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Motorola’s deal sweeter than first believed as Sears shops DC market

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* There are two large and relevant worries about Gov. Pat Quinn handing out all these tax incentives lately to big corporations.

1) He’s not a great negotiator’ and

2) He’s negotiating from a position of weakness, considering the recent corporate tax hike and the well-known problems with Illinois’ business climate.

* And now it turns out that Motorola got a far sweeter deal than the public was told. The state would dole out $110 million over ten years to the company in exchange for keeping its corporate headquarters in the state and retaining 3,000 jobs. Turns out, that last little detail was part of what the governor calls an “oral agreement” with the corporation…

What was not disclosed at the time is that the agreement specifically requires Motorola Mobility to retain a workforce here of 2,500 workers. The company disclosed in the contract that it employs 3,290 people at its locations in Libertyville and Chicago, which therefore allows it to reduce the size of its workforce and still get the credits.

That detail was contained in the state’s contract with Motorola Mobility, one of 10 tax incentive contracts the state provided to the Chicago Tribune as a result of a Freedom of Information Act request. Motorola Mobility’s contract represents about half of the $217 million in tax credit deals the state has made this year. […]

“We have an oral agreement with them,” Quinn said in a telephone interview Friday. “They told us that they were going to maintain 3,000 employees in their site in Libertyville and we believe them.” […]

The contract also includes a clause that Motorola Mobility is not required to hire any workers to qualify for the incentives. But if it does, the company could keep 100 percent of the taxes the new employees would have paid the state.

No such clause exists in the other nine incentive packages finalized this year under the state’s cornerstone economic development program, based on a review by the Tribune.

* So, you gotta wonder how far Quinn will go to keep Sears here…

Sears Holdings Corp., owner of the Sears and Kmart retail chains, is considering the [Washington DC] area as a place to relocate its corporate headquarters, according to two people familiar with the company’s plans.

The company is one of more than 100 in Illinois with tax breaks that are scheduled to expire and last month suggested that it would considering leaving. It has reportedly been considering several states including Georgia, New Jersey, North Carolina and Texas. […]

Two weeks ago the company began to inquire about possible sites in the Washington area, according to the sources, who spoke on the condition of anonymity because they were not authorized by the company to discuss its plans.

If the company moves from the Chicago area, where it was founded as Sears, Roebuck and Co. in 1893, it would mean a colossal relocation of jobs. At its current headquarters in the Chicago suburb Hoffman Estates, Sears occupies 2.4 million square feet and employs 6,200 people. The numbers dwarf those of other high-visibility relocations to the Washington region, such as Northrop Grumman, which will employ about 300 people at a 333,000-square-foot building in Falls Church.

Sears spokeswoman Kimberly Freely said the company would not discuss a possible relocation. “Speculation about whether Sears will remain in Hoffman Estates is not fair to our associates, particularly so early in this process,” Freely said in a statement.

* Other state-business news…

* Illinois senators differ on approach to privatization of public infrastructure - Republican Mark Kirk favors fewer restrictions on public-private partnerships, while Dick Durbin wants to guarantee a return on federal taxpayer investment

* States see solution to budget gaps in Net tax

* Group calls for mayor to end lease of Skyway

* City undergoes apartment-building boomlet; as recession eases, developers aim for both the boring and the bright

* Clout condo deals in Chicago get scrutiny

* Backlog of Cases Gives a Reprieve on Foreclosures: In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm. Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

* United Airlines returning to normal after computer glitch snarled weekend travel

* Caterpillar sees slower pace in dealer sales

* Blue Cross profits surge: The parent of Blue Cross & Blue Shield of Illinois raked in $1.1 billion in profit last year, a doubling of 2009’s results that is likely to stoke the controversy over skyrocketing health insurance costs.

posted by Rich Miller
Monday, Jun 20, 11 @ 10:31 am

Comments

Does anyone see a problem with individual subsidies and breaks? End them and lower the rate. This would help the large corporations, and even more the small businesses who employ a vast majority of the state workers.

Comment by Cincinnatus Monday, Jun 20, 11 @ 10:51 am
If you are a big old business in Illinois state leaders will cut a deal with you to stay here. If you are not then they will not. Problem is, vibrant economies need new businesses to grow, not dinosaurs on CPR. Quinn is dealing with dinos here. He has to because the Illinois way requires that you know someone to do something. This has kept new businesses from opening here. When a governor begs an old brand then that state is dying.

Comment by VanillaMan Monday, Jun 20, 11 @ 10:58 am
Washington DC has one of if not the highest cost of living indexes in the country. Not to mention that residents are not elgibile to vote.

