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Tax Dollars And Sense
Last week, the Chicago Community Development Commission approved a tax increment financing project that will "create" 500-650 permanent jobs lasting ten years by relocating Sara Lee's meat division, MeatCo’s headquarters. The project is going to cost Chicago taxpayers up to $6.5 million dollars.
The proposed contract stipulates that MeatCo will receive $1 million every year for five years as long as they maintain 500 full-time equivalent jobs. If at the end of the five years they have 650 jobs, they will get a $1.5 million bonus, as long as they keep those jobs for five additional years.
As it turns out, the jobs that are being “created” in this proposal are actually just being “relocated” from Downer’s Grove- just a 45 min Metra ride away from Union Station. It is unclear whether or not the current employees will move to Chicago (and pay taxes) or simply increase their carbon footprint by commuting every day.
This reminds me of a This American Life episode that aired back in May 2011 called "How to Create a Job." If you have an extra hour, it's worth a listen.
The episode mainly focuses on how the trend these days is to shift jobs, not create jobs. A Mayor or Governor will woo a company to move to their city or state with some kind of financial incentive and then declare that they created X number of jobs. Often times the jobs just move geographically from one place to another, without actually employing locals or improving the local economy as deeply as promised.
Certainly, the West Loop’s economy will benefit from adding 500-650 additional workers to that area. But, it is written right in the contract that the current employees will be staying in their positions—so, it’s a bit of a stretch to say that this TIF money is being used to create jobs, when really it’s being used to ship jobs to Chicago from Downer’s Grove. Is that really worth our tax dollars? Hard to say.
But more to the point, MeatCo, why are you moving? Presumably, since you are receiving TIF money, you wouldn’t be moving BUT FOR the TIF money. But, that’s not the case, is it?
The Chicago Tribune writes: "We believe that a downtown location will provide MeatCo with an environment that will be energetic, foster breakthrough thinking, create revolutionary products, offer fresh perspectives and own the market," Chief Executive Marcel Smits wrote in the email to employees in October.”
So, do you really need our $6.5 million? Sounds like you have reason enough to move.
This brings me to my favorite part of the This American Life episode. Andrew Reschovsky, an economist at the University of Wisconsin says that there are a lot of things that politicians can do to encourage businesses to move to their city or state and bring jobs with them-- other than tax breaks and financial incentives:
“[Politicians could say] I'm going to improve the quality of the state university system, or I'm going to invest in community colleges, good roads, good bridges, to have some physical infrastructure, to have an educated labor force.”
His point is well taken. Chicago has a lot to offer businesses that want to move here and set up shop—not just financial incentives. Certainly, Mayor Emanuel has a strong vision for what the city should and can look like in the 21st century. So instead of giving Sara Lee $6.5 million to move here, Mayor Emanuel should focus on sharing his vision for Chicago and continuing to make Chicago a great place to do business. That way, companies like Sara Lee will want to move here without taxpayers having to foot the bill.
****This project is still awaiting approval by the Chicago City Council.
To read the Community Development Commission Staff Report for this TIF project, go here.
To listen to the This American Life episode, go here.
To read the full Chicago Tribune article, "Slimmer Sara Lee moving to Chicago," go here.
Some of the nation’s best-known companies—including GE, Google and Goldman Sachs—have avoided paying the taxes they owe, costing us $100 billion last year.
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