Capitol Fax.com - Your Illinois News Radar

Big manufacturing tax cut leads to loss of two factories to Wisconsin

Posted in:

Illinois

* From the Milwaukee Journal Sentinel...

An Illinois lighting company with 400 employees plans to move across the state line to Kenosha — the second manufacturer in a week to say it will leave northern Illinois for Wisconsin.

Kenall Manufacturing plans to relocate its headquarters and factory from Gurnee, Ill., to a 354,000-square-foot facility to be built near I-94 along Highway 158.

The company is getting over a million dollars in incentives…

One aspect of the various government incentives is ready: Kenosha County will provide $1 million from a special economic development fund authorized two years ago, County Executive Jim Kreuser said.

Another $250,000 from the fund was used recently to help woo Hanna Cylinders from Libertyville, Ill., to Kenosha County. That relocation, announced last week, will bring about 100 manufacturing jobs to Pleasant Prairie by the end of the year. Hanna, which makes hydraulic and pneumatic cylinders, will occupy a 105,000-square-foot plant in Lakeview Corporate Park.

* But the specific incentives are only part of the bigger picture…

Another key to luring companies such as Kenall to Wisconsin, he believes, is the virtual phasing out of the state corporate tax on income generated by manufacturing production. Enacted in 2011, the legislation will effectively cut the tax on production from 7.9% to 0.4% over the next few years, Battle said.

He said Kenall and other firms consider “the direction and velocity of the state’s business climate” when making location decisions, and that the elimination of almost all of the tax on production earnings “clearly was in our favor.”

* But the Hanna Cylinders move has a bright side…

(A) Chicago-based developer already has eyed the site along Route 176 for an industrial facility.

Bridge Development Partners LLC plans to invest $25 million to $30 million in two buildings with a mix of light assembly, manufacturing and warehousing uses.

The project marks the first speculative construction of its kind in Libertyville in several years.

Although the facility would be built without specific tenants in mind, the site could attract 200 to 300 jobs — a “realistic expectation,” said Mark Christensen, a principal with the commercial real estate firm.

* And this is from a press release…

Governor Pat Quinn and Mike’s Hard Lemonade Co. today announced that the premium malt beverage maker is opening its new U.S Headquarters in Illinois, creating 80 jobs. The office, located at Jackson and Jefferson Streets in Chicago’s West Loop, is positioned to tap into the region’s substantial marketing talent and consumer product expertise. The announcement is part of Governor Quinn’s agenda to drive Illinois’ economy forward and create jobs.

“Mike’s chose to relocate to Illinois because of the state’s central location, leading education institutions and its progressive business environment,” Governor Quinn said. “The presence of a dynamic company like Mike’s is the kind of business Illinois needs to advance our vision of becoming one of the most exciting and vibrant business corridors in the nation.”

* Related…

* Chicago-area foreclosures down 59% from last August

* In Quest For Lower Taxes, How Far Is Too Far?

* Whole Foods coming to Englewood

posted by Rich Miller
Thursday, Sep 12, 13 @ 10:59 am

Comments

Welcome to Illinois: We make the booze for the manufacturers we ship out of state.

Comment by Chicago Cynic Thursday, Sep 12, 13 @ 11:07 am
–Bridge Development Partners LLC plans to invest $25 million to $30 million in two buildings with a mix of light assembly, manufacturing and warehousing uses.–

Let’s hear it for private enterprise investing their own money in Illinois.

I’m not sure if I get the added attraction of the Wisconsin manufacturing income tax phaseout. Illinois corporations don’t pay income taxes on goods sold outside the state.

Just read the annual reports of Illinois’ leading exporters and you’ll know what I’m talking about.

Comment by wordslinger Thursday, Sep 12, 13 @ 11:07 am
WI gets our manufacturing while we get… the new headquarters for a “malt beverage maker”?

Can the commissioner please reverse this trade?

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 11:09 am
Google Maps tells me that Route 158 exit on I-94 is about 15 miles from the current facility.

The lost of property taxes is real however how much employee turnover can expected?

Comment by Bill White Thursday, Sep 12, 13 @ 11:12 am
This actually appears to be part of a larger pattern.

