Chicago Economic & Finance News

[spyguy]

http://www.chicagobusiness.com/artic...mulls-new-name

Sara Lee seeks subsidies for Chicago move, mulls new name
By: Ryan Ori and Kate MacArthur and Greg Hinz October 06, 2011

Sara Lee Corp. is changing its name and asking the city of Chicago to help underwrite a headquarters move downtown.

In recent weeks, the Downers Grove-based food company has toured downtown office buildings, including Willis Tower and 500 W. Monroe St., Crain's has learned. At the same time, Sara Lee is seeking millions of dollars in city subsidies for the move, sources say.

[kingkirbythe....]

I'm looking to move downtown too. Chicago and Illinois need give me a tax break.

[bnk]

Originally Posted by spyguy

http://www.chicagobusiness.com/artic...mulls-new-name

Sara Lee seeks subsidies for Chicago move, mulls new name
By: Ryan Ori and Kate MacArthur and Greg Hinz October 06, 2011

Sara Lee Corp. is changing its name and asking the city of Chicago to help underwrite a headquarters move downtown.

In recent weeks, the Downers Grove-based food company has toured downtown office buildings, including Willis Tower and 500 W. Monroe St., Crain's has learned. At the same time, Sara Lee is seeking millions of dollars in city subsidies for the move, sources say.

This whole playing off other states really is getting old but I have to put the blame on Quinn. It was a stupid move and his policy created this fiasco. If the big trading exchanges ever do leave than that would really be the darkest day in all of history for the state.

EDIT

I just read seeks subsides for move. I thought that Sara Lee was pulling a Florida, Wisonsin, NJ or Texas threat. I was wrong. But Anyway my anger still stands.

[Haworthia]

I think the whole practice of offering tax breaks to companies to relocate ought to be banned somehow on a national level. It's foolish. It just redistributes economic activity instead of generating new activity. That money could be used for infrastructure or something else of real worth.

I mean, I'm happy Sara Lee wants to move downtown, but they should only do so if they think it will help their business. I do not think Chicago should bribe them to do so.

[intrepidDesign]

Originally Posted by Haworthia

I think the whole practice of offering tax breaks to companies to relocate ought to be banned somehow on a national level. It's foolish. It just redistributes economic activity instead of generating new activity. That money could be used for infrastructure or something else of real worth.

I mean, I'm happy Sara Lee wants to move downtown, but they should only do so if they think it will help their business. I do not think Chicago should bribe them to do so.

Amen. I originally though their reason for moving downtown is that they wanted to attract the kind of talent that appreciates an urban environment/be closer to professional services? Now they want financial help making a good business move?

This is a problem that plagues all of America, and nowhere is it more apparent than the case of Kansas City. I read an article a while back about Missouri and Kansas in a subsides war. The companies that were taking advantage of said subsides were just moving down the block, effectively eroding both states coffers yet creating practically zero new jobs.

I honestly don't know what the solution to this problem is. Some would say, lower corporate taxes, but that leaves less money for the state to provide the things that are meaningful to the work force. Whats the good of having jobs in a city or town that is falling apart and no one wants to live in, and how are you suppose to build a decent talent pool with a poor standard of living?

[Baronvonellis]

Yes, bribery is a big problem around the world. It creates waste and inefficiency. This is government bribery and should be illegal. There are anti-bribery laws in the US. But since big corporations control the government, they can pretty much do anything they want.

[Nowhereman1280]

Originally Posted by Haworthia

I think the whole practice of offering tax breaks to companies to relocate ought to be banned somehow on a national level. It's foolish. It just redistributes economic activity instead of generating new activity. That money could be used for infrastructure or something else of real worth.

I mean, I'm happy Sara Lee wants to move downtown, but they should only do so if they think it will help their business. I do not think Chicago should bribe them to do so.

Couldn't disagree more. All cities should be competing for jobs and businesses. This means the people who waste their money on stupid shit we don't need will go bankrupt and the others which improve their built environment and attract talented citizens will thrive. Just look at what cities are booming right now: Portland, Madison, Austin, etc... They are all doing it right and don't need any tax breaks to attract businesses. Chicago is the same way, we are attracting all sorts of new businesses to downtown and really not offering much in the way of tax breaks. That's because Chicago has made great strides in attracting the talented citizens it needs to be appealing to business. It has also done a good job of improving the built environment and crime rates to make itself more appealing.

