a couple million dollars a year for and they’re going to have to pay double-digit millions.’ And that’s just to start. That is before they put a $2-3 billion stadium in the ground and before they put any of the ancillary development in the ground, which they will never be able to move.” […]

“They’re really…I won’t say destroying it but they are reducing it dramatically to the point where all those great advantages that Arlington Heights has had, they’ve reduced to the point where the Bears are going to talk to other communities like Naperville, which is in a different county jurisdiction.”

* The superintendents of three area public schools didn’t seem bluffable last month in a letter to the Bears…

On May 1, our attorneys extended an offer in which the school districts might agree to support an assessment based on a market value of $95 million. This offer, as all our prior offers have been, is subject to and conditioned on final approval or consent of our individual boards of education. It is our firm belief that this offer provides the clarity and fairness CBFC Development needs, while maintaining the integrity of the property tax system on which school districts depend and protecting the other taxpayers within our communities who do not receive such large reductions in their assessments. Given the substantial gulf between our positions, we do not see the need to make a counteroffer at this time. Instead, we intend to proceed to resolution of the 2022 tax year on its own. A resolution of the 2022 assessment will help to inform both us and CBFC Development on an appropriate assessment for tax years 2023 and 2024, the tax years when CBFC Development will take responsibility for the property taxes.

* Meanwhile, I read this Crain’s piece a couple of times and it looked to me at first like Rep. Buckner was just spit-balling…

With a Bears move to Arlington Heights facing new uncertainty, a state legislator whose district includes Soldier Field is urging the city to make a new pitch to keep the team somewhere in Chicago. And there is some indication the team might at least talk about it.

In a phone interview, state Rep. Kam Buckner, D-Chicago, said he believes a path to get Chicago back in the game may have opened in the wake of the team’s announcement that it no longer is focusing strictly on Arlington Heights and has talked to Naperville about building a new stadium complex there.

“I think so. It’s possible,” Buckner said in a phone interview. “I’ve said from the beginning that Arlington Heights was not a foregone conclusion. Mayor (Brandon) Johnson deserves a chance to broker a deal that I think makes sense for the team and the city.”

Buckner, who serves on Johnson’s transition team, said he doesn’t know if the administration is refining an offer former Mayor Lori Lightfoot put on the table last year to potentially dome Soldier Field. But the city should be “proactive” now, given the Bears’ statement, he said. And it perhaps ought to consider other Chicago locations beyond Soldier Field, such as the former USX property on the Southeast Side, Buckner said.

Fox 32 followed up with Rep. Buckner…

Q: I know you know the mayor pretty well. I have a two-part question. Number one: Do you think there has been a conversation about this topic at city hall in the last three or four days? And number two: What’s your instinct about Mayor Johnson and his willingness to make a serious proposal?

Buckner: I’m not sure if that talk has happened yet. But my assumption is that if it has not, it is coming very quickly.

So, Buckner claimed to have no specific inside information. More Buckner…

I also know that the mayor’s been very clear about the fact that he wanted a chance to reset the conversation, to have conversations with the McCaskey family about the future of the franchise. And I truly think that he deserves that. So hopefully, this is a push of the reset button so the proper folks can come to the table and talk about what this looks like.

* But here’s WTTW…

Johnson’s office didn’t return a call on Monday seeking comment, nor did the Bears.

But a source with knowledge of the situation says a talk between the two sides is likely to take place in the next several days.

We’ll see.

* And let’s go back to Marc Ganis‘ comments on 670 The Score…

“I just heard from somebody at the league that they’re going to have a sit-down meeting with the mayor as well, the new mayor, Mayor (Brandon) Johnson, about if there’s possibly another site in the city of Chicago that he may want to propose. Not Soldier Field. That’s gone. That’s been gone for a long time.”

Could just be gossip “from somebody at the league.” Could be more. Ganis predicted almost a year ago that the Bears would move to Arlington Heights.

Anyway, your thoughts?

…Adding… Forgot to post this one…

The Bears’ flirtation with Naperville last Friday made all the headlines and captured the city’s attention. That was surely the intended effect new president and CEO Kevin Warren had in mind when he agreed to meet with the municipality and released the statement that Arlington Heights was no longer the “singular focus” for the Bears’ new stadium pursuit.

The Bears will hope to get the same effect, if not multiplied, should they meet with new Chicago mayor Brandon Johnson about finding a way to stay in the city.

That’s all well and good. The Bears’ search for leverage has many paths, but a sole goal: To bend Arlington Heights and the surrounding municipalities to their will.

That last bit ties this all together. Leverage everywhere you look. But their sunken costs at AH are pretty darned high to move again.