From April 2013: http://www.biztimes.com/article/20130415/MAGAZINE03/304129983/

“Perched on the Wisconsin-Illinois border, the Kenosha County community has attracted numerous businesses from Illinois as firms south of the border head north in search of larger and less expensive space…

Recent developments that will bring Illinois companies to Pleasant Prairie include:

Platteville-based L&M Corrugated Container Corp.’s plans to move its operations in Zion, Ill. to a 99,838-square-foot building at 10680 88th Ave., which it plans to purchase. The company, a manufacturer of corrugated packaging, has 45 employees at its Zion facility that will move to Pleasant Prairie.

EMCO Chemical Distributors Inc. plans to move its corporate headquarters from North Chicago, Ill. to a 260,000-square-foot facility at 8601 95th St. in Pleasant Prairie. The move will bring about 125 employees to Pleasant Prairie.

CenterPoint WisPark Land Company LLC’s plans to build a 471,403-square-foot industrial building on a 26-acre site north of 109th Street between 80th and 88th avenues in Pleasant Prairie for Taiwan-based Ta Chen International Inc., a distributor of stainless steel, aluminum and nickel alloy products. The company plans to have 61 employees at the facility, which will be its new Midwest distribution center and will be relocated from a 215,000-square-foot facility in Gurnee, Ill.

Chicago-based Good Foods Group LLC purchased a 57,000-square-foot building at 10100 88th Ave. in Pleasant Prairie and plans to establish production operations and will move its corporate headquarters there. The company will bring 50 jobs to Pleasant Prairie and could expand its workforce to 150 in about two years if its growth rate continues.

Perhaps the most significant business relocation from Illinois to Pleasant Prairie occurred in 2010 when Uline Inc. completed construction of a new $125 million corporate headquarters in the village. The campus, located near I-94, consists of a 200,000-square-foot office building and a 1 million-square-foot distribution center.

Uline is considering plans for an expansion of the headquarters campus, Pollocoff said.”

Wow.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 11:12 am
Moving from Gurnee or Libertyville to Kenosha County? Sure, the businesses might get a nice tax break but I doubt many of the employees will have to move, so I question the jobs impact of this. Half or more of these job-holders probably lived in Wisconsin anyway. I don’t think it’s a huge loss for us, but you never want to see stories like this.

On the other hand, how does WI expect to recoup the million in incentive cash if the companies are paying such a reduced tax by moving? 0.4%? They’re going to have to sell a lot of widgets to pay back the Cheeseheads who are fronting the cash for this.

Comment by 47th Ward Thursday, Sep 12, 13 @ 11:16 am
Those companies will be imposing burdens on Wisconsin but not paying taxes.

That does not sound like a sustainable business model for the state.

Comment by Skeeter Thursday, Sep 12, 13 @ 11:16 am
Well, PQ got Mike’s to locate in Chicago. Whoopee. Glad to see he’s bringing jobs to Chicago. Too bad he doesn’t do the same for the rest of us.

Comment by Neglected stepchild Thursday, Sep 12, 13 @ 11:24 am
Workman’s Comp and the U.I. Trust Fund will be effected. I’m too lazy to dive into the Obamacare mess to see if that’s a consideration.

Comment by Weltschmerz Thursday, Sep 12, 13 @ 11:24 am
@Skeeter,

as opposed to our current model?

Comment by RonOglesby Thursday, Sep 12, 13 @ 11:25 am
Ron,

“Illinois does things wrong” does not equate to “Bringing in business and then not taxing them is right.”

It is not one or the other.

Comment by Skeeter Thursday, Sep 12, 13 @ 11:29 am
@Skeeter,

good to hear you say that.
Like Illinois, Wisconsin’s incentives are generally short term based. And the reduction in taxes on manufacturing was supported widely. The idea is that businesses dont pay taxes anyway (taxes they pay they pass on to consumers in price changes).

Anyway, people are all for giving money to “those that need it”. I like seeing tax models that bring business and jobs, and people (that pay taxes) into an area.