They will pay more in taxes moving to DC then they pay here. If thats where they want to go, lets find out how much they will pay us to stay in our lower tax lower cost of living areas. Lets see they pay us normal tax rate + 2 points over and we will let them stay….

Comment by Ghost Monday, Jun 20, 11 @ 10:59 am
I hear they are also looking into Hawaii, NYC, Beverly Hills and the Hamptons.

Comment by Wumpus Monday, Jun 20, 11 @ 11:04 am
Illinois no longer has a killer ap. NY has finance. Charlotte has banking. Houston has energy. LA has entertainment. We just have a vibrant past. We are cutting deals with yesterdays big fish. You cut deals for tomorrows Motorolas and Sears.Watching Quinn reminds me of watching the British government dealing with British Leyland Crony capitalism does not work.

Comment by VanillaMan Monday, Jun 20, 11 @ 11:14 am
Question for the unbiased on this board: If a Republican was governor, how would these tax incentive discussions be going?

I have no memory of these incentives being discussed in recent campaigns (and I don’t just mean the recent one) but that’s probably my memory and not reflective of the facts.

Comment by Redbright Monday, Jun 20, 11 @ 11:14 am
VM,

Welcome back.

You are absolutely right. Quinn’s focus is on retaining jobs. His emphasis should be on creating new wealth and jobs, otherwise we stay the same course we have been on for a decade. Incentive should not be the be-all and end-all, population, low taxes, markets and many other factors also are significant drivers in economic growth.

One wonders if the Comptroller has performed a detailed analysis of state-directed incentive programs, and of the current business structure (taxes, WC, torts) and of their effects on growth. THAT would be an interesting study.

Comment by Cincinnatus Monday, Jun 20, 11 @ 11:24 am
===Illinois no longer has a killer ap===

I’m not sure what you mean VM, but have you forgotten that Chicago is a national leader in transportation? Intermodal connections between air, rail and road are a huge part of our economy and the envy of almost every other state. Then there’s the commodities industry, manufacturing, etc.

I know you like to see Illinois’ glass as half-empty, but I prefer to see it as half-full. Things aren’t as bad as your comment makes it seem. That doesn’t mean things are swell either, but Illinois is in decent shape, all things considered.

Comment by 47th Ward Monday, Jun 20, 11 @ 11:26 am
I wonder if motorola’s word to not cut jobs is like Quinns word to veto any tax increase over 4%. Motorola figures oral agreements with a man who doesn’t keep his word is not a big deal. Soy boy is clueless

Comment by Fed up Monday, Jun 20, 11 @ 11:32 am
The DC area is a surprise, such that it makes you wonder how serious that could be.

There’s a fairly big entity flush with cash in the area that drives up the cost of everything — labor, residential and commercial real estate.

You’re certainly not building any corporate campuses in corn fields in that neck of the woods.

Comment by wordslinger Monday, Jun 20, 11 @ 11:39 am
Sears gets closer and closer to liquidation everyday. Their stores are empty and their once solid line of products are not industry leaders. The only value left in sears is the land the stores sit on.

Comment by Fed up Monday, Jun 20, 11 @ 11:40 am
Not sure if this was ever posted:

http://www.chicagotribune.com/news/opinion/ct-oped-0617-tax-20110617,0,963335.story

Comment by Apple Monday, Jun 20, 11 @ 11:42 am
Don’t you think the taxpayers in VA and MD will be questioning whether they should give SEARS a tax incentive???? What’s next - a horse and buggy company?

Comment by Redbright Monday, Jun 20, 11 @ 11:49 am
You know you have a weak governor when of all people - MOTOROLA - is outmanoeuvring him.

In a lot of ways Motorola’s last 12 years mirrors Illinois - once a well respected institution that was grounded in fiscal sense and good judgement.
Then they took their eye of the ball.

Nowadays both have to resort to gimmicks to keep the doors open.

Comment by Anonymous Monday, Jun 20, 11 @ 11:51 am
Chicago can not be “a” national leader when it used to be “the” national leader. Half full or empty? The Chicago glass overflowed for generations but no longer. These dying elephants are moving to their graveyard.

It is like watching the Soviets give CPR to Chernenko.
The Chicago Way is now killing us.
Big single party government stifles tomorrows world.

We don’t want nobody nobody sent is our eitaph.

Comment by VanillaMan Monday, Jun 20, 11 @ 12:09 pm
VanillaMan, neither Motorola nor Sears are headquartered in Chicago.