This is why cities exist, because there are benefits to locating centrally. Competing with tax breaks is just one way larger agglomerations out compete smaller agglomerations: they have larger economies of scale when it comes to taxes and are able to offer lower rates. The stronger cities should be able to bribe as many companies to move there as they can afford. If a city, perhaps Detroit as an example, can't compete, then it should shrink or cease to exist.

[ardecila]

Originally Posted by Haworthia

That money could be used for infrastructure or something else of real worth.

As long as the subsidy is less than the additional tax revenue derived from the new business, then the city still comes out ahead.

The only thing that matters is whether the business is seriously considering locating elsewhere, or is just fishing for a subsidy. (Obviously, the city has to take its best guess). To me, the mere fact that Sara Lee is planning a move within the Chicago area suggests to me that they're interested in the downtown location for its own sake, not for a subsidy. If they wanted, they could pull a Sears and threaten to leave the state altogether, but they haven't done this.

[sentinel]

Originally Posted by Nowhereman1280

Well he certainly seems to think it will make Chicago more appealing. I was actually at a fundraiser with him last night and got a chance to briefly discuss the Ford coup and the other projects he is working on to bring jobs into the city. I got the impression that we should expect great things out of the budget he is proposing next week. I let him know that all the urban planning nerds, myself included, think he is off to a great start especially with bringing Gabe Klein in.

I brought up the boathouses he has proposed and he mentioned that he is extremely close to having donors to fund two of them already. Want's to get started on them ASAP.


Anyhow, the biggest benefit of eliminating the head tax isn't even the obvious savings of not paying $4 a month per employee, it's eliminating the bureaucracies associated with the tax. Once it's gone, no city employees need to make sure the tax is being paid and no corporate accountants or tax lawyers need to make sure the companies have properly paid their taxes. It's simply not worth the measly $23 million a year for the amount of headaches it causes. If they need the revenue they should just raise some other tax by a hair. Why would anyone want to disincentivize having employees in the city in the first place?

Nowhereman, when you spoke with Rahm, did the issue of CME and now CBOE threatening to leave IL come up and whether or not the City is working with those groups to stay in Chicago? I feel that the discussion has centered wholly on the state and trying to get incentives from the state to stay here, but I'm curious and a little perplexed as to why Chicago has stayed relatively dormant during the whole discussion, and how Rahm is playing his hand on the matter.

[lawfin]

Originally Posted by Nowhereman1280

Couldn't disagree more. All cities should be competing for jobs and businesses. This means the people who waste their money on stupid shit we don't need will go bankrupt and the others which improve their built environment and attract talented citizens will thrive. Just look at what cities are booming right now: Portland, Madison, Austin, etc... They are all doing it right and don't need any tax breaks to attract businesses. Chicago is the same way, we are attracting all sorts of new businesses to downtown and really not offering much in the way of tax breaks. That's because Chicago has made great strides in attracting the talented citizens it needs to be appealing to business. It has also done a good job of improving the built environment and crime rates to make itself more appealing.

This is why cities exist, because there are benefits to locating centrally. Competing with tax breaks is just one way larger agglomerations out compete smaller agglomerations: they have larger economies of scale when it comes to taxes and are able to offer lower rates. The stronger cities should be able to bribe as many companies to move there as they can afford. If a city, perhaps Detroit as an example, can't compete, then it should shrink or cease to exist.

I have conflicting feelings in regard to this type of inducement. And I think many studies indicate that in the end it is not worth it; especially given that certain factors like human capital, infrastructure, connectivity etc are often deemed much more important than marginal difference in tax rates.

