A bill that would extend the life span of a decades-old incentives program would also open the doors for any community to compete for a special taxing district.
The measure, making its way through the Illinois House, would loosen the rules of the enterprise zone program. Participation is currently limited to blighted areas, defined by considerations such as income, unemployment and poverty rates.
Businesses in enterprise zones can tap incentives, including tax credits, property tax abatements and sales tax exemptions. The program’s supporters say these incentives attract and retain businesses.
Under the legislation, communities would compete for new zones as older districts expire and would have to meet three of 10 requirements. Most of the old requirements still stand, but new criteria include: a local labor market with large employers that have downsized, a substantial plan for how the area would use the designation to improve the tax base, and local high schools or community colleges offering industry-based credentials that prepare students for careers.
Communities would receive points for each requirement they meet. Mark Denzler, vice president and chief operating officer of the Illinois Manufacturers’ Association, said the bill doesn’t change the core of the program. It simply makes the process more competitive, he said.
Denzler stressed that blighted areas would still rank higher than wealthier areas, making it more likely that they would get the zones. Unemployment and poverty rates are weighted heavier than other factors.
The bill, however, doesn’t spell out whether the area with the most points wins. That decision would rest with a new five-member board, chaired by the director of the Department of Commerce and Economic Opportunity. The board would also include the director of the Department of Revenue and three appointees by Gov. Pat Quinn.
Beginning in 2016, 68 zones will be up for grabs. Critics say the original program’s goal would be lost if the bidding is opened up.
“It basically signals things become political pork,” said Greg LeRoy, executive director of Good Jobs First, a nonprofit that researches economic development subsidies. “Economic development isn’t pork. It should be targeted to places that really need help. It doesn’t meet the definition of incentives anymore.”
The first batch of the state’s 97 zones will begin expiring next year. The bill would create five additional zones and extend the zones’ life span for 25 years, with the last 10 years of the extension subject to review.
The Illinois Manufacturers’ Association has been pushing legislators to extend the life of the zones and create additional ones. But questions on whether the program is working have derailed past efforts. The language in Senate Bill 3616, introduced Tuesday in the House, is a compromise between two measures introduced earlier this session. House members must approve the bill before it makes it to the Senate for final approval. It would then need Quinn’s signature.
A sponsor of the bill, Rep. John Bradley, D-Marion, said Monday that the bill does a better job of tracking enterprise zones and their value for the state, while making the application process fairer.
Legislators created the program nearly three decades ago to stimulate business and industrial growth and revitalize blighted areas. Critics have said the zones are not well-monitored for effectiveness and that they siphon away state and local tax revenue. The state’s fiscal 2011 report on the program says companies created 8,980 jobs, retained 14,119 jobs and invested $2.5 billion in the state.
A Tribune analysis estimated the state program’s cost at about $95 million for fiscal 2010. The newspaper made its calculations based on figures from the state comptroller office’s tax expenditure report. Those figures do not take into account county and municipal incentives or other incentives not reported to the comptroller’s office.
To help officials determine whether the program is a job-creation tool or a drain on state coffers, companies would be required to report the value of their tax incentives. But their names and details of their projects would continue to be kept secret.
“I don’t think it’s fair. Without the transparency, no one can tell whether it is good deal for the taxpayers,” said Rep. Jack Franks, D-Marengo.
The bill would also open the door for companies that use staffing agencies or part-time work to tap into the incentives. A full-time job is now defined as a person working for at least 35 hours a week for 52 weeks, for a minimum total of 1,820 hours a year. Under the new language, a company could receive tax breaks for the number of hours it employs workers rather than the number of workers. Every 1,820 hours worked per year would equal one job.
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