Stop the Presses: Unconscionable incentives undermine economic development

by Mike Kroll

 

The tactics of economic development in today's world are all too often those of desperation. In a process that clearly calls for salesmanship many communities have instead resorted to a battle of financial bribes. Rather than extolling the inherent shared assets and virtues that distinguish one community from another -- making your town a better place to live, work and raise a family. This approach can be exemplified by the lengths East Moline was willing to go to land the Triumph Pork Processing plant. The agreement East Moline was offering Triumph amounts to a laundry list of giveaways so extensive it is hard to see what real benefit the community would gain from being chosen by Triumph.

Now the folks at Triumph are dangling 1,000-plus future jobs in a region that is always looking for more jobs. And these are relatively well-paid jobs, supposedly averaging $11.75 per hour (although it isn't clear whether this figure is inclusive of benefits). Triumph wants to build the world's largest meat processing plant (somewhere north of 600,000 square feet) at a total cost of more that $135 million (at least $60 million in the building alone). A construction project of this size will generate a substantial number of construction jobs, albeit temporary; and as always East Moline's economic development officials tout the ripple effect across the community.

Triumph plans to produce high quality pork sausage in tremendous quantities and mostly for export to Europe. This will require lots and lots of pigs. Estimates are that more than 16,000 hogs per day would be processed at this plant. This would likely result in the construction of many new large-scale hog farms in proximity to the plant. To produce the premium overseas product that Triumph wants will require that only the right hogs are used and those hogs must be raised according to strict standards by contracted mega-hog farms. Given the dual imperatives of “just-in-time” delivery of hogs and today's higher fuel prices they won't want these hog farms scattered across six states. It is probable that many new mega hog farms would be constructed in eastern Iowa and western Illinois.

East Moline wants this plant built on undeveloped land near the Rock River. City officials have declared this land to be “blighted” and unlikely to develop without the application of special incentives available to Tax Increment Financing districts. “In order to provide adequate infrastructure to the Project, [East Moline] has determined that it is in the best interest of the City and the health, safety, morals and welfare of the residents of the City for the City to improve its infrastructure including the extension of water and sanitary sewer service to the Project.” Such utility extensions are not uncommon and seem to be very reasonable incentive but East Moline sweetened the pot further to help Triumph get the project rolling. As a TIF district any of the added property taxes that are collected due to the millions of dollars of improvements made to this property by Triumph won't go to tax-supported public bodies like the city, schools, or county. Instead, the initial $5 million these funds will be returned to Triumph as an incentive gift. But this is only the start of TIF money promised to Triumph.

Hog processing plants use lots and lots of water and generate lots and lots of wastewater. This wastewater is contaminated with fats, grease, solids, bacteria and ammonia (to name a few ingredients) and must be treated before discarded into the Rock River. To do this East Moline has promised another $8 million in TIF money to construct an on-site sewage treatment plant that will be owned by the city but leased to Triumph for just $100 per year. Triumph is expected to “operate and maintain the sewage treatment facility at its sole cost and expense.”

To provide all the water needed by this hog processing plant East Moline is willing to go well beyond just running a water line to Triumph's plant. East Moline promised to “construct a high water tower, at its own expense.” The water main and tower must provide water flow of at least 4,250 gallons of water per minute 24 hours per day, 365 days per year and a capacity of over 3.4 million gallons daily. Now to East Moline's credit they aren't offering to simply give all this away for free, just nearly free. Triumph would be guaranteed a water rate of $0.41 per 1,000 gallons over a 20-year contract (with annual adjustments for inflation over the life of the contract). Another $7 million of TIF money will be used to pay for these water infrastructure improvements.

In addition to water and sewer the plant will also require gas and electric service but we can't have Triumph paying for these either so East Moline will absorb that cost as well. Not to be left out, Rock Island County is committed to improving Barstow Road along side the Triumph site to handle the weight and extra traffic that will result from hundreds of hog trucks entering and exiting the Triumph plant daily. Once these improvements are completed the county will turn over responsibility for the road to East Moline who will rename it Triumph Parkway. At this point we have a commitment of more that $20 million in TIF dollars plus low-ball water and sewer pricing but that's just not enough! Since TIF funds are based on the future prospect of property tax revenue East Moline will need to sell $20 million in revenue bonds to provide the upfront funding demanded by the project. As with all borrowing this will incur costs for interest and fees.

The stumbling block to the East Moline project has been the demand that in addition to being a TIF district the Triumph site also be designated as an Enterprise Zone as well. This requires all of the participating tax bodies to agree on the extension of the existing Enterprise Zone. One of those parties, the City of Silvis balked and is so far stymieing the project. As an Enterprise Zone Triumph would be exempt from all permits and fees, utility taxes, and sales taxes on construction materials. Triumph would also save on Illinois corporate income taxes and get an investment tax credit too.

Thanks to the Silvis City Council the Triumph project remains in limbo but the shear extravagance of the incentives offered are amazing. East Moline seems willing to pay dearly for the privilege of having the world's largest slaughterhouse and the 1,000 jobs that go with it. But is this really an accomplishment? For all of the environmental costs that accompany such a business what would East Moline really gain? Historically, companies like Triumph don't use local contractors to build such plants and most of the employees in meat processing plants do not originate in the local community. In this time of great concern over illegal immigrants it is worthy of note that meat processing jobs such as these historically attract just such workers. On a cost-benefit basis the citizens of East Moline and Rock Island County should be loudly thanking the Silvis City Council for saving them from their own economic development officials.