That being said it does lay bare the claim by many in faith in the free-market; and instead indicates the underlying truth of the US economy as it has always been a mixed-economy

[lawfin]

Thought this would have been mentioned already.

http://www.chicagotribune.com/busine...,2594899.story

[Nowhereman1280]

Originally Posted by sentinel

Nowhereman, when you spoke with Rahm, did the issue of CME and now CBOE threatening to leave IL come up and whether or not the City is working with those groups to stay in Chicago? I feel that the discussion has centered wholly on the state and trying to get incentives from the state to stay here, but I'm curious and a little perplexed as to why Chicago has stayed relatively dormant during the whole discussion, and how Rahm is playing his hand on the matter.

That would have been a good question to ask, but it didn't come up. However it did come up when I was talking with some people who work in the Mayor's office at another event a couple weeks ago and they basically laughed off CME's threats. Now I don't know if that indicates the city is calling their bluff or if it means "really? do you honestly think we'd let them get away?", but I am confident that Rahm has a direct line to the CEO's of those companies and can just call them up at any time to discuss it.

In all honesty there isn't much the city can do here except pick up the tab created by the state. The reason these companies are up in arms is that the state taxes went up, not because the city did anything. I don't think Rahm is about to just cut city taxes which didn't increase at all to make up for the money the state is now siphoning away. In any case the elimination of the head tax will make their relationship with the City of Chicago better at least because it will probably save them a few million a year.

I think these companies are full of shit anyhow because the entire infrastructure of the derivatives industry is firmly rooted in Chicago.

Originally Posted by lawfin

I have conflicting feelings in regard to this type of inducement. And I think many studies indicate that in the end it is not worth it; especially given that certain factors like human capital, infrastructure, connectivity etc are often deemed much more important than marginal difference in tax rates.

That being said it does lay bare the claim by many in faith in the free-market; and instead indicates the underlying truth of the US economy as it has always been a mixed-economy

Well I view it this way: Cities have two ways of competing, offering a discount to become the "budget option" or investing in their built environment or talent pool to become a "premium option". Chicago generally seems to try to take the "premium" route though that does not preclude the use of tax incentives to snag deals where the company is truly wavering on a decision.

As far as free market vs mixed market, I don't even look at it that way because competition creates inefficiencies and choice on all levels. I could care less about the term free-market and am more concerned about applying "free-market" principles to situations where they can provide additional efficiencies and choices.

[sentinel]

I thought this was interesting..

http://www.chicagobusiness.com/artic...-its-neighbors

Illinois' business climate outshines its neighbors'
By: John Pletz October 17, 2011

Lost amid headlines about rising corporate taxes, companies threatening to leave the state and rival governors wooing others is an important fact: Illinois is a better place to do business than surrounding states.

A Crain's analysis of the factors most important to a healthy business climate shows that Illinois outranks Wisconsin, Indiana, Missouri and Iowa. Dozens of interviews with CEOs, entrepreneurs and experts in corporate site selection confirm that Illinois has more of what businesses need to thrive.

The state has a larger pool of talented workers, bigger markets, more money for investment and better transportation. Together, these advantages outweigh the rising taxes and state budget deficits that have put Illinois in an unwelcome spotlight.

"It's not just taxes or a patch of land: It's all about the people and the human capital," says Gregory Brown, CEO of Schaumburg-based Motorola Solutions Inc., which employs about 5,000 in the state. "The incentive is higher to stay and build on the base of talent here. There's great talent in Illinois.".....

Read more: http://www.chicagobusiness.com/artic...#ixzz1ayR5YHE8
Stay on top of Chicago business with our free daily e-newsletters

[lawfin]

Originally Posted by sentinel

I thought this was interesting..

http://www.chicagobusiness.com/artic...-its-neighbors

Illinois' business climate outshines its neighbors'
By: John Pletz October 17, 2011

Lost amid headlines about rising corporate taxes, companies threatening to leave the state and rival governors wooing others is an important fact: Illinois is a better place to do business than surrounding states.

A Crain's analysis of the factors most important to a healthy business climate shows that Illinois outranks Wisconsin, Indiana, Missouri and Iowa. Dozens of interviews with CEOs, entrepreneurs and experts in corporate site selection confirm that Illinois has more of what businesses need to thrive.

The state has a larger pool of talented workers, bigger markets, more money for investment and better transportation. Together, these advantages outweigh the rising taxes and state budget deficits that have put Illinois in an unwelcome spotlight.

