In recent months, we've written repeatedly
about how the Daley administration uses taxpayer subsidies to woo
deep-pocketed corporations to relocate their offices to Chicago's
Loop. As such we've been very interested in the news that the city is
working out a plan ...
In recent months, we've written repeatedly about how the Daley administration uses taxpayer subsidies to woo deep-pocketed corporations to relocate their offices to Chicago's Loop. As such we've been very interested in the news that the city is working out a plan to stuff another $25 million into the pockets of United Airlines' parent company, UAL Corp., in exchange for moving its operations center from Elk Grove Village to the newly-minted Willis Tower -- a tentative plan confirmed this week by Ald. Bob Fioretti (2nd Ward).
As articles in both the major dailies explained yesterday, the $25 million subsidy will come from the Lasalle Central tax increment financing (TIF) district, which the Sun-Times rightfully described as part of the mayor's "rich money pot." Both papers also pointed out that, just last year, the airline landed a $5.47 million deal (PDF) through the neighboring Central Loop TIF district to help refurbish its new corporate headquarters at 77 W. Wacker Dr in exchange for keeping a minimum of 325 employees in the office.
Indeed, just last month, another $10 million agreement (PDF) was inked for "improvements at 77 W. Wacker Dr." In this case, the taxpayer spending won't have the side-effect of creating new construction jobs or allowing the airline to expand its staff. Instead, the funds will be doled out in increments of up to $2 million over the next five years to offset the local tax on jet fuel.
If the deal to move the operations center goes through, that will amount to UAL securing more than $40 million in taxpayer funds in just a few years -- $40 million that has been diverted from city services, schools, libraries, and parks for this purpose. So, as the Reader's Ben Joravsky has asked about other TIF subsidies to downtown corporations, what do we get in return?
City officials have yet to make a good case on this front. Talking to the Sun-Times, Fioretti offered the same explanation that City Hall used in justifying the $3.8 million gift recently bestowed upon UAL's soon-to-be neighbors, Willis Holdings Ltd:
Fioretti said a subsidy is justified because the average UAL worker will spend about $6,700 a year at downtown businesses.
Rita Athas, executive director of a company that promotes corporate relocations to Chicago, offered the paper a similar rationale:
She cited "the collateral benefit to all the small businesses that surround the tower: the deli stores, the shoe shops, the stores people will be shopping in because they're here." Athas said a study by the International Council of Shopping Centers shows each worker contributes $7,249 to the annual downtown economy.
Forty million dollars is an awfully large investment for boosting coffee and sandwich sales.
UPDATED: Over at Crain's, Greg Hinz looks at the resulting sales tax revenue -- around $500,000 a year per his calculations -- and concludes that the subsidies are worth it.