Posted on April 18, 2012 10:25 AM
State Legislators Consider Economic Development Incentives
The State of Illinois uses several programs and incentives to attract, retain, and entice businesses to grow within the state. Several of the State’s programs provide financial incentives for businesses to retrain employees or relocate business headquarters, and these programs typically apply to a business regardless of geographic location. Illinois also uses geographic-based economic incentive programs, like Enterprise Zones, where particular fixed areas within a county or municipality are targeted with tax rebates, exemptions, and other incentives to stimulate business development and retention. The General Assembly is currently considering the expansion or extension of several incentive programs.
Since 1984, the Illinois Department of Commerce and Economic Affairs (DCEO) has created 97 Enterprise Zones. Each zone has a 30-year life cycle, and without extensions the oldest zones will expire starting in 2014. This session, the legislature is considering several aspects of the Illinois Enterprise Zone Act, including time limits, geographic size constraints, and the cap on the number zones. Two Enterprise Zone bills have emerged as the lead bills in their chambers of origin, and CMAP anticipates that these bills will be acted on now that the General Assembly has reconvened on April 17, 2012.
- Amendment 1 to HB4189 would amend the Enterprise Zone Act to include additional requirements. If adopted, it would mean that eligible zones must meet three of five criteria:
1. Unemployment rate is at least 120 percent above the state average.
2. Poverty rate is at least 20 percent.
3. At least 70 percent of the households have incomes equal to or less than 80 percent of the median household income to the next largest geographic unit in the area.
4. Population has decreased at least 20 percent between the last two decennial federal censuses.
5. At least 1,000 full-time equivalent jobs would result from the area's designation as an Enterprise Zone.
- SB 3688 was reassigned to the Special Committee on Enterprise Zone Extensions in March. CMAP monitored the hearings, where representatives of the private sector and local government provided testimony. Testimony focused on the business community's support for expansion and extension of the zones.
In their current form, neither of these bills calls for a deep analysis of the existing zones and their tax dollar investments -- after 30 years of implementation, some important insights could be gained by studying the impact of tax incentives on the economic development of the distressed areas targeted.
Other Incentive Programs
While much of the activity in Springfield around geography-based incentives has dealt with Enterprise Zones, several other bills have met procedural deadlines and moved from the chamber in which the bill was introduced to the second chamber for further consideration:
- HB3934 would require Economic Development for Growing Economy (EDGE) tax credit agreements to be posted online.
- HB5440 would reinstate the Business Location Efficiency Incentive Act to encourage the development of affordable housing near mass transit. It would also provide tax credits under EDGE.
- SB3402 would allow municipalities to establish technology development districts by ordinance.
Many geographic incentive bills were introduced this session but never moved far beyond the Rules or Assignments Committees. These bills illustrate the gamut of issues legislators sought to address.
- HB3919 would create tax incentives for Job Renewal Zones.
- HB3922, HB5834, and SB1601 all seek to extend Enterprise Zones for 20 years.
- HB5858 would set the limit to the number of Enterprise Zones that DCEO could certify up to 39 zones per year.
- HB3569 and HB5802 would authorize DCEO to create an additional 50 Enterprise Zones between now and 2015.
- HB6143 would allow for the merger of East St. Louis-area Enterprise Zones.
- HB3472 would require municipalities or counties that request economic development zones, such as Tax Increment Financing districts (TIFs) or Enterprise Zones, to submit relevant information to the State Comptroller within five days so that the Comptroller may post the information on a public website.
GO TO 2040 emphasizes strategic economic development that can build sustainable prosperity for our region. The plan’s section on supporting economic innovation recommends implementation actions that Illinois should employ to help ensure that the state’s limited resources are put to targeted, effective use. GO TO 2040 also recommends rigorous analysis of the history and impacts of these programs, enabling policy makers to make data-driven and informed decisions on the effectiveness of current or proposed incentives. The need for evaluation of state incentive programs is not unique to Illinois, however. A recent Pew Center on the States report, Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth, demonstrates the need for evaluation in many states to inform policy choices and measure the economic impact of incentives.
CMAP will continue to monitor these bills and related amendments as art of its work to analyze tax policy issues that impact the region’s economic productivity. Following the January 2012 report by CMAP’s Regional Tax Policy Task Force, the CMAP Board asked staff to conduct a full assessment of state and local incentives and rebates in FY 2013.