Comment by RonOglesby Thursday, Sep 12, 13 @ 11:35 am
Crystal Exhibits also moved to Kenosha from Illinois in 2011: http://abclocal.go.com/wls/story?section=news/local/wisconsin&id=8018703

That area is apparently becoming quite the hotspot.

Not sure I agree with some indicating it is irrelevant we lose those jobs to Wisconsin. I would much prefer they were moving here, rather than from here.

These moves also manifest in other small ways.

Sales tax on lunch. Gas tax filling up your car to head home. Local businesses growing with the added revenue of new customers. The individuals who eventually decide to move there because it’s an easier commute. So on and so forth.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 11:38 am
–The idea is that businesses dont pay taxes anyway (taxes they pay they pass on to consumers in price changes).–

That’s always been a silly argument. That presumes that businesses have no competition or other fixed costs and can just pull their margins out of the air.

Comment by wordslinger Thursday, Sep 12, 13 @ 11:39 am
While I don’t discount the importance of taxes on businesses’ location decisions, there are definitely other factors that motivate where they open. One factor is “latent” demand for products. One of my friends owns a frozen dessert corporation that is taking off in Chicagoland. She keeps selling franchises, and new stores keep opening. To my knowledge, there were not many stores specializing in this particular (and perhaps more healthy) frozen dessert. Her stores are becoming a recognizable brand name with a logo. She also owns the distribution company that sells the dessert to other businesses.

This is why legalizing marijuana is important to me. There is large demand for it, and it gets diverted into the black market. It should be diverted into the mainstream economy and regulated properly, so that smaller businesses can make money too.

There are also drawbacks to lower taxes. Florida and Texas, which have no state income tax, lead the country in fewest residents with health insurance.

Unfortunately, here is some sad news. Last year, the country had the highest inequality since 1928.

http://finance.yahoo.com/news/1-percent-grab-biggest-share-221910213.html

Comment by Grandson of Man Thursday, Sep 12, 13 @ 11:39 am
And how much in tax breaks did the Gov give Mike’s
to get the 80 employee’s here? Look what he gave Navistar in Naperville and now they are laying of loads of people!!

Comment by Union Man Thursday, Sep 12, 13 @ 11:44 am
Ron, I admire your ability to live with the cognitive dissonance.

If corporations really don’t pay taxes, simply passing them on to the consumers, than why are they attracted by tax breaks?

Comment by wordslinger Thursday, Sep 12, 13 @ 11:44 am
Well even if there is no significant loss of jobs for Illiois residents as it relates the companies moving to Kenosha… besides the property tax issue is that employees probably helped support surrounding businesses… employees probably went out for lunch, grabbed drinks after work, filled up with gas near work, stopped by Walgreens near their job site, etc.

Comment by Just Observing Thursday, Sep 12, 13 @ 11:45 am
Some of the comments can rationalize this in many ways, but it is still a disturbing trend for Illinois.

Comment by downstate hack Thursday, Sep 12, 13 @ 11:50 am
“This actually appears to be part of a larger pattern.”

So does this: In much of Gov. Walker’s term, Wisconsin fell to 44th in job creation and gained fewer jobs than the country as a whole.

http://www.jsonline.com/news/wisconsin/wisconsin-private-sector-job-creation-ranking-declines-799bcsa-200435291.html

Comment by Grandson of Man Thursday, Sep 12, 13 @ 11:53 am
=== Wisconsin fell to 44th in job creation and gained fewer jobs than the country as a whole. ===

As we rank 50th in unemployment rate and close in on 51st (including DC).

http://www.bls.gov/web/laus/laumstrk.htm

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 12:07 pm
“WI gets our manufacturing while we get… the new headquarters for a “malt beverage maker””

Until Lisa Madigan hears about the “malt beverage” manufacturer, and targets them…

Comment by Anon Thursday, Sep 12, 13 @ 12:21 pm
Ty Fahner told them to move.

Wordslinger, denying that corporations collect and don’t pay taxes is prime evidence economic cluelessness. That’s no more sensible than claiming that taxes on property, dogs or cattle are paid by property, dogs and cattle.

