Taxpayer-subsidized manufacturer shutters Illinois plant

Taxpayer-subsidized manufacturer shutters Illinois plant

Despite years of taxpayer subsidies, rail car manufacturer Nippon Sharyo has closed its Rochelle plant – pointing to a reality some politicians don’t want to face.

Japan-based rail car manufacturer Nippon Sharyo is closing its doors in Rochelle, despite having received more than $10 million in state subsidies and tax credits since coming to the city in 2010.

The plant’s closure follows years of mass layoffs. Even as the company enjoyed financial advantages at the expense of taxpayers, Nippon Sharyo – which manufactured cars for Chicago-area commuter Metra trains – announced layoffs each year from 2015 to 2017.

Reality for the manufacturer proved far different from what politicians told taxpayers upon its arrival. When the plant officially opened in 2012, then-Gov. Pat Quinn said Illinois was an “ideal choice” for a large, global company like Nippon Sharyo. But given the economic struggles Rochelle and the state face, the price of luring the manufacturer was never truly a good deal for taxpayers. And the company’s failure to stay afloat should be recognized as an indictment of policies that give special breaks to large companies.

Quinn would be right that Illinois – and in particular Rochelle – has many built-in geographic advantages. Nicknamed the “Hub City,” Rochelle lies at the intersection of several major transportation routes and two major railways. But much like the rest of the state, an unfriendly business climate and a devastating tax burden hamper Rochelle’s ability to maximize those advantages.

In 2017, residents in Ogle County, where Rochelle is located, paid an average effective property tax rate of 2.4 percent, according to ATTOM Data Solutions, a property data company. That’s more than twice the national average, and the 22nd-highest countywide average in Illinois. Illinoisans pay the second-highest average effective property tax rate in the nation, according to ATTOM.

Taxpayers feel that pain, and many have voted with their feet. The U.S. Census Bureau’s 2017 population data estimates Rochelle shrank by nearly 400 residents since 2010. This is a problem for Ogle County as a whole as well, having lost an estimated 2,400 people since 2010, according to census data. The population numbers become more startling when looking at the migration trends: From 2011 to 2015, Ogle County saw roughly 530 residents move into the county from another state. But more than double that – nearly 1,300 residents – left Ogle County for another state during that timeframe, far outweighing those gains.

In other words, as lawmakers were handing out taxpayer money to Nippon Sharyo, the tax base around it was shrinking.

The county’s close proximity to more competitive states like Wisconsin and Iowa is one potential driver of outmigration, but Ogle hasn’t even won the border wars with other Illinois counties: While 1,600 Illinoisans moved into Ogle from other counties across the state between 2011 and 2015, 1,800 residents left Ogle for a different Illinois county during that time.

Residents of Rochelle and Ogle County feel Illinois’ economic reality, which makes saddling them with the bill for corporate handouts all the more unsustainable. Unfortunately, that hasn’t stopped lawmakers from pursuing such policies, nor has it stopped some writers from cheerleading them.

In 2017, one article labeled Rochelle a “boom town,” citing a handful of corporations based in the area – including Nippon Sharyo. In large part, however, it wasn’t a “booming” business environment that brought those corporations to Rochelle, but generous taxpayer handouts.

The piece cited Nippon Sharyo, Boise Cascade, Tyson Foods and Hormel among companies Rochelle has attracted. State taxpayers unwittingly courted at least two of those companies – Nippon Sharyo and Hormel. While Nippon Sharyo had received state subsidies since 2010, Hormel has received tax credits from the state’s Economic Development for a Growing Economy, or EDGE, program for most years since 2006.

While lawmakers are quick to cut sweetheart deals with taxpayer money, they’ve done little to truly make Illinois a draw for job creators. This became evident in 2017 when automakers Toyota and Mazda turned down the opportunity to build a plant in Illinois. The companies had identified Rochelle as a possible site for a 4,000-job assembly plant, but declined, citing Illinois’ lack of right-to-work laws – which nearly all Illinois’ Midwestern neighbors have.

What can turn Rochelle and other Illinois towns into “boom towns” are comprehensive reforms that improve the tax climate for all businesses. Rochelle’s manufacturing sector – which will suffer a serious setback with the departure of Nippon Sharyo – could benefit from an overhaul of the state’s outdated workers’ compensation system, for example. Businesses and taxpayers alike could also benefit from real property tax relief, as well as reforms to the main drivers of the state’s high property taxes, such as growing pension costs. Meaningful reforms could produce many “boom towns” in Illinois – but special favors at the expense of struggling taxpayers will not.

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