Illinois Bellies Up to the Bar with Beer Maker Subsidies

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With substantial state and local subsidies, MillerCoors—the new joint venture that unites Miller Brewing and Coors Brewing—has announced it will locate its new headquarters and 300-400 employees in downtown Chicago. While hailed by Illinois Governor Rod Blagojevich and other leaders as a major gain for the region’s economy, the deal once again poses questions about the role of such public subsidies in business location decisions, and their costs compared with their benefits.

While modest compared to earlier Illinois mega-deals, the state and local incentive package promised MillerCoors is still substantial, ranging between $20.5 and $23 million or about $57,000 per job. Chicago’s competitors for the new headquarters were reportedly Dallas, Kansas City, Boston and Atlanta.

MillerCoors was pledged $18 million in state assistance, including $17.5 million in corporate income tax credits (over 15 years), a $500,000 grant for capital improvements, and $325,000 for employee training. The City of Chicago will provide between $2.5 million to $5 million in tax increment financing, depending on which of three downtown Chicago sites offered the company is selected.

As a result of MillerCoors’ decision, Milwaukee will lose 150-175 administrative jobs to Chicago, although the company will reportedly boost the capacity of its Milwaukee brewing operations by up to 55% by 2011. Employment at the company’s Molson-Coors’ headquarters in Golden, Colorado apparently will be similarly affected.

It appears that the hastily assembled incentive package had a limited role in the company’s selection of Chicago. While acknowledging state and city’s support, company president Tom Long cited Chicago’s available labor and excellent inter-city travel connections as crucial to the decision to locate here.  Another company official cited Chicago’s concentration of advertising and marketing firms, some already closely linked to MillerCoors.

And, when interviewed yesterday by a Colorado newspaper, MillerCoors CEO Leo Kiely couldn’t say how big the subsidy package actually was. He instead stressed that the location decision was driven by “the bias for a neutral city” that could mediate between the company’s production centers in Milwaukee and Golden. 

These comments suggest that subsidies from fiscally hard-pressed state and local governments were a minor, even negligible factor in MillerCoors’ decision to put its headquarters in Chicago.

Even the Chicago Tribune has its suspicions. Although the Tribune print edition’s front page story on the deal had the upbeat headline “Beer giant to locate in Chicago”, the on-line version had “Beer tab too high for jobs?” While acknowledging the “symbolic victory” for Chicago of landing the MillersCoors headquarters, the Tribune pondered whether an incentive package was even needed, given Chicago’s many economic and cultural assets.

The Tribune’s skepticism may reflect disillusion with the hype and exaggerated claims associated with the 2001 Boeing deal. The massive state and local subsidies provided Boeing then were justified by inflated job creation claims and by unfulfilled predictions of an influx of new corporate headquarters to Chicago.

In contrast, the Tribune’s story on the MillerCoors deal cites federal data showing high-paying corporate management jobs continuing to grow rapidly despite the Chicago’s loss of some headquarters. Perhaps if more observers shared the Tribune’s skepticism, there would be fewer, and less costly subsidy giveaways.

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