Jared Labell, Executive Director of Taxpayers United of America was interviewed by Omaha World-Herald about ConAgra’s move to Chicago and the inecentives Illinois provided.
ConAgra Foods wanted to move its headquarters to Chicago so badly that the company took a pass on an estimated $28.5 million in incentives Nebraska would have offered to keep it in Omaha.
Instead the company accepted Illinois tax credits that are expected to amount to less than half of what Nebraska would have offered.
The disparity in potential tax breaks supports the assertion of ConAgra Chief Executive Sean Connolly that business incentives did not play a big role in the decision to shutter its Omaha headquarters.
When announcing the Chicago move in October 2015, Connolly said, “The decision to move headquarters was solely based on the strategic needs of our business and was not a city-versus-city exercise.”
But documents newly obtained by The World-Herald also show that ConAgra officials told the Illinois state government a different story in the months prior to its announcement.
ConAgra told Illinois officials that tax incentives were needed to justify moving its offices to Chicago. Illinois officials must have been convinced. They found a way around a statewide moratorium on incentives the governor had recently imposed because of a budget crisis in Illinois.
ConAgra did not answer questions about why it requested and accepted additional tax credits during the moratorium.
Company spokesman Mike Cummins said in a statement to The World-Herald: “Everything we have done to grow and manage our company has been handled appropriately and guided by the highest standards.”
ConAgra’s request of Illinois came amid a state budget crisis so severe that organizations serving the poor didn’t receive state money and scaled back services, state museums closed, school administrators worried they’d have to close their doors and the state lottery suspended payments to prize winners. In the wake of the tough times, the governor froze economic incentives used to recruit and retain businesses.
An Illinois spokeswoman last year told news media in Chicago that the state’s offer to ConAgra came before the incentives program was suspended. But documents obtained by The World-Herald show a different timeline.
ConAgra bypassed the moratorium by tacking its headquarters request onto an application it had submitted a few weeks before the freeze. That application for incentives was for an unrelated expansion at a northern Illinois cookie factory it owned, according to documents from the Illinois Department of Commerce & Economic Opportunity, requested by The World-Herald under public records law.
ConAgra’s real estate consultant, Chicago-based Jones Lang LaSalle, was aware of the freeze on incentives and boasted that it found a way around it.
Nominating itself for an industry award, the real estate firm wrote: “JLL negotiated an innovative tax incentive award for the deal — a major accomplishment since the state had put a temporary, highly publicized hold on Illinois incentives programs — that was critical to Conagra’s Board decision to move to Chicago.”
A spokeswoman for the State of Illinois told The World-Herald this month that the state approved ConAgra’s incentives because it considered the headquarters request part of the cookie plant project. “The scope of the project changed,” she said.
“Per past practice, the administration honored all commitments made prior to the freeze,” she said in an email.
JLL, the real estate consultant, in response to a question on how the headquarters request was tied to the cookie plant, said the process to apply for the incentives “began well before the moratorium was in place,” according to a statement the firm gave to The World-Herald.
The application for tax credits on the cookie plant — not including the headquarters move — was dated May 12, 2015, and Illinois informally approved it May 28, five days before Gov. Bruce Rauner’s June 2 moratorium announcement.
Soon after, big changes came to ConAgra.
New York hedge fund Jana Partners on June 18 revealed it had bought a large stake in ConAgra and would press for changes to improve the company’s profitability. ConAgra, already under intense scrutiny from new CEO Connolly, said on June 30 it would sell its private-label division, which included the cookie plant.
[Read more coverage of the changes at ConAgra.] On July 17 ConAgra asked Illinois for new financial incentives for a corporate office in Chicago, attaching the request to the cookie plant project even though it knew the plant wouldn’t be with the company much longer. On Aug. 12 an Illinois official wrote to Connolly offering possible financial support for what ConAgra was by then calling a new corporate headquarters.
A taxpayer watchdog said the state circumvented the moratorium with its approval of the ConAgra incentives.
Jared Labell, executive director of Taxpayers United of America, a Chicago group, said given the dire condition of Illinois’ finances, “enforcing the moratorium would seem prudent, and it is concerning that ConAgra might have tried to find a loophole in the system.”
A spokeswoman for Illinois Gov. Rauner didn’t respond to a request for comment. A spokeswoman for Jim Schultz, who at the time led Illinois’ Department of Commerce — which administers the tax credits — said Schultz was not available for comment. Today Schultz leads a new, privatized economic development organization created by Rauner.
It’s unclear what role if any the $13 million in incentives played in ConAgra’s decision to move its headquarters out of Omaha, where the food manufacturer had been based since 1922. The company retained office employees in Omaha but Chicago is now home to its executive offices and the people overseeing its branded food operations.
While JLL called the incentives “critical,” Nebraska could have offered more than twice as much — $28.5 million — according to estimates ConAgra submitted to Illinois as part of its incentives application.
The estimates, not previously reported, are part of the documents obtained by The World-Herald. As part of its application for the Illinois incentives, ConAgra calculated the cost of operating a headquarters in Chicago, Omaha and St. Louis, according to the documents. (Those costs were redacted from the documents.)
