Illinois facing job assault from other states

By David Mercer

Associated Press

Published: Tuesday, Aug. 23 2011 4:50 p.m. MDT

The Modern Drop Forge Co. in Blue Island, Ill., is seen on Tuesday, Aug. 23, 2011. The company announced plans to set up forging production lines and offices in an existing Merrillville, Ind., facility where it expects to hire perhaps 240 workers in the next few years. The Indiana Economic Development Corp. says that once the new factory is fully operational, the company's Blue Island facility will likely close. Modern Forge makes parts for the aerospace, truck and marine industries.

M. Spencer Green, Associated Press

CHAMPAIGN, Ill. — Even as Gov. Pat Quinn hailed the start of a construction project Tuesday that will create 1,200 short-term jobs, Indiana and South Dakota kept up a push by other states to chip away at Illinois' vulnerable economic image and lure jobs away.

Quinn announced a $146 million infrastructure project at a Ford Motor Co. assembly plant on Chicago's southeast side, which he said would ease rail and vehicle congestion. But Blue Island, Ill.-based Modern Forge Cos., which makes truck, RV and aerospace parts, at the same time announced plans to expand in Indiana and possibly leave Illinois entirely. It plans to hire up to 240 people in permanent jobs over the next three years.

"I don't think it takes a genius to figure out the business climate in Indiana is better than Illinois, and that's been coming on for a long time," said Modern Forge general manager Patrick Thompson, who said he expects a large number of the company's 275 Blue Island employees to take jobs 35 miles east in Merrillville. The company will close the 97-year-old Blue Island plant if its new facility does well, he said.

"It's not just about state income taxes," Thompson added, citing worker's compensation costs and other factors.

The move fueled more debate over Illinois' business climate, and how much its recent corporate and personal income tax increases have damaged its image among business owners. While some Illinois business leaders commented that states in the area should stop bickering and work to develop a regional economy, Indiana's secretary of commerce said Illinois' high taxes and battered image make that unlikely.

Illinois' corporate tax-rate increase, from 4.8 to 7 percent, was intended to help ease the state government's multibillion-dollar budget deficit. But it made the state a target for Indiana, New Jersey and other states trying to lure businesses away. Over the past month, a smiling South Dakota Gov. Dennis Daugaard has joined the dogpile, asking via direct-mail postcards sent to businesses in Illinois, Minnesota and California, "Tired of taxes? Call me."

Quinn, for his part, talks up Illinois' successful bid last year to keep Navistar International Corp.'s headquarters in state, and bring about 1,000 jobs with it from Indiana.

For months now, though, a number of Illinois businesses have said they just might leave if the state doesn't listen to their complaints.

Quinn, as he announced the Chicago project, said Illinois made Modern Forge an offer to stay and maintained that the state remains the cornerstone of the Midwest's economy.

"I wish they would stay here. We did make, I thought, a generous offer to them, but it's their choice," he said. "We're a regional economy in the Midwest and I think it's very important to understand that Illinois is the capital of the Midwest and always will be, and we are the biggest economy."

Illinois Chamber of Commerce President Doug Whitley has been a harsh critic of the income tax increase, but he said regional cooperation makes far more sense than the scrambling states are doing now to lure jobs from each other. It's an argument many economists make, too, saying that working to draw companies from one location to another doesn't create new jobs.

"The reality is, our economies are very much intertwined; when a plant is built in Indiana there's a very good likelihood that they're getting products and they're getting components from Illinois," Whitley said. "It is in Illinois' interests to have a better relationship with our neighboring states."

Indiana Secretary of Commerce Mitch Roob, though, said his state sees no benefit in trying to work with its higher-tax neighbor — particularly given how its image has suffered since the tax increase.

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