Ill. facing quandary of expiring tax breaks

CHAMPAIGN – When Sears Holdings rattled Illinois last month by saying it was considering moving its headquarters out of state, Gov. Pat Quinn promised he would find a way to keep the retailer around.

It’s a potentially costly scenario that could be repeated more than 100 times over the next three years.

Tax break deals with 107 companies will expire in 2012, 2013 and 2014, according to records obtained through a Freedom of Information Act request. Those deals, worth more than $100 million, run out at a time when other states view Illinois as a prime target for poaching after this year’s tax increases stirred unhappiness in the state’s business community.

Illinois may have little choice but to offer bigger breaks to many of those companies or risk seeing them leave, even though the state already faces a budget deficit that could top $9 billion annually in coming years.

Dozens of the deals are with companies that employ hundreds or even thousands of people in the state, including J.P. Morgan Chase, Deere & Company, U.S. Cellular Corp., Abbott Laboratories and Wells Fargo.

“If you get household name corporations appearing in news headlines [for leaving the state], that’s not a good thing,” Doug Whitley, president of the Illinois Chamber of Commerce,
said, referring to Sears’ threat and more recent news that both the Chicago Board Options Exchange and CME Group were considering leaving Illinois.

“When a company raises its hands and says ‘Look at me,’ ” Whitley added, “then you’ve got a government entity scrambling.”

A state spokeswoman said there is no set way for the Department of Commerce and Economic Opportunity to handle expiring tax incentive contracts.

But she said the end of a deal isn’t a guarantee of a new one.

“This is not an automatic ticket for a company to get additional incentives,” Marcelyn Love said in an email. “Our focus is on being responsive to companies so we can better assess their needs and make Illinois an attractive place to do business.”

Tax breaks and the way states use them to compete with each other, particularly those offered to retain existing jobs, are often criticized. Many economists say they don’t create anything new, but instead pay companies to maintain the status quo.

The tax break deals set to expire in Illinois in the next few years were made through the state’s Economic Development for a Growing Economy program, known as EDGE. It is Illinois’ primary tool to persuade companies with offers to leave the state to stay. The program also gives incentives to firms considering adding jobs to create them in Illinois.

Early last month, using the EDGE program, Illinois promised Motorola Mobility $100 million in tax breaks to keep the consumer electronics maker’s headquarters in Libertyville.