"It's not just taxes or a patch of land: It's all about the people and the human capital," says Gregory Brown, CEO of Schaumburg-based Motorola Solutions Inc., which employs about 5,000 in the state. "The incentive is higher to stay and build on the base of talent here. There's great talent in Illinois.".....

Read more: http://www.chicagobusiness.com/artic...#ixzz1ayR5YHE8
Stay on top of Chicago business with our free daily e-newsletters

See my comment 3-4 above this.

[bluesxtreme]

Kraft considers moving to Chicago

http://www.chicagotribune.com/busine...,6381068.story

Northfield-based conglomerate Kraft Foods, which plans to divide itself into two publicly traded companies, said Wednesday that it is considering moving at least one of its headquarters to downtown Chicago next year, Crain's Chicago Business is reporting.

Kraft, currently the world's second-largest food company, plans to split into a $16 billion North American grocery business and a $32 billion global snacking business. Both companies, currently being referred to as "Global Snacks" and "North American Grocery," will be based in the Chicago area.

[Nowhereman1280]

^^^ I hope they both end up downtown. I like the current trend of Chicago area companies consolidating back into the CBD.

[the urban politician]

Originally Posted by Nowhereman1280

^^^ I hope they both end up downtown. I like the current trend of Chicago area companies consolidating back into the CBD.

^ Except that many seem to be imploding legacy companies like Kraft and Sara Lee, simply fishing for incentives to satisfy their shareholders as they swirl the drain

[Nowhereman1280]

Originally Posted by the urban politician

^ Except that many seem to be imploding legacy companies like Kraft and Sara Lee, simply fishing for incentives to satisfy their shareholders as they swirl the drain

What? Kraft is not an "imploding legacy company"... They just bought Cadbury for $18 billion like less than a year ago. Nor is United which just gobbled up Continental to become one of, if not the, largest airlines in the world. Nor is Motorola which, despite its period of instability in the post-razr years, is on the upswing and may be purchased by Google. Even Sarah Lee, while it isn't doing great, still has a very strong base of brands and a profitable core business.

The reason you don't see hot shot companies moving into downtown from the burbs is that there are not hotshot companies in the burbs. All the awesome new companies are starting and staying in the city. Just look at Groupon and all the Lightbank startups.

I think what you are seeing is major companies moving when they do major acquisitions, mergers, or splits because that's when companies typically do major office moves and consolidations.

[FlashingLights]

Originally Posted by Nowhereman1280

What? Kraft is not an "imploding legacy company"... They just bought Cadbury for $18 billion like less than a year ago. Nor is United which just gobbled up Continental to become one of, if not the, largest airlines in the world. Nor is Motorola which, despite its period of instability in the post-razr years, is on the upswing and may be purchased by Google. Even Sarah Lee, while it isn't doing great, still has a very strong base of brands and a profitable core business.

The reason you don't see hot shot companies moving into downtown from the burbs is that there are not hotshot companies in the burbs. All the awesome new companies are starting and staying in the city. Just look at Groupon and all the Lightbank startups.

I think what you are seeing is major companies moving when they do major acquisitions, mergers, or splits because that's when companies typically do major office moves and consolidations.

Motorola mobility is not on the upswing other then the fact that Google purchased them for IP property. Samsung and htc are killing them. Their newest razr appears weak in comparison to the galaxy nexus. I don't see much excitement other then the fact that Google has endless moneyb to keep them afloat.

[Attrill]

There is no way Kraft or Sarah Lee can be seen as "imploding". Both companies have their issues, and are undergoing reorganization, but they're relatively stable and doing pretty well in a bad economic climate. Motorola is nothing but a big question mark right now. There was plenty of reason to be concerned for them recently, but since the Google buyout they have money and are likely to undergo some major changes in the next year or two. "Imploding" to me would be a company like Sears. They have no future vision and are just cutting costs (and their own throats) to get by.

I think it makes perfect sense for Kraft to move to Chicago. They already work with loads of support companies in the city ranging from everything to legal services, commodities, advertising, PR and marketing. At my previous job I used to have to drive up to Kraft quite a bit and it seemed like half the people I was in meetings with had driven up from Chicago.