Comment by Rich Miller Monday, Jun 20, 11 @ 12:14 pm
Illinois needs to revisit the corporate tax rate and code in the next legislative session. I think everything that needs to be said has more or less been said in this thread but I’ll summarize; lower the rates, broaden the base, end the special-interest tax breaks, and stop looking over our shoulders at creating special categories for dying industries. We should be thinking in terms of general dynamism for the economy, not putting the squeeze on potentially hundreds of thousands of other jobs to protect 2500 jobs here or 3200 jobs there.

Comment by Angry Chicagoan Monday, Jun 20, 11 @ 12:15 pm
One specific thing needs to be added. If DC is proving to be a more attractive place for corporate headquarters, it isn’t because of lower taxes. The District is brutal, and Maryland and Virginia aren’t exactly bargain basement either. However, they have amenities to offer. Local authorities in the DC metro have made a conscious effort over many years to invest in infrastructure and quality of life for their region, and the increasingly heavy federal presence is, of course, both an attraction and a means of underwriting the cost.

Companies may very well go to where they can get the most from government, but the places that measure those benefits solely in terms of how much they can cut taxes are quite likely to lose out to places that see both the costs and benefits of government and market themselves accordingly. And what’s even more chilling is Illinois approach of not only betting the farm on the low-cost approach but doing so only for the politically connected. That means the grand total of approximately nothing for everyone else.

Comment by Angry Chicagoan Monday, Jun 20, 11 @ 12:20 pm
The Illinois legislature will revisit nothing about corporate taxes in the next session. A corporate tax increase was a win-win for the only people that count. It supposedly provides additional revenues to fund state employee pensions, which enourages the pensioners and active employee unions to feed their politicians. It also encourages large businesses to approach legislators to arrange for waivers, abeyances and whatever else to nullify the impact of the tax. Again, somewhere in here, a benefit inures to politicians. A political structure which condones and essentailly requires candidates and elected officials to constantly seek contributions is inherently conflicted and untrustworthy.

Comment by Cook County Commoner Monday, Jun 20, 11 @ 12:28 pm
Jack Franks passed the Corporate Accountability Act back in ‘03 specifically because of Motorola.

History. Doomed. Repeat.

Comment by Yellow Dog Democrat Monday, Jun 20, 11 @ 12:29 pm
===VanillaMan, neither Motorola nor Sears are headquartered in Chicago.===

Once upon a time, both were headquartered in Chicago.

Comment by Louis G. Atsaves Monday, Jun 20, 11 @ 12:32 pm
Rants aside, Chicago’s is the fourth largest metro economy in the world, behind Tokyo, New York and Los Angeles.

It is also rated by Moody’s as the most diverse metro economy in the country.

Comment by wordslinger Monday, Jun 20, 11 @ 12:35 pm
Apparently, the House already tried to get Sears to stay here, but it got shot down in the Senate…

From http://www.chicagoreader.com/chicago/Content?category=3691073

Speaking of TIF reform . . .

The legislative effort to give schools more control over how much money they have to divert to TIFs recently ran into a brick wall.

Originally devised by a bunch of housing activists and suburban public school officials, the bill would have allowed school districts to opt out of having to pay into TIF districts.

In the case of the Montrose/Clarendon TIF, it would have meant the Chicago Public Schools could have saved $30 million over the next 24 years instead of seeing it turned over to developers.

Alas, the opt-out provision never made it to the final bill, SB 540, which the senate passed on April 15. That provision was killed thanks to an aggressive effort by pro-TIF lobbying forces such as the Illinois Municipal League.

On May 31 the house passed a heavily amended version of the senate bill. But this amended bill died in the senate in part because of a house addition that had nothing to do with TIF reform: an extension of the Economic Development Area for Hoffman Estates, which is essentially a big tax break for the Sears corporate headquarters.

An EDA is like a TIF except the area doesn’t have to be blighted. Though, as I’ve discovered through the years, there are so many loopholes in the TIF law that TIF districts don’t really have to be blighted either—otherwise Chicago’s downtown wouldn’t have any.

Damn, this stuff is complicated.

Anyway, northwestern suburban school officials didn’t want the EDA extended because they’re tired of watching millions of their property tax dollars get diverted to Sears. So the TIF reform bill died in senate committee.

Why did the house muck up the process by adding the Sears subsidy amendment?

There are four possible answers: (a) it was an innocent oversight; (b) it was an attempt to sneak through the Sears subsidy by piggybacking it to a popular bill; (c) it was a devious attempt to sabotage TIF reform, as wimpy as it was; or (d) all of the above.

