Accountable USA - Illinois

Illinois jumped into the “economic war among the states” with its 1985 bid of a quarter billion dollars for Diamond-Star (a joint venture of Mitsubishi Motors and Chrysler), then the richest package ever for an auto “transplant” (see below).

Four years later, the state and a locality assembled subsidies of similar value when Sears practiced “job blackmail” by threatening to relocate its headquarters. By loosening its TIF law's definition of blight to include undeveloped land, Illinois qualified the affluent, distant Chicago suburb of Hoffman Estates to offer Sears a $180 million local subsidy on top of the state's millions. Several thousand jobs moved from what was then the world's tallest building at the hub of Chicago's rail and bus transit web (i.e., hyper urban density) 29 miles to a greenfield site that was then not even served by transit (see below).

In 2011, Sears committed job blackmail again, threatening to leave the state as soon as its old subsidies expired. Sears’ repeated blackmail threats are far from unique in the state. Since February 2009, Illinois has repeatedly given big subsidy packages to companies—including Navistar, Caterpillar and Motorola Mobility—claiming they were considering an out-of-state move. Larger companies have even utilized their sway to persuade lawmakers into allowing them to keep a portion of the personal income taxes paid by their employees.

Illinois has at times been on the other end of interstate corporate relocations. In 2001 it gave a $56 million to Boeing to move its headquarters to Chicago from Seattle (see below). The package consisted of both state subsidies and local property tax breaks. After taking office in 2011, Chicago Mayor Rahm Emanuel vowed to reform the city’s bloated TIF system.

The state commonly bundles tax credits, grants, and infrastructure assistance. Illinois’ revenue-reducing tax credits include the Enterprise Zone, High Impact Business, Film and EDGE programs. Illinois also provides direct cash grants to companies through the Business Development Assistance program. The IDOT Economic Development program provides indirect cash grants which fund infrastructure built to benefit companies.

The cost of these programs can be considerable. For example, the Enterprise Zone program alone costs the state nearly $94 million each year. Many companies don’t utilize tax credits because Single Sales Factor wipes out their tax liabilities. Tax credit subsidies are frequently used as a backstop just in case the company incurs a tax bill.

In 2003, accountability advocates celebrated when, in response to Good Jobs First's study A Better Deal for Illinois, the state enacted a strong subsidy disclosure system that went online in 2005. Despite those who claimed sunshine would spoil the business climate, Illinois’ transparency practices have continued without complaint.

The state's searchable online database provides access to PDF reports submitted by companies. The database reveals which companies got subsidies, where the company located, how much it received, and what the results were in terms of job creation and wages. The disclosure system is superior to those of most other states, but it is not yet comprehensive as it omits subsidy deals signed before 2003, film tax credit recipients and covers only two of eight enterprise zone programs. Overall, there is online transparency in four of the five major economic development programs we looked at.

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Economic Development for a Growing Economy (EDGE) Tax Credit

a large discretionary “deal-closing” tax credit program for companies based on worker personal income tax withholding over ten years; some companies may now keep worker personal income taxes

$31.3 million (FY 2012)
80/100
35/100
60/100

Enterprise Zone Program

an expensive and growing program enabling eight state and five local subsidies for specially designated zones throughout the state; state officials recently revealed that many recipients are exempt from disclosure

$81.1 million (FY 2013)
85/100
35/100
58/100

Film Production Services Tax Credit

a rapidly growing program providing tax credits for 30% of film production costs and 45% of wages; companies can sell or transfer the credits for up to five years

$11.8 million (FY 2012)
0/100
16/100
43/100

IDOT Economic Development Program

a funding stream for road infrastructure built primarily to benefit specific companies, primarily big-box retailers

$7.3 million (2010)
80/100
25/100
40/100

Large Business Development Assistance Program

a “deal-closing” grant program for companies expanding or relocating in Illinois; it has resulted in numerous clawbacks

$12.1 million (FY 2013)
82/100
35/100
60/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Diamond-Star Motors (1985); Mitsubishi (2011)

In 1985 Diamond-Star Motors, a joint venture of Mitsubishi Motors and Chrysler, staged a six-state competition for the siting of a $680 million auto assembly plant. The winner was Illinois, which put together a subsidy package worth an estimated $249 million. Among the provisions were $40 million in job training funds, $11 million for site acquisition and preparation and $35 million in infrastructure improvements as well as enterprise zone tax credits and ten-year, 50 percent property tax abatements. Gov. James Thompson travelled to Japan to lobby for his state, which loaded on the subsidies despite industry scuttlebutt that Illinois was attractive because Japanese automakers were spreading their plants around Midwestern states to deter the U.S. Senate from enacting automotive domestic content legislation, as the U.S. House of Representatives had in 1983. 