Comment by Driveby Thursday, Sep 12, 13 @ 12:36 pm
Yeah but Mike’s moved here in April 2012

http://www.chicagobusiness.com/article/20130912/BLOGS02/130919918/quinn-tries-to-squeeze-news-out-of-2012-headquarters-move

http://www.cspnet.com/news/beverages/articles/mikes-hard-lemonade-announces-leadership-change

In other news Quinn announces Man Of Steel movie being shot in Plano…

Comment by OneMan Thursday, Sep 12, 13 @ 12:39 pm
In other news Quinn announces Ford to start making cars at a plant on Torrence avenue in Chicago.

Comment by OneMan Thursday, Sep 12, 13 @ 12:49 pm
Formerly Known As,

The economy is sluggish as a whole. A few companies moving around is a very small part of a larger picture. I wouldn’t get too hung up on that as a model for economic success, and the facts so far bear this out.

We do have a lot to do in Illinois to improve, but what we all have to work on is increasing wages for middle class workers. They’re getting killed in comparison to what the wealthiest people are making.

Comment by Grandson of Man Thursday, Sep 12, 13 @ 12:59 pm
“Competition among states and cities to lure businesses in hopes of creating jobs is not new, but it has become more fierce in recent years… state and local governments are giving out $80 billion a year in tax breaks and other subsidies in a foolhardy, shortsighted race to attract companies. That money could go a long way to improving education, transportation and other public services that would have a far better shot at promoting real economic growth.”
http://www.nytimes.com/2012/12/06/opinion/race-to-the-bottom.html

Comment by Ruby Thursday, Sep 12, 13 @ 1:54 pm
Exactly what form is that million bucks taking? Loans, infrastructure, grants, reduced property taxes, etc.? It just says they are giving them money. I agree with Skeeter that not taxing businesses isn’t necessarily the way to compete with other states.

- wordslinger - Thursday, Sep 12, 13 @ 11:39 am:

–The idea is that businesses dont pay taxes anyway (taxes they pay they pass on to consumers in price changes).–

—-That’s always been a silly argument. That presumes that businesses have no competition or other fixed costs and can just pull their margins out of the air.—-

Genuinely not sure what you are trying to say. Of course businesses are going to pass on costs to consumers, otherwise you fail. You generally pass on 100% of costs, plus some profit margin–unless you are so well capitalized that you can absorb losses in pursuit of larger future gains.

Is your point is that all businesses (should!) face the same taxes, thus it shouldn’t matter whether they are taxed? Or that we shouldn’t care whether they are passed on? Because that I agree with that, to a point. We can’t give businesses free property taxes (for example) just because they will pass it along. Consumers can decide whether they want to absorb those costs.

However, if your point is that businesses will absorb tax increases and lose profits in order to stay competitive…well, that’s somewhat correct in the short term due to companies getting trapped. But it is mostly wrong in the long term. Companies that can react will do so; companies that can’t will suffer.

Or are you saying something else entirely? I never count out the possibility that you are just being ornery, heh.

Comment by Liandro Thursday, Sep 12, 13 @ 1:55 pm
I agree with Grandson of Man that over-all patterns and strategies are more important than individual movements. For example, if Illinois has some grand strategy to let companies seeking tax breaks go, and instead focus on developing a vibrant business community that is worth the tax rates–great.

I don’t think any economic guru is chasing such a plan at the moment. Instead, we are doing what other states are doing: grabbing businesses when we can stay in the bidding. Then, if we lose out, we whine about how it wasn’t that important anyway, and we didn’t need them, and hey–look at this malt company that just came in with REAL jobs!

Comment by Liandro Thursday, Sep 12, 13 @ 2:04 pm
“disturbing trend”

I’d like to see your one disturbing trend and raise you another disturbing trend:

Minnesota, the most liberal state of the three, has a lower unemployment rate than both Illinois and Wisconsin. Minnesota just raised taxes.

http://www.deptofnumbers.com/unemployment/minnesota/

Each state runs on a different model. Minnesota’s model is to invest in education and healthcare. Wisconsin’s model is to cut education and healthcare.

Comment by Anonymous Thursday, Sep 12, 13 @ 2:09 pm
Sorry, the above Anonymous post was me.

