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Gold Collar: How State Job Subsidies in the Chicago Region Favor Affluent Suburbs

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Gold Collar: How State Job Subsidies in the Chicago Region Favor Affluent Suburbs GOLD COLLAR: HOW STATE JOB SUBSIDIES IN THE CHICAGO REGION FAVOR AFFLUENT SUBURBS by Jeff McCourt and Greg LeRoy with Philip Mattera January 2007 Copyright 2007 Good Jobs First All Rights Reserved Good Jobs First 1616 P Street NW, Suite 210, Washington, DC 20036 202-232-1616 ~ www.goodjobsfirst.org ACKNOWLEDGMENTS We gratefully acknowledge the Ford Foundation for its support of this study and other smart growth work at Good Jobs First. We greatly appreciate the support of Chicago Metropolis 2020, whose staffers assisted in analyzing and mapping the data for this report. Jeremy B. Thompson, a University of Illinois Chicago Campus graduate student, provided research assistance during his 2005 summer internship at Good Jobs First. TABLE OF CONTENTS Page Executive Summary 1 Introduction 4 Chapter 1: The Geographic Distribution of State Job Subsidies in Metropolitan Chicago 7 Chapter 2: The Northwest (O’Hare) Corridor—An Economic “Engine” That Didn’t Need Another Jump-Start 13 Chapter 3: Worsening Regional Inequality by Subsidizing High-Growth Counties 15 Chapter 4: Fueling Regional Disparities in the Tax Capacity of Local Communities 27 Chapter 5: Tilted towards Affluence—Subsidy Distribution within Cook County and Chicago 30 Chapter 6: Conclusion and Public Policy Options 32 Data and Methodology 34 Appendix: The Illinois Online 36 Subsidy Disclosure System Endnotes 39 LIST OF TABLES, CHARTS AND MAPS Page Table 1: Chicago-Area Expenditures by Illinois Economic Development Programs (1990-2004) 6 Table 2: The Distribution of State of Illinois Job Subsidies in Metropolitan Chicago (1990-2004) 7 Map 1: Location of Economic Development Subsidies (1990-2004) 8 Map 2: Number of Subsidy Deals at Each Company Location 9 Chart 1: Subsidy Per Capita Based on 1990 Population 10 Table 3: Distribution of Subsidies Compared to Distribution of Business Establishments 11 Chart 2: Subsidy Per Business Establishment 12 Table 4: Summary Employment, Income and Poverty Statistics for Six Counties and Chicago 15 Table 5: Average Unemployment Rates for Chicago and Six-County Region 16 Map 3: Subsidy Locations vs. Unemployment Rates 17 Table 6: Median Household Income in Chicago and Six-County Region, 1990-2004 18 Map 4: Subsidy Locations vs. Household Income 19 Table 7: Poverty Rates in Six-County Region, 1990-2004 20 Table 8: Demographic Composition of Six-County Region 21 Page Map 5: Subsidy Locations vs. African-American Population 22 Map 6: Subsidy Locations vs. Hispanic Population 23 Map 7: Subsidies Locations Accessible to CTA Transit Service 25 Table 9: State Economic Development Subsidy Distribution by Tax Capacity Score (1990-2004) 28 Map 8: Subsidy Locations vs. Tax Capacity of Municipalities 29 Table 10: Job Subsidies in Different Parts of Cook County 30 Table 11: Subsidy Distribution by Chicago Areas and ZIP Codes 31 EXECUTIVE SUMMARY This first-ever analysis of the geographic percent of the subsidies (whether distribution of state-granted economic measured in dollars or the number of development subsidies in the Chicago deals). By contrast, the suburban portion of region shows that the outer suburbs have Cook County and the “collar counties” of received a disproportionately large share. DuPage, Lake, Will, Kane and McHenry each At the same time, Chicago and many of its received a subsidy share in excess of its inner suburbs, which have experienced population share. For example, DuPage, severe job loss—especially in with about 11 percent of the population, manufacturing—have been shortchanged. got 18 percent of the subsidy dollars; Will, Rather than promoting urban revitalization with a population share of less than 5 and offsetting the forces promoting sprawl, percent, got over 11 percent of the dollars. these government incentives have exacerbated the problem and worsened Looking at subsidy dollars per capita, economic inequality in the region. Chicago’s $64 was dwarfed by DuPage’s $277, Will’s $380 and $265 for the collar Good Jobs First reached these conclusions counties as a group. Even suburban Cook by mapping some 780 subsidies provided County, at $197, had a per capita amount by the State of Illinois to specific more than three times that of Chicago. companies during the period from 1990 to 2004. The incentives, which came from ten A similar picture appears when the different programs, had a total value of distribution of subsidies is compared to the $1.2 billion. Subsidies administered locally, distribution of business establishments. such as tax increment financing, were not With 34 percent of the six-county area’s included. business establishments in 1993, the collar counties received 47 percent of the The skewed distribution of incentives can business subsidy dollars given out in the be seen most clearly when comparing the 1990-2004 period. The suburbs as a whole share of subsidy dollars received by (counting suburban Cook) had 70 percent different areas to their share of the region’s of