 As state senators sent the tax package to the governor's desk
Tuesday, economic development experts said other companies are
likely to threaten to move as well unless Illinois offers them more
financial goodies. More than 100 companies, including Deere & Co.
and Abbott Laboratories, have incentive packages expiring in the
next three years -- and may want better deals.Businesses thinking
of moving to Illinois could demand even bigger incentives or play
Illinois against other states in a bidding war, experts said.
"Once it becomes known that you're giving incentives, other
companies are going to ask for them. Why wouldn't they?" said Judith
Stallmann, a professor at the University of Missouri-Columbia who
has studied economic development.
The tax package includes $100 million in incentives for Sears
Holdings Corp. and CME Group Inc., which runs the Chicago Mercantile
Exchange and the Chicago Board of Trade. A smaller financial
company, CBOE Holdings Inc., would also share in the tax relief.
To help reduce anger over the aid for those companies, the
package also includes roughly $120 million in more general tax
breaks for all businesses and about $110 million in relief for poor
and middle-class families.
The business measures passed the Senate 44-9. The cuts aimed at
helping families passed 48-4. Gov. Pat Quinn supports the package.
Economic development experts said states often have little choice
when major companies threaten to depart. Losing companies as
prominent as Sears and the Chicago Mercantile Exchange, particularly
without making a bid to keep them, can be a major blow to a state's
business reputation.
"When you think of Illinois, you think of both of these
companies," said Tim Monger, former executive director of the
Indiana Department of Commerce and part of a real estate brokerage
that works with companies on site selection.
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Illinois officials, even ones who support the tax relief package,
acknowledge that more businesses are likely to come forward with
their hands out. They say the requests will have to be considered
one by one, at least in the short term. Down the road, Republicans
and Democrats are likely to battle over cutting income taxes --
which were increased in January -- or making other changes designed
to improve the state's overall business climate.
A site-selection consultant in Park Ridge said he's already
hearing from businesses that feel neglected and want state help.
"One of the unintended consequences of this whole thing is you
are going to see a lot more midsize businesses feeling like they're
getting screwed by the state," said Brent Pollina. "They're carrying
the tax burden. The state doesn't care about them at all."
Experts say generous incentive packages aren't particularly
effective in creating new jobs or retaining old ones.
A paper by Stallmann, from the University of Missouri, notes one
study found that only 10 percent of new jobs that are attributed to
economic incentives actually were created by the incentives. Another
study found that companies often don't hire as many people as they
promised when the state aid was handed out.
[Associated Press;
By CHRISTOPHER WILLS and DAVID MERCER]
Copyright 2011 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
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