Yesterday on WBEZ's Eight Forty-Eight, Tribune business columnist David Griesing came on to discuss a timely issue: the incentives used by the City of Chicago to lure large corporations to downtown office buildings.  This is a topic we've written about regularly over the past year, as we've watched MillerCoors, Willis Holdings, United Airlines, and numerous other large companies receive hefty taxpayer handouts from Mayor Daley in return from moving their respective headquarters or operations centers to the Loop.  At a time when the city is deep in the red and considering painful cuts to services, the ongoing corporate welfare is hard to swallow.

At one point in the WBEZ segment, host Richard Steele asked Griesing whether the hundreds of millions we've forked over to these corporations "is worth it at the end of the day."  Griesing's answer: "Well it depends on who you're asking."  (Read his full response at the end of the post.)  But what Steele should have actually asked is this: "How do we know if it's worth it?"

Indeed, when the ink dries on the each of these deals, the debate in the press inevitably surrounds the cost-per-job estimates and the various long-term revenue projections stemming from the agreement. But what's missing is any method for examining the previous contracts. No one digs into the earlier relocations to see whether they fulfilled expectations and were ultimately worth the public investment. Instead, we're greeted with a perpetual refrain: "Trust us." "We know what we're doing." "Trust us."   

In the context of the United deal earlier this month, the Reader's Mick Dumke hit the nail on the head:

It doesn't sound like United will be held to account if it reneges on its commitments. From the Department of Community Development's report on the United deal: "If United fails to maintain a minimum of 2,500 FTE positions at the Building during the term of the Compliance Period, United will be in default of the RDA."

What then? Will the company face any penalties? It's not clear.

It will get a chance to rectify its mistakes. The document goes on to say: "United shall be entitled to a single 1-year cure period during the Compliance Period in the event that the employment number falls below 2,500. Any default year by United (if cured) shall not count toward the required 10 years of compliance or any other obligation of United under the RDA. If a default has occurred and has been cured, then any subsequent default with respect to the employment covenant shall constitute an Event of Default without notice or opportunity to cure."

In essence, United is being handed public money and told to do the right thing.

It's also important to note that, for all the talk of jobs "created" by these deals, they're usually being filled by imported workers (from wherever the company was previously based).  For instance, referring to the MillerCoors deal finalized in the spring, Griesing emphasized that the city is going to get "about 300 to 400 jobs when they finish hiring." But here's the Reader's Ben Joravsky on the MillerCoors move back in March:

Then there's the matter of the 325 jobs that the city keeps saying MillerCoors will "create," with help from the city's "workforce development specialists." I don't know why they're even bothering. It's not like the company's producing 325 new positions for unemployed Chicagoans—they're relocating folks from Milwaukee and Denver. And they might not keep all 325 jobs in Chicago. According to the project overview, they'll only be penalized if they employ fewer than 293 here. None of these new employees will even be required to reside in the city. MillerCoors CEO Leo Kiely says he'll get an apartment in Chicago but keep his primary residence with his wife in Denver.

Confronted with the details of the MillerCoors transaction, city officials would surely point to vague estimates of the business activity spurred by those additional employees, the construction contracts, the local property purchases, etc. But considering the size of these handouts and all the years they've been going on, it's incredible to think that it's all just a guessing game.

Here's some excerpted transcript from the Eight Forty-Eight discussion referenced above:

STEELE: David, what about the trade-off.  The city gives a lot of  incentives, tax breaks, TIFs, and all of that. And when you balance that against the jobs we get and some other advantages for a company being here, is it worth it at the end of the day?

GRIESING: Well, it depends on who you're asking. In the case of MillerCoors, which opened their headquarters this summer, they're going to have about 300 to 400 jobs when they finish hiring.  The city gave $20 million worth of tax breaks for that.  For United, $35.8 million worth of tax breaks for United to move its operations from the suburbs out near O'Hare to downtown.  When Boeing came, I think it was about $50 million for about 500 jobs. 

So that sounds like a lot of money per head.  But when you kind of get this halo effect of Chicago being kind of a center of business activity, this is an attractive place to move -- other companies that end up moving in and don't get these big tax breaks.  That's the strategy that the city is trying to employ.  They're trying to go for high-profile companies that they do give these tax breaks with and hoping that it has an effect of attracting others. 

A lot of people think Chicago has given away way too many tax increment financing districts -- created too many of those -- given up too many tax breaks.  But when you look at the alternative of not getting these jobs and you look at Dallas, that has lost out to us a couple different times, or Denver, which has lost out to Chicago. If you ask people there, "Hey, would it have been worth it to give up some taxes in order to get a bunch new jobs?"  I would guess the answer in some cases might be yes.