Consumer-electronics maker Motorola Mobility said Friday that it will keep its headquarters in the Chicago suburb of Libertyville after the state promised the company $100 million in tax breaks over the next decade, easily one of the largest incentive packages the state has ever given a company.
The state also announced a change to the tax-break program that will allow companies that don’t have income taxes to apply tax breaks to instead use them to cut down on the amount of employee tax withholdings they have to turn over to the state. Gov. Pat Quinn called that change a key provision in the Motorola Mobility deal.
Motorola Mobility made the announcement at its headquarters with Quinn. Under the deal the company will keep a workforce of about 3,000 people at its headquarters. The company, spun off from Motorola Inc. earlier this year, had said it might move to California or Texas.
Motorola Mobility CEO Sanjay Jha said the tax breaks provided through the state’s Economic Development for a Growing Economy program, known as EDGE, were a key factor in the company’s decision but not the only the factor.
“At the end I think this incentive package was an important factor, but so was the partnership we’ve built with the governor’s office and our history here,” he said. Motorola Mobility is one of two new companies created by the January split of Motorola Inc., which was based in Schaumburg, Ill. since 1976. Motorola was founded as Galvin Manufacturing in Chicago in 1928.
The deal will let the state hang onto one of its relatively few major technology companies, which Quinn said was important to keep graduates of elite universities like Northwestern and the University of Illinois in the state.
“We have lots of brainpower in Illinois; we want to summon that brainpower,” Quinn said. “We don’t want folks to leave.”
The governor didn’t answer questions from reporters about whether the incentives package amounted to an invitation for other companies to look for tax breaks or threaten to leave if they don’t get them.
Libertyville Mayor Terry Wempler said the news ended an anxious few months.
“The initial rumour that went around was that California has more engineers and better engineers,” he said. We had some discussions with Motorola and they were playing it kind of close to the vest.“
Wempler said Motorola Mobility is among the five largest employers in Libertyville, though he wasn’t sure how much the company generates in property tax revenue.
State statistics form March show the area had a 10.5 per cent unemployment rate in March, the most recent month available. That’s significantly higher than the state or national rates, which were both 8.8 per cent in March.
Motorola Inc. split into two companies earlier this year, the consumer-oriented Motorola Mobility, which makes cellphones and cable TV set-top boxes and has about 19,000 employees, and Motorola Solutions. The latter includes professional products such as police radios and bar code scanners and is based in another Chicago suburb, Schaumburg. It had become the more successful of Motorola’s businesses before the split.
Motorola officials had said the consumer-oriented business might be moved to the San Francisco area, San Diego or Austin, Texas.
Illinois probably had little choice but to offer the incentives, whether Motorola Mobility would have really left or not, said Ron Baiman, an economist at the Center for Tax and Budget Accountability, a Chicago-based fiscal watchdog group. The unemployment rate and the state government’s multibillion-dollar budget deficit mean Illinois has to hang onto every job it can.
“You never know if they’re bluffing or serious, and right now the state’s strapped for employment and will do just about anything they can to retain jobs,” he said.
He said, though, that such incentives packages do nothing to help the country’s economic.
“We should have a national strategy that would not allow companies to play one state off another,” Baiman said. “The bidding of one state against another really doesn’t help; it just costs the taxpayers and increases the subsidies to corporations.”
Illinois in recent years has offered several large incentives packages, particularly to auto manufacturers, including $62 million worth of tax breaks last fall to Chrysler to maintain 2,300 jobs at an assembly plant in Belvidere. But, according to state records, Friday’s deal is the largest in at least the five years.
Friday’s deal with Motorola will also include job training funds. And the company, under the deal, will also maintain a design centre in downtown Chicago. It wasn’t immediately clear how many people work there.
Quinn signed into law the change in the EDGE program that allow qualifying companies to apply tax breaks to their withholding taxes rather than their corporate income tax. Companies sometimes don’t have income tax to pay either because they’re not making enough money or other provisions in state law.