Comment by Grandson of Man Thursday, Sep 12, 13 @ 2:12 pm
Our State is a used to be a great state to do business in until the time of Dan Walker. When the Democrats and Madigan started writing workers comp.rules and they got passed with little opposition. Madigan’s Law firm has done land office business ever since.
Meanwhile Illinois has been losing jobs like mad.
The chickens have come home to roost.
We still can’t get pensions straight, why not move and get a bonus on top of it.

Comment by Mokenavince Thursday, Sep 12, 13 @ 2:50 pm
===When the Democrats and Madigan started writing workers comp.rules===

WC has been subjected to the agreed bill process forever.

Comment by Rich Miller Thursday, Sep 12, 13 @ 2:53 pm
Maybe Governor Quinn should call Volkswagen

http://www.freep.com/article/20130910/BUSINESS01/309100146/Sen-Corker-Tennessee-calls-Volkswagen-talks-UAW-incomprehensible

=== NASHVILLE — Volkswagen would become a “laughingstock” if it goes through with a deal to have the United Auto Workers represent workers at its Tennessee plant, U.S. Sen. Bob Corker said Tuesday. ===

I’d be totally okay with the UAW representing auto workers at an IL Volkswagen assembly plant

Comment by Bill White Thursday, Sep 12, 13 @ 2:58 pm
And our model is?

Exporting citizens?

According to a Moody’s report issued earlier this year, in 2010 we lost a net of -2,661 residents to Wisconsin and lost a net of -4,458 residents to Indiana. That is the only year they provided data for.

What does it say that we are losing residents?

What does it say that more people are moving into Indiana and Wisconsin FROM Illinois than are moving into Illinois from Indiana and Wisconsin?

While I am not a nihilist, it’s been said that people vote with their feet.

People are voting. And they aren’t choosing Illinois for the time being.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 3:06 pm
According to the U.S. Census Bureau, 12.4 percent of Wisconsin residents, on average, are poor using the federal definition of poverty. The Wisconsin border counties of Kenosha, Walworth, and Rock are not counties with deep poverty and have rates of 8-10%. So this is really not where Wisconsin needs to bring jobs to.

Northern Wisconsin counties like Ashland, Sawyer, and Rusk have poverty rates well above average.
Ashland county has a poverty rate of almost 17% with a median household income of around $36,800 a year. While this looks good compared to the poverty rates in Jackson and Alexander counties in Illinois that have poverty rates in the 30% range, with median household incomes around $33,000 a year. None the less as is typical with business incentives Wisconsin like Illinois does not promote business development in areas of deep poverty. Both states let companies drive development dollars where they want them to go.

Comment by Rod Thursday, Sep 12, 13 @ 3:15 pm
The Wisc. staggered tax reductions for manufacturing really won’t mean much financially for any given company, but they sure do sing about a “business friendly” state.

Good marketing.

I supported the idea of lowering the corporate nominal income tax rates, when we increased the individual ones. I liked the idea of a mostly symbolic “manufacturing” tax cut for Illinois, given that it wouldn’t cost us much (or gain much for the companies.) We often lose the image war with businesses, when most of our substance is competitive.

Comment by walkinfool Thursday, Sep 12, 13 @ 3:19 pm
==Each state runs on a different model. Minnesota’s model is to invest in education and healthcare. Wisconsin’s model is to cut education and healthcare.==

And Illinois’ model is to expand education and health care, but not actually pay for it.

Comment by Anon. Thursday, Sep 12, 13 @ 3:28 pm
“And they aren’t choosing Illinois for the time being.”

With due respect I would like to also offer you this. I’ve posted this several times (sorry), but it is relevant again to the discussion. In most of 2011–more recent data than what you present–Illinois gained more jobs from Wisconsin than vice-versa, even though we lost two more companies than we gained.

http://www.chicagobusiness.com/article/20120119/NEWS07/120119763/illinois-loses-some-jobs-offset-by-startup-gains

Comment by Grandson of Man Thursday, Sep 12, 13 @ 3:33 pm
=== what we all have to work on is increasing wages for middle class workers. ===

We completely concur on this front, Grandson. There are problems at both ends of the spectrum on this one.

