About five years ago, John B. Sanfilippo & Son Inc., the producer of Fisher nuts and trail mixes, agreed to build a headquarters and state-of-the-art processing facility in Elgin rather than head out of state.
In exchange for $5 million in state tax breaks over 10 years, the company promised to retain 930 employees, hire 25 more and spend $80 million on the 90-acre complex. Politicians posed with shovels for groundbreaking photos, and then-Gov. Rod Blagojevich ballyhooed the state's role in helping the firm expand its operations in Illinois.
In 2006, 2007 and 2008, Sanfilippo couldn't reap the benefits of any tax credits because it didn't have any corporate income taxes to pay. And in 2009 and 2010, when the company did have taxable income, it outsourced too much of its workforce to meet the employment standards in the 2005 agreement. It hopes to meet the goal this year.
Welcome to the murky waters of Illinois' cornerstone corporate incentive program aimed at retaining and creating jobs, known as Economic Development for a Growing Economy, or EDGE. Launched in 1999 by former Gov. George Ryan to keep up with neighboring states, the program has been credited with clinching more than 450 projects statewide. The program has lured or kept in state such marquee companies as Boeing Co., Navistar International Corp., Groupon Inc. and Mitsubishi Motors Corp.
But a Tribune examination of annual reporting during the program's first nine years shows companies failed to qualify for credits 52 percent of the time. While in some cases companies qualified in some years but not others, two-fifths of the projects the state has tracked through 2008 never qualified for credits. The congratulatory fanfare and political theater often present at the unveiling of these projects obscures the all-too-real possibility that projects have an almost equal chance of getting derailed, failing to hit promised job targets or not needing the tax credits as they do of proceeding as planned.
Determining the leading cause of failure is nearly impossible. Companies are not required to tell the state why they failed to qualify for credits.
But the fact that so many companies have left money on the table, for whatever reason, raises questions about how effectively the EDGE program functions as a tool to create and retain jobs.
"If so many companies are leaving so much money on the table, the incentives are not incentives, they are subsidies," said Greg LeRoy, executive director of Good Jobs First, a nonprofit that researches economic-development subsidies. "The fact that so many applied, got them and didn't need them reinforces that conclusion."
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When more than a dozen companies were approached by the Tribune about projects that did not qualify for credits, some declined to comment and others provided only limited explanations.
R.R. Donnelley & Sons Co., for instance, acknowledged that it didn't meet the "necessary conditions" to receive tax credits on a 2001 printing plant expansion in Mattoon in central Illinois. But it declined to explain why. The project had been expected to create 100 jobs, according to an industry publication.
A source familiar with the development said the company was never able to hit that job target.
Last year the state provided Donnelley with another incentive package, worth nearly $3 million, for a project in St. Charles.
The program's mixed track record comes as the state is desperately trying to jump-start its economy: Unemployment is hovering around 9 percent, neighboring states are trying to poach Illinois businesses in the wake of tax hikes here, and Illinois is struggling to shed its reputation as a fiscal disaster.
In recent years, the EDGE credit has reduced the state's corporate income tax revenues by about $25 million annually, with the state giving out $280.5 million in credits in the decade ended Dec. 31, 2009. The state was unable say how much tax relief had been promised but went unclaimed during that time.
But the ball keeps rolling: Gov. Pat Quinn in his first two years in office pledged a total of $330 million in tax credits over 10 years to nearly 100 projects.
"EDGE tax credits have been an essential part of the public/private partnerships that have brought jobs and growth to Illinois," Quinn said in a written statement. "These credits have encouraged companies like Mitsubishi, Chrysler and Navistar to grow in Illinois, creating and retaining thousands of jobs for working families across our state. Last year, Illinois was fourth in the nation in job creation."
The state's top economic development official, Warren Ribley, sees unclaimed credits as good news for taxpayers. When companies make their promised investments but don't reach their employment targets, the state gets some job growth without forfeiting revenue, though often there are other forms of public assistance associated with the projects.