Economic Development Area (EDA) Facts
Updated on Oct. 20, 2011
Sears Holdings (Sears) is one of the state’s largest employers and has been a valuable partner for the Village of Hoffman Estates, surrounding communities, local businesses, and the State of Illinois over the last 20 years. We employ 6,100 people at our headquarters, 20,000 statewide, and have 9,100 local vendors, contractors and businesses that provide services and goods to the company. Since our 1992 relocation we have invested more than $200 million into local infrastructure and aided in the development of the Prairie Stone Office Park to house our facilities and to further development of the surrounding land. We are a significant taxpayer to State of Illinois – over $213 million last year and billions over the last 20 years. We’re an economic development engine for local businesses - 30,000 hotel nights and meals, 18,000 airline tickets in and out of O’Hare for associates alone, with 100,000 people visiting our campus every year.
The Prairie Stone project has resulted in 5.3 million square feet of new development to date (1990-2011). Seventy-nine new businesses (measured by business licenses and including Sears) located within the 780-acre EDA. Additionally, another 47 businesses have sprung up in the last 5 years in a development that is adjacent to our office park, the Poplar Creek Crossing shopping center, and elsewhere in the western area. These businesses (in total) employ an estimated 11,000 people.
Facts about the Economic Development Agreement (EDA)
In 1992, the EDA was established through a bipartisan agreement reached by state and local elected officials to incent Sears to stay in Illinois – enabling the Village of Hoffman Estates to promote and maintain the office park and attract and retain businesses for the benefit of all taxing jurisdictions. The EDA was intended to permit Sears to be reimbursed for investments made for local infrastructure (roads, bridges, etc).
Since coming to the Village of Hoffman Estates, Sears has made investments in excess of $750 million dollars and, to date, Sears has received approximately $41 million in reimbursements. We expect, when the current EDA expires, the total reimbursements will be approximately $75 million resulting in a net direct investment of $675 million to the region.
More specifically, Sears EDA Expenditures & Reimbursements:
- Sears spent $200 million in infrastructure and bond shortfall payments
- Sears spent over $250 million in property taxes
- Sears spent over $300 million in building its facility
- Sears will have received approximately $75 million in reimbursