CHICAGO – Illinois took a giant step toward fixing its biggest financial problem by putting a sweeping pension reform on the books, but legislators’ inaction on tax incentives aimed at keeping companies and creating new jobs has triggered fresh concerns about the state’s business climate.
The Senate and a House committee took up legislation this week offering tax breaks for Archer Daniels Midland Co., chemical distributor Univar and newly-merged OfficeMax and Office Depot. But the House left after Tuesday’s pension vote, pushing the issue into 2014 since lawmakers aren’t due back until January. The slowed action – an ADM official said the company needed a decision by year’s end – could frustrate companies and give other states that have already ridiculed Illinois for its unemployment and major financial problems the chance to swoop in.
“The Illinois government’s failure to act in a timely manner is a huge disappointment for business people who are trying to make decisions in a timely manner,” said Illinois Chamber of Commerce President Doug Whitley. “It’s bad form.”
Three separate bills were discussed, but all had the same idea: Give companies a reason to stay or move to Illinois with the promise of retaining and creating new jobs in a state that struggles with its financial image and has one of the highest unemployment rates. Legislation cropped up earlier this year when agribusiness giant ADM announced it was relocating its longtime headquarters from Decatur. The company hasn’t said where it’s going, but city officials in Chicago, Atlanta and St. Louis have said they’re all in the running.
The Senate approved two bills. One would give ADM up to $30 million in tax breaks and the company would have to add hundreds of jobs in Illinois. The other calls for roughly $58 million in incentives for Univar, a Washington-state based company that wants to relocate to Illinois where it has some offices, and Naperville-based OfficeMax and Florida-based Office Depot.
Sen. Tom Cullerton, a Villa Park Democrat who sponsored the second bill, said Texas was in the running for luring away Univar. Other lawmakers expressed concerns during testimony that the office supply companies would chose Florida, a state that has already given Office Depot millions in incentives over the years.
Either scenario could be embarrassing for Illinois, particularly since governors from Texas and Florida waged public campaigns calling on Illinois companies to move out of state.
“Let’s make sure we take from other states as opposed to other states take it from us,” Cullerton said.
Texas Gov. Rick Perry’s spokeswoman Lucy Nashed declined to talk specifics about Univar, but said the state would be competitive.
“It really is just a matter of any time a company is looking to expand or relocate that we want Texas to be part of that conversation,” she said. “Whether it’s Illinois or Washington state or any other state.”
Officials with OfficeMax declined comment. Univar officials didn’t return calls.
“We will review our options,” ADM spokeswoman Victoria Podesta said. “We expect to make an announcement soon.”
Tax breaks can be a big motivator for companies to relocate, say experts who help corporations make it happen. And it’s especially critical for Illinois, which has other problems, such as messy state finances and high corporate and incomes taxes.
Even though Chicago is attractive geographically and has access to international airports – a factor Chicago officials have cited to ADM executives who travel globally – Illinois needs to offer a balance like tax incentives, according to Brent Pollina, head of Pollina Corporate Real Estate in suburban Chicago. His firm helps companies find new locations.
State officials have done so before. In 2011, Gov. Pat Quinn signed $100 million in tax breaks and incentives for Sears Holding Corp. and CME Group Inc., which operates the Chicago Mercantile Exchange and Chicago Board of Trade.
Still, Illinois’ process for approving tax breaks, which requires a legislative OK, is slow in comparison to other states and could be a deterrent.
“It seems like Illinois can’t seem to get its act together,” Pollina said. “Illinois really is behind the times when it comes to the concept of economic development and helping work with business.”
But Illinois lawmakers said their hands were tied because they had to first deal with the state’s roughly $100 billion pension problem, a crisis that has diverted money from other services and led to repeated credit downgrades.
State Rep. Mike Zalewski, a Riverside Democrat who sponsored another bill that would offer approximately $92 million in tax breaks for all three companies, conceded that pensions remained “the No. 1 focus.”
His bill included a satellite television tax, something he hoped would make it more palatable to his colleagues. Even so, other lawmakers said they’d have difficult approving corporate tax breaks at the same time they cut benefits for hundreds of thousands of public employees.
The tax incentives could come back in late January when lawmakers return to Springfield.
“It’s still under consideration,” House Speaker Michael Madigan told reporters.
The bills are HB2536, SB1227 and HB3271.
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