“I’d say d minus a,” said one Springfield lobbyist I talked to.

Huh?

“I think it’s probably a little of all of the above, except for an innocent mistake. There’s nothing innocent about Illinois politics.”

Touché.

Comment by Anon Monday, Jun 20, 11 @ 12:42 pm
Anon, Ben should’ve checked the bill status. The legislation was assigned to Senate Exec for a hearing this week the day before his story appeared.

Comment by Rich Miller Monday, Jun 20, 11 @ 1:08 pm
Re: LPS and Foreclosures.

Part of reason foreclosure takes so long in Judicial Foreclosure states (like IL) is because the banks and mortgage note holders have so totally clustered up the process. It’s like every single deed I see coming out of a foreclosure, judicial deed, or REO action isn’t a regular Warranty Deed, it’s virtually always a “Special Warranty Deed” - which is a nice legal way of saying it’s a warranty deed except for blemishes on title (which in most cases, did not exist on prior recorded instruments for the property).

The article is a nice puff piece on how the problem is all those “Judicial Foreclosure” states like IL, except what the problem really is that the banks and mortgage note holders have totally screwed up the paperwork, and are now starting to be held accountable.

Remember the name MERS…..

Comment by Judgment Day Monday, Jun 20, 11 @ 1:09 pm
–Speaking of TIF reform . . .

The legislative effort to give schools more control over how much money they have to divert to TIFs recently ran into a brick wall.–

Ugh, by all means, let’s take a look at TIF reform.

Here in Oak Park, the two school districts and the village are at half a million dollars and counting in combined legal fees over a beef where it seems pretty clear that the village violated a TIF deal they had with the schools for a few million dollars.

So we’re paying legal fees in on all sides from property taxes for a settlement where the village is going to have to cough up the millions anyway, sooner rather than later.

By the way, the Oak Park TIF district has done well on its own, without village interference, once they allowed restaurants that invested XX amount of dollars to serve booze.

Who knew restaurants made money off of booze?

Comment by wordslinger Monday, Jun 20, 11 @ 1:33 pm
I wonder if Rahm will make a play to have Sears relocate to the city.

Comment by Niles Township Monday, Jun 20, 11 @ 1:58 pm
Sears Holding is neither fish nor fowl in the retail world. They’re basically Sears, K-Mart, Lands End, Kenmore and Craftsman.

In the great scheme of things, they’re the 21st largest retailer in the world. They never really figured out how to deal with the WalMart, Target, Best Buy and Lowes of the world, all of whom have far bigger market shares.

I think they’re going to whack it up and are looking for cash. They’ve already licensed Craftsman and Kenmore, which would have been unheard of just a few years ago.

Comment by wordslinger Monday, Jun 20, 11 @ 2:13 pm
Don’t they still own the Discover Card? I thought finance had become a bigger thing for Sears than retailing, but maybe not.

If their credit card business is all that, then they probably ought to move to Delaware, where real credit cards come from.

Comment by 47th Ward Monday, Jun 20, 11 @ 2:21 pm
Don’t we spend enough money with Motorola with out tax breaks??? Every State Police car, IDOT truck,Tollway vehicle and almost every other State Agency has a Motorola 2 way radio or Motorola cell phone in them!!! The State and most other local PDs and Fire depts use Motorola equipment. We are also paying Motorola millions of dollars a year to lease the Starcom 21 radio network from the Big “M” to connect all first responders in Illinois! How often do you think Cairo needs to talk to Rock Island???? Motorola could move their HQ anywhere as most of this equipment is made in China and the rest of the “nickle an hour” slave labor countries of the world.

Comment by Greg Downstate in the real world Monday, Jun 20, 11 @ 2:28 pm
-”" Niles Township - Monday, Jun 20, 11 @ 1:58 pm:

I wonder if Rahm will make a play to have Sears relocate to the city.”"”

I wonder where the could move to…… Wait, Wait, uh how about the old “Sears Tower”????

Comment by Greg Downstate in the real world Monday, Jun 20, 11 @ 3:17 pm
47, Sears spun off Discover card about five years ago. It was always a dog as a brand, and emblematic of the Sears troubles.

Can’t beat VISA; Can’t beat WalMart; Can’t beat Target; Can’t beat Best Buy; Can’t beat Lowes.

Where does Sears win?

Sears and Monkey Wards invented retail, back when Chicago built the West by shipping entire cities by rail. The Brennan Boys from Fenwick kept them going, but demographics and business models changed and got the better of them.

Sears has never found it’s niche since then.