Michigan Gov. Jim Blanchard said he believed that Mitsubishi used his state to “whipsaw” Illinois into increasing its offer. The huge deal generated complaints from existing manufacturers in Illinois and prompted the state legislature to pass a bill requiring economic analyses of the impact of subsidies to foreign firms. Gov. Thompson vetoed the measure. Despite all its tax breaks, Diamond-Star later successfully contested its local property tax assessment. In the early 1990s Chrysler ended its relationship with Mitsubishi, and the Bloomington-Normal plant dropped Diamond-Star and took on the Mitsubishi name.

In February 2011 Mitsubishi was given a $29 million subsidy package in connection with its plan to produce the Outlander Sports Crossover in Bloomington-Normal. (Key sources)

Sears headquarters (1989 and 2011)

In 1989 retail giant Sears, Roebuck & Co. announced plans to abandon its corporate headquarters in the Sears Tower in downtown Chicago and move to another site, possibly outside Illinois. After reportedly considering 50 sites in various states, Sears chose Hoffman Estates, a wealthy suburb about 29 miles northwest of the Loop. The decision came after Illinois offered its largest retention package ever.  The package included about $60 million from the state for site preparation and infrastructure improvements as well as enterprise zone tax benefits. Hoffman Estates committed to $112 million (later upped to $180 million) in tax increment financing, which was originally intended only for areas of economic distress.

Apart from the taxpayer cost, the plan came under criticism from environmentalists and Chicagoans for moving more than 5,000 jobs from a transit-rich city center served by a racially diverse workforce to a remote, predominately white exurban location with limited transit access.  Hoffman Estates struggled to service the TIF bonds after the expected development boom around the Sears facility failed to materialize. Sears carried out large-scale layoffs in Hoffman Estates in 1999 and 2005.

In 2011, as its tax deal was set to expire, Sears began pressing for new breaks, warning that it might otherwise move its headquarters out of state. Illinois officials quickly began working on a new subsidy package, as did officials in other states hoping to lure Sears, despite the fact that the company was struggling financially and had an uncertain future. In December 2011 the state legislature reached agreement on a plan to provide Sears $150 million in tax credits over ten years. (Key sources)

Boeing headquarters (2001)

In an unusually public auction for a trophy deal, Boeing let it be known in 2001 that it planned to move its headquarters away from its main manufacturing facilities in Seattle and was considering three new homes: Chicago, Denver and the Dallas-Ft. Worth area. Officials in the three locations went all out to win the competition, even though the economic impact of the 500-job relocation would not be enormous. Illinois Gov. George Ryan got the state legislature to offer a 20-year property tax exemption as part of the subsidy package he put together. In May 2001, Boeing chose Chicago; the final package turned out to be worth about $56 million.

The $30 million state portion included $17 million in EDGE corporate income tax credits, while Chicago provided the property tax abatement, worth $16 million, and a variety of other subsidies. The Boeing executive in charge of the search later said that the financial assistance was “irrelevant” and that what really counted was the city’s pro-business attitude. Some observers thought Chicago had more big-city amenities suitable for Boeing executives and their families. (Key sources)

Walmart in Illinois

  • At least 38 Wal-Mart locations have received subsidies worth about $152.1 million in Illinois.
  • At least 3 Wal-Mart locations in Illinois have challenged their property tax assessment.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. Illinois is among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.
  • Wal-Mart receives about $9.6 million a year from a state policy that allows retailers to keep a portion of the sales tax they collect from customers.

For more information, see the Illinois page of Wal-Mart Subsidy Watch.