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 Òjust-in-timeÓ 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 ÒblightedÓ
and unlikely to develop without the application of special incentives available
to Tax Increment Financing districts. ÒIn 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.Ó 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 Òoperate and maintain the sewage
treatment facility at its sole cost and expense.Ó
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 Òconstruct a high water tower, at its
own expense.Ó 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.