Companies pillaging the state for all they can and leaving little for public services on one hand.

The possibility of a large influx of newly legal residents about to apply downward pressure on labor supply and wages on the other hand, if immigration reform passes this fall.

And clueless, spastic leadership from the heads of our state to top things off.

Bad news.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 3:43 pm
Thank you for posting that, Grandson. I have not seen it before despite it being a re-post.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 3:44 pm
When it comes to jobs, my mind turns to mush for the stupidity when the argument degenerates into local and state taxes, or the efforts of White Knight governors “creating jobs” at a clip of $10 million a press release.

JHC, we all went to school, didn’t we?

Obviously, there are a lot of bigger factors in play. Top of the list is the despicable abuse of workers and environmental degradation in low-margin industries in Asia, led by the murderous Chinese commies, but including “democracies” like India and swell “allies” like Pakistan.

You want to make America “competitive?” Insist on the universal emancipation of women and children and stop buying that cheap junk from the sweatshops of Asia.

Those kids in Hanoi don’t need to be sewing your Nikes, they need to be in school.

Comment by wordslinger Thursday, Sep 12, 13 @ 4:00 pm
Wordslinger,

Don’t often agree but you are absolutely correct that Illinois economy and the US in general would be much better if everyone considered more than just the price when shopping. Payong an extra nickel for a item with a made in the USA label would solve a lot of problems in this country no matter what your political party.

Comment by Fed up Thursday, Sep 12, 13 @ 4:20 pm
Formerly Known As,

You’re welcome.

“Obviously, there are a lot of bigger factors in play.”

No doubt about it. That’s the point I was trying to make. I believe in what you say, that one way to better our economy is to buy American-made products. Another way is to provide a legal environment in which the labor force can prosper, which is why I don’t support right-to-work laws and bargaining-stripping, like Walker did. Budget cuts involving union cooperation happened in other states and would have happened in Wisconsin with full collective bargaining for public employees. What Walker did was divisive and unnecessary.

Comment by Grandson of Man Thursday, Sep 12, 13 @ 4:33 pm
@Grandson

Just had a chance to read that link you shared. That is unfortunately not the good news I was hoping for.

“Illinois had a net loss of 128 jobs to Wisconsin, Indiana, Michigan and Ohio. The data show that Illinois lost 27 companies and 719 jobs to Indiana but gained 22 companies and 337 employees from its neighbor…

Illinois lost 16 companies and 158 jobs to Michigan but gained 15 companies employing 83 workers. Illinois gained 20 companies and 506 jobs from Wisconsin, while losing 22 companies and 129 jobs to its northern neighbor.”

We are not only losing population to our neighbors, but jobs and companies as well?

Albeit not by huge numbers, that’s still not good.

Thank you again though for taking the time to share the link.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 5:11 pm
The original data that article references can be found here: www.illinoisinnovation.com/innovation-index/growing-competition-among-states-for-companies-and-jobs/

It shows that from January-September 2011, Illinois lost a net of -5 workers and -7 companies to Indiana and Wisconsin. The Wisconsin numbers appear to be an outlier that may easily be explained by the relocation of a single large employer from Wisconsin to Illinois.

Either way? It’s not exactly the sky falling, but nor is it a contradiction of the fact people have been leaving our state in recent years.

If anything, it adds to the evidence we are losing people, jobs and companies to our neighboring states.

Comment by Formerly Known As... Thursday, Sep 12, 13 @ 5:19 pm
Formerly Known As…

Thanks for posting the link. In the original article, Illinois more than made up the jobs lost to other states, via start-ups (23,000 jobs). We’re quibbling over crumbs, my friend. It’s about the bigger picture.

Comment by Grandson of Man Thursday, Sep 12, 13 @ 6:34 pm
This whole trend towards nil business taxes in the end is depressive and recessionary. States spend huge amounts poaching resources from each other in an exercise in rent-seeking rather than real growth; and the tax bill then falls on individual consumers, who can no longer afford the businesses’ products. One more step in the dismantling of the US economy. Personally I think we can do without Walkernomics here in Illinois.

Comment by Angry Chicagoan Friday, Sep 13, 13 @ 8:43 am