In a June 2011 article, Gov. Pat Quinn told the Chicago Tribune why the state rewarded a tax credit to Motorola Mobility worth more than $100 million over ten years. “They told us that they were going to maintain 3,000 employees at their site in Libertyville and we believed them,” Quinn said.
To the chagrin of Libertyville, the company announced Thursday those jobs will be shifted to the Merchandise Mart in downtown Chicago. The Quinn administration confirmed that Motorola Mobility keeps its tax credit.
In Motorola Mobility's defense, the point of the tax credit was to keep the company in Illinois, not Libertyville. But why did Motorola Mobility get a tax deal in the first place? It is not clear how credible their threat ever was to move from Illinois. Also, Motorola Mobility needs taxpayer help less than ever as Google officially purchased the company in May. Talks of a Google acquisition were first publicly announced last August, soon after the tax break started.
Under the May 2011 agreement, Motorola pledged to invest $30 million in capital improvements, $570 million in research, and maintain a workforce of 2,500 employees in Illinois, contrary to the 3,000 positions first reported.
In return, Motorola may apply for a more than $10 million credit each year under the Economic Development for a Growing Economy, or EDGE, program run by the Illinois Department of Commerce and Economic Opportunity, IDCEO. The company reports (PDF) that it received an $11.6 million tax credit in 2011.
According to an e-mail from IDCEO spokeswoman Sandra Jones, the initial contract specified that the jobs would be in Libertyville. IDCEO changed the agreement Thursday to make Chicago the new locale, according to Jones.
The move “goes a long way in creating a vibrant technology hub in the city that we hope will attract more investment and more innovation,” Jones wrote.
But under EDGE, companies don’t get special tax deals for creating vibrant technology hubs.
They get deals for threatening to leave the state. “The EDGE program is designed to offer a special tax incentive to encourage companies to locate or expand operations in Illinois when there is active consideration of a competing location in another state.” IDCEO says on its Web site.
Then-Motorola Mobility CEO Sanjay Jha spent the months before his company’s tax break announcement publicly ruminating about moves to Silicon Valley, Austin, Texas and Anaheim, California.
In a June 2011 Crain’s Chicago Business interview, Jha would not say how close the company was to moving. Jha left Motorola Mobility in May when Google completed its acquisition. Google’s purchase also did not alter the tax break.
State Rep. Jack Franks (D-Woodstock), who wrote legislation to make the EDGE program more transparent, expressed outrage about Motorola Mobility’s tax break in an interview three weeks ago.
Thomas Cafcas, research analyst at Washington, D.C.-based Good Jobs First an organization that studies corporate tax breaks, says that Motorola Mobility’s relocation in of itself should not upset Illinois taxpayers.
“If you ignore subsidy factors, it was probably a good move to go to Chicago,” Cafcas says. The city is not handing out its own tax break, Cafcas notes, and more tech workers are likely concentrated in Chicago than in Libertyville.
But there is a lack of evidence the tax break changed Motorola Mobility’s behavior, such as preventing a move to California or Texas. “There is no reason to pay companies to do what they were going to do anyway,” Cafcas says.