the business establishments but 85 population or their share of business percent of the subsidies. establishments. Chicago, which had about 38 percent of the region’s population Looking at subsidy dollars per during the period, received only about 15 establishment, Chicago was far outpaced 1 EXECUTIVE SUMMARY by all other parts of the region. The $3,205 higher household incomes, lower per-establishment amount received in the unemployment and less poverty than city was less than half that of suburban Chicago. Cook and roughly a third of those amounts received by the collar counties. On a per- Comparing the distribution of subsidies establishment basis, Will County received with where workers of color live finds almost six times the business subsidies relatively few deals in parts of Chicago that received by the city. are predominately Africa-American and many deals in areas of the collar counties A very disproportionate share of the that are overwhelmingly white. The pattern subsidies went to companies in areas of is not quite as egregious for Hispanic sizzling economic growth, especially the residents. Northwest Corridor around O’Hare Airport. Companies in the Corridor received more Combined, these measures clearly indicate than $198 million in subsidies, which was that subsidies are going to the places that more than the total of $177 million need them the least, while the struggling received in all of Chicago, which had five areas of Chicago and its inner-ring suburbs times the population. This despite the fact are getting less than their fair share. that massive public investments in the Moreover, we found that the ability of airport and surrounding freeways have core-area workers to take advantage of the made the area a very attractive place for new employment opportunities in the companies to locate, transforming it into collar counties is limited by the fact that the metro area’s largest employment the vast majority of subsidized workplaces center. in the newly developing suburban areas are not easily accessible by public The imbalance is also evident when transportation from the city. This means looking at the distribution of subsidies in that for the many car-less workers in low- comparison to the tax capacity of the income, especially minority, communities, different communities in the region (tax those jobs are effectively out of reach. capacity being a measure of the potential tax revenue a location has to fund services Large disparities are also evident within such as education and public safety). Job Chicago and within suburban Cook County. subsidies were most heavily concentrated The north and northwest portions of Cook in those parts of the region with the County, which are far more affluent than greatest tax capacity, fueling imbalances the southern part of the county, absorbed and leaving older communities to struggle the largest share of subsidies. Inside with a lagging tax base. Chicago, a substantial share of the subsidies went to the central business Regional biases are also found when the district, while lower income areas such as subsidy distribution is compared to the West Side received very few. economic measures such as employment growth, median household income and the Given that some of the subsidies we poverty rate. The collar counties getting analyzed (such as Industrial Revenue disproportionate subsidies also have much Bonds) were initiated by requests from the 2 GOLD COLLAR companies themselves, the role of state income tax breaks if a company government policy decisions in creating locates jobs proximate to public these regional disparities is ambiguous. transit and/or affordable housing. Nor can we estimate how many of the Amending the new law to require subsidies were granted to companies that companies seeking any state business were relocating from Chicago to the incentive in metropolitan areas with suburbs; such information is not available mass transit service to meet the for past deals, though it should be location efficiency standards (or available in the future, thanks to the develop a remedial plan to meet disclosure law the state passed in 2003. them) would increase job access for lower-income workers and encourage With those caveats, it is evident that reinvestment in older areas. Illinois’ economic development subsidy programs are not directing resources to • Amend the state’s subsidy disclosure law communities most in need of more jobs to require subsidized companies to and a stronger tax base—either because justify business relocations within these programs have no targeting Illinois and report the impact on requirements or because the few with workers and communities affected by targeting provisions are being misused. the moves. Disclosure reports on state-subsidized business relocations To help policymakers address this should include impact statements on problem, we offer the following policy job dislocation, future commuting options: distance, and public transit accessibility. While Illinois’ subsidy • Reserve and target state business disclosure law now requires incentives to areas with high companies to provide basic unemployment and/or low income.
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