Missouri could have offered $6.93 million in incentives for a St. Louis headquarters, the documents say. Officials from the Missouri Department of Economic Development didn’t respond to a request for comment.
Illinois doesn’t require a company to show that it actually is considering other locations to receive tax credits, so Omaha and St. Louis’ presence on the list doesn’t mean they were necessarily in the running.
A company does have to show that without the tax credit the project wouldn’t happen in Illinois. But a company can do this simply by showing it has options for locating in other states and could do so “reasonably and efficiently.”
The tax credit was likely not a factor in ConAgra’s decision, merely a perk, said Thomas Cafcas, a research analyst with the Washington, D.C., group Good Jobs First, which tracks state and local job subsidies and promotes accountability in economic development.
The annual benefit of the Illinois tax credits would be under $1 million. ConAgra had $15.8 billion in sales in the year ending May 2015.
Good Jobs First said that for the typical company, state and local taxes add up to less than 2 percent of the overall cost of doing business.
“ConAgra’s headquarters move is about business basics, not taxes,” Cafcas said, noting the company’s strategic reasons for moving and that several other food companies also have recently concentrated in Chicago.
He said the move demonstrates that companies’ decisions have “little to do with states offering subsidies to companies and much to do with transportation, workforce and internal strategic business planning decisions that states have no control over.”
Labell, with Taxpayers United of America, agreed ConAgra isn’t dependent on the credits to stay in business or as a reason to relocate.
“These EDGE credits sweetened a deal the company possibly was already intent on pursuing,” he said, referring to the Illinois incentives, which are dubbed Economic Development for a Growing Economy.
Rauner lifted the moratorium in November while announcing changes to the program.
Meanwhile, Nebraska officials say they never had the chance to make a formal pitch to get ConAgra to stay.
[Read more: In effort to keep ConAgra in Omaha, city never stood a chance] Gov. Pete Ricketts told The World-Herald last year he met with ConAgra just days before the Oct. 1 announcement of its move. At the time, some officials and other observers were worried that the company might relocate. ConAgra kept its plans close to the vest and told The World-Herald it declined to comment on what it called rumor and speculation.
Ricketts offered to provide financial incentives beyond what was already allowed by state economic development policies. But without details about ConAgra’s plans, the state was unable to make a specific offer, state officials say. Financial incentives hinge on details such as the dollar value of a company’s investment and the number of new jobs a company might bring.
Nebraska “worked diligently to demonstrate the financial advantages of maintaining ConAgra’s headquarters in the state,” Courtney Dentlinger, director of the Nebraska Department of Economic Development, told The World-Herald this month in a statement. “This included the identification of several state and local programs available to the company.”
She said ConAgra’s $28.5 million estimate of what it could receive from Nebraska was “likely accurate based on their internal information.”
But ultimately, she said, “We did not have an opportunity to provide an estimate.”
ConAgra’s not asking for incentives from Nebraska was a change from 1987, when the state passed generous tax and economic incentives to get the company to stay, after it threatened to leave for Tennessee. (Omaha also tore down more than 20 historic buildings — the largest historic district demolished in U.S. history — after ConAgra’s chief executive at the time insisted on the downtown riverfront for the company’s office campus.)
[Read more: Omahans weigh cost of destroying Jobbers Canyon to make way for ConAgra campus] Information about the dollar value of tax credits and other incentives ConAgra has received from Nebraska over the years is not publicly available. Confidentiality for applicants for the incentives was guaranteed as part of the legislation ConAgra pushed in the 1980s.
The 1987 laws have since been replaced by other business-incentives legislation.
Ultimately the company would open its Chicago office in June of this year, leaving behind an Omaha operation diminished by restructuring and layoffs, but which still employs 1,200 people.
The agreement says ConAgra must hire 150 new workers on top of a baseline of 643 current Illinois workers to qualify for the credits. It does not require new jobs at the cookie plant — which ConAgra had already planned to sell, along with the rest of its private-label food division, at the time it signed its tax credit agreement with Illinois.
The company said it will bring 150 new management jobs for total new payroll of $23.85 million.
For each new management-level worker, making an average annual salary of $159,000, ConAgra could get a credit of $5,962, at the state’s current 3.75 percent state income tax rate, The World-Herald calculated.
That could add up to nearly $900,000 a year, or $13.4 million over the 15-year span of the agreement.
ConAgra Foods requested, and received, tax credits even though the State of Illinois had suspended its controversial economic incentives program.
May 12, 2015
ConAgra asks Illinois for EDGE tax credits to support expansion of its Illinois cookie plant, unrelated to its corporate office.
Illinois approves the request, pending a formal agreement.
Illinois Gov. Bruce Rauner suspends economic incentives, including the EDGE tax credit program, because of state budget troubles.
ConAgra requests new financial incentives from Illinois to create a corporate office in Chicago.
Illinois offers ConAgra “potential financial support” for a new corporate headquarters in Chicago.
Sept. 28 and 29
ConAgra signs a formal tax credit agreement with Illinois, with benefits for both the cookie plant and the corporate headquarters.
ConAgra announces it will move its headquarters to Chicago.
Rauner restarts a revamped EDGE tax credit program.