Archive for February, 2012

Sears: Now Come the (Penalty-Free) Headquarters Layoffs

February 20, 2012

As I foreshadowed on January 5, despite a huge subsidy package enacted by the state of Illinois in December, Sears Holdings Corp. has already announced layoffs at its headquarters in the Chicago suburb of Hoffman Estates. Last week, the retailer announced that 100 HQ staff will be laid off.

This after the chain announced on December 27—just 11 days after the subsidies were signed into law—that it will close as many as 120 stores nationwide.

That December deal, valued at up to $275 million, came after Sears threatened to relocate in headquarters to another state. Its predecessor company, Sears, Roebuck & Co., played the same “job blackmail” game in 1989. The $168 million, 23-year deal it won then was soon to expire when Sears Holdings announced it might again be footloose.

Everything about these two episodes demonstrates what is wrong with economic development in America today. The 1989 subsidy package paid Sears to abandon its famous Tower in Chicago’s transit-rich Loop and relocate 29 miles northwest to an area which then did not even have a transit bus line—one of the most egregious cases of state-sponsored sprawl in U.S. history.

To enable the subsidy, the state had to pervert its tax increment financing (TIF) law to allow “greenfield TIFs,” a tax-revenue problem that plagues the state today, as TIF diverts more than $1.2 billion from public services a year.

Some Chicagoans saw the 1989 exurban flight as symptomatic of Sears losing touch with its historically urban customer base, and little has happened since to contradict that idea. Now controlled by a hedge fund manager, Sears has been losing market share for years, and analysts have noted that it is reinvesting far less in its stores that it is taking in depreciation charges (not to mention costly stock buybacks).

Neither the 1989 nor the 2011 subsidy packages are structured to specifically address the company’s decline. Worse, the 2011 package reportedly allows Sears to shrink by another 1,750 jobs: with 6,000 remaining HQ employees, the deal allows the company to keep collecting the tax breaks as long as 4,250 employees remain.

Like I wrote in a blog last August: when an ailing company asks for a tax break, the wisdom of the plant-closings movement tells us: tax avoidance can be one form of corporate disinvestment, another early warning sign of job loss. Put another way: if a company doesn’t see a future in the community or the state, why should it keep investing in the schools or roads or universities? The alarm bells are loud and clear.

For better or worse, Illinois and Sears are stuck with each other. So what should state leaders do? Most are trying to make light of the Sears layoff news, emphasizing the jobs that remain. But taxpayers would be far better served if public officials said to the company: we demand that you use the subsidies we are giving you to vigorously reinvest in your stores, hire more executives with retail expertise, stabilize your market share and secure Illinois jobs.

With their 1,750-job layoff loophole, Illinois politicians don’t have the formal authority of fine print. But they do have a whole lot of angry taxpayers who would rally behind such a position.

What’s NOT the Matter with Kansas and Arkansas?

February 17, 2012

Kansas and Arkansas are not big on subsidy transparency, but they are now represented for the first time in Good Jobs First’s Subsidy Tracker database. Using open records requests, we obtained data on nine corporate tax credit programs in Arkansas and two training programs in Kansas. This leaves only three states—Mississippi, Nevada and South Carolina—with no data in Subsidy Tracker. We are trying to obtain unpublished data from them as well.

The Kansas and Arkansas additions are part of the latest expansion of Subsidy Tracker: 20 new programs from a total of seven states. One of those states is Oregon, which recently began to post information on corporate tax credits pursuant to legislation enacted last year as the result of efforts by groups such as OSPIRG.

Subsidy Tracker now has more than 118,000 entries from 298 programs in 47 states and the District of Columbia. Below is a list of the latest programs added to the database.

Arizona: Arizona Competes Fund
Arkansas: Advantage Arkansas Income Tax Credits
Arkansas: ArkPlus Income Tax Credit
Arkansas: Create Rebate Program
Arkansas: Economic Investment Tax Credit
Arkansas: InvestArk Sales and Use Tax Credits
Arkansas: Sales and Use Tax Refund for Targeted Business
Arkansas: Targeted Business In-House Research Credits
Arkansas: Targeted Business Payroll Credits
Arkansas: TaxBack Sales and Use Tax Refunds
Kansas: Kansas Industrial Retraining
Kansas: Kansas Industrial Training
New Mexico: Film Investment Program
North Carolina: Industrial Development Fund
North Carolina: Job Maintenance and Capital Development Fund
North Carolina: Site Infrastructure Development Fund
Oregon: Employer Workforce Training Fund
Oregon: Greenlight Oregon Labor Rebate
Oregon: Oregon Investment Advantage Program
Rhode Island: Comprehensive Workforce Training Grants

NYC Unleashes Decades of Subsidy Data

February 1, 2012

After years of nudging by Good Jobs New York and others, subsidy transparency in the Big Apple took a giant leap forward yesterday.

Thanks to the New York City Council and a bill sponsored by Brooklyn’s Diana Reyna, the New York City Industrial Development Agency released data on 623 discretionary subsidy deals. The new report – which includes data as far back at the 1980’s – is trend-setting for being in excel (not just in PDF format) and for including all currently subsidized firms. Previous reports were only required to include project for a seven-year window. Previously, GJNY transcribed this data from PDF’s to create its “Database of Deals” and we will merge the two databases giving New Yorkers of all stripes: advocates, community organizers, elected and public officials, journalists and academics a unique tool that shines a light on how discretionary subsides are allocated.

As we explained in October of 2011 when the bill was passed, New York City is on an up- swing with regards to subsidy transparency. The report, formally known as the Annual Investment Projects Report, includes 126 fields of data including:

  • Current employment, promised employment and employment at time of deal
  • The amounts and types of city subsidies used to date and remaining
  •   Amount of subsidies recaptured
  • Percentage of employees that are city resident
  • Percentage of employees offered health benefits

Combining new subsidy deals, extensive company-specific data in a downloadable, excel format makes what we believe, to be the country’s best local subsidy disclosure report. Though, as reported last month, New York State still has plenty of room for improvement.

Good Jobs New York will be reviewing the data in the weeks ahead and will report back our findings. In the meantime, we encourage you to do the same!