As someone who does a lot of work in the city and in the still-booming (yes, they are) corporate corridors of suburban Cook, DuPage and Lake counties, I’d like to see some paperwork on the 6,000 jobs out at Sears in Hoffman Estates that are supposedly at stake.

I don’t think so. Once real estate goes back up, they’re going to make a bundle on that ridiculously underdeveloped property.

And as someone who knows, you couldn’t find a subsidized space for 6,000 jobs in the DC area unless you took over the Pentagon and were willing to pay for it.

That’s beyond silly. Sears is in a cash-out, end-game right now. Buyer — Gov. Quinn — beware.

Comment by wordslinger Monday, Jun 20, 11 @ 3:26 pm
Those of you trying to convince the commenters on here that Illinois is still a great place to do business are talking to the wrong people, unless there are corporate CEOs commenting.

The bottom line is what do business leaders believe? We’re finding out what they think lately. Pay to stay is not a long term plan.

Comment by Old Milwaukee Monday, Jun 20, 11 @ 3:28 pm
Maryland certainly wouldn’t be a good area. They have an 8.25 percent corporate income tax, a personal property replacement tax, and on top of that for workers, some counties have a personal income tax on top of the regular state level. I’m sure that would make Sears peeps real happy.

http://business.marylandtaxes.com/taxinfo/corpincome.asp
http://business.marylandtaxes.com/taxinfo/property/default.asp

Comment by Precinct Captain Monday, Jun 20, 11 @ 3:41 pm
–The bottom line is what do business leaders believe? We’re finding out what they think lately. Pay to stay is not a long term plan.–

Big business leaders are saying, “I want a handout.”

Surprise.

What are you saying? Any facts at all?

Can any of the bottom-line, doom-saying Eyeores put a fact to something?

Line it up:

The United States is by far, the largest economy on the planet. Ever.

Within the United States, the State of Illinois is, among the 50, the fifth largest economy.

Where are the Utopias you were expecting in your life? The better places? What’s your model?

The chronic, factless whining about “business climate,” is absurd, and probably explains a lot.

Those who can’t cut it, maybe they just can’t compete, especially with the immigrants who keep coming here.

You know, the ones who raise capital and work their tails off.

Comment by wordslinger Monday, Jun 20, 11 @ 3:42 pm
Eddie Lampert, Chairman of Sears Holdings, financial genius vs Gov. Patrick Quinn It’s a battle of wits with an unarmed man.

Comment by Chefjeff Monday, Jun 20, 11 @ 3:47 pm
From Crain’s Chicago Business:

http://www.chicagobusiness.com/article/20110620/NEWS05/110629982/states-tax-deal-to-retain-navistar-lacks-job-guarantee

Comment by Apple Monday, Jun 20, 11 @ 4:02 pm
$44,000 a job, That’s what $110,000,000/2500jobs gets us. A ridiculously high subsidy even over ten years. Does anyone in this Governor’s Office have a degree in math? Apparently based on this and his budget proposals. No.

Comment by downstate hack Monday, Jun 20, 11 @ 4:09 pm
I believe corporations have received the message loud and clear. Make a noise that you are planning a move and Guv Quinn will shower you with riches to stay.

Comment by The Sky Is Crying Monday, Jun 20, 11 @ 4:16 pm
Following downstate, $44,000 is $4,400 a year. At 3% tax, all those jobs need to average a salary base of $146,700 to just break even. That’s $366M a year. Pop that to ten years, with some cost factors, and that is serious money to the local economy. Sears has that many jobs in that salary range?

Comment by zatoichi Monday, Jun 20, 11 @ 4:45 pm
Ugh, try again. $4,400 / 5% tax = $88,000 salary x 2,500 jobs = $220M a year. Still serious local dollars per year. How many Sears jobs are at that salary level and how many $88,000 a year jockeys can afford the DC area?

Comment by zatoichi Monday, Jun 20, 11 @ 4:55 pm
Sky — Quizzical is thinking of leaving Illinois. Quizzical is believed directly or indirectly to support thousands of local employees in the entertainment and beverage industries. If granted subsidies or significant tax breaks, Quizzical would be glad to pump significant amounts of money directly into the Illinois lottery.

Comment by Quizzical Monday, Jun 20, 11 @ 6:50 pm
The fact that a governor is doing lap dances for businesses that haven’t had a new idea in a generation and holding fire sales while threatening to leave Illinois right after they file bankruptsy tells us that the State is not what it used to be.

When Quinn starts begging losers like Sears, then you know the ball game is over.

Comment by VanillaMan Monday, Jun 20, 11 @ 9:07 pm