Wednesday, December 18, 2013

ADM Decides To Move Corporate Headquarters To Chicago Without Tax Incentives

Archer Daniels Midland, the Decatur, Illinois-based agri-giant with a $27 billion market cap, sought $1.5 million in annual tax breaks from the state of Illinois under its EDGE credit program to relocate its corporate headquarters to Chicago. The special tax credit program requires legislative approval on a case-by-case basis in Illinois, and the state's Speaker for life, Rep. Michael Madigan (D-Chicago), balked at the plan given the state's poor financial condition. The Chicago Tribune is reporting that ADM will go forward with an announcement today of its relocation to Chicago where its CEO had already recently purchased a home without the tax credits. Legislative leaders in the Illinois House described ADM's demand, along with other recent corporate tax break demands as blackmail:
. . . Illinois House Majority Leader Barbara Flynn Currie characterized the ask as anything but benign.
"It is essentially blackmailing the state," Currie told Young. "It essentially is saying if you don't jump to, if you don't go do this for us, we might think about going somewhere else."
Even if the legislature had rubber-stamped the deal, Gov. Pat Quinn said he wouldn't approve such a measure until the House and Senate dealt with public pension reform.
But after the Democratic-controlled legislature voted this month for sweeping changes to public employee pensions, legislators seemed to squirm in the politically awkward position of squeezing labor at the same time they were considering tax incentives for big corporations.
Incentives for ADM, chemical company Univar and the newly merged combo of Naperville-based OfficeMax and Office Depot of Boca Raton, Fla., got through the Senate but weren't acted upon by the House before adjournment for the year Dec. 3.
OfficeMax/Office Depot last week announced its plan to make its home in Florida, a move affecting 1,600.
Democratic House Speaker Michael Madigan, the next day, suggested that a pattern of business executives threatening to leave Illinois unless they get tax incentives and politicians quickly responding has created an appearance of "corporate pay-to-play."
Madigan has called for overhauling a system that prompts companies to line up hat in hand at the Capitol.
"I find it very difficult to support tax giveaways for corporate CEOs and millionaire shareholders whose companies pay little in state taxes," Madigan, who is state Democratic chairman, said in a statement.
"I question our priorities when corporate handouts are demanded by companies that don't pay their fair share while middle-class families and taxpayers face an increasing number of burdens."
Madigan said the state "must resist the temptation to cave to corporate officials' demands every time they impose a deadline for payment in exchange for remaining in Illinois, and end the case-by-case system of introducing and debating legislation whenever a corporation is looking for free money from Illinois taxpayers."
From a logistical standpoint, Chicago was seen by many as ADM's logical choice for a headquarters all along, given its central location, educated workforce, transportation network and standing as an international hub.
But when Springfield balked at its incentives request, it toured other cities in the Midwest and beyond.
Asked several weeks ago what it would mean if ADM chose one of them instead, Emanuel rejected the question, instead focusing on what he thought would keep ADM in Illinois.
"ADM and their leadership will see what GE Transportation saw when they left western Pennsylvania and came to the city of Chicago," Emanuel said. "They thought it was an incredible business climate here in the city of Chicago. That's what I said to ADM and what I'd say to anybody."
It will be interesting to see how this debate plays out with the bidding among 21 states for Boeing's new 777X plant. Chicago is the corporate headquarters of Boeing and the state is among those vying to win the proposal. Chicago might view it as a partial victory for the city if the plant is built in neighboring Gary, Indiana as opposed to another state.

6 comments:

Jeff Cox said...

With respect to Chicago, Gary, Indiana is in fact another state.

Gary R. Welsh said...

Jeff, I would lay odds that if the plant was built in Gary, at least half of the employees would reside on the Illinois side of the border because of its close proximity to the state line. That's not a total loss for Chicago if the plant is built in Gary like it would be if it's built in another state.

Anonymous said...

No, Jeff. Gary is Chicago.

Jeff Cox said...

You're right about most of the employees living in Chicago. In fact, Gary's proximity to Chicago helps Indiana's bid. Boeing gets Indiana taxes while still being able to attract employees who likely don't want Indiana's Bible Belt culture.

Jeff Cox said...

No, Anon. Gary is Indiana. Not culturally, but it's physically in Indiana, which it means it pays Indiana taxes, which are lower than Illinois' and, especially, Chicago's.

Anonymous said...

When Northwest Indiana aligns with a common mission, it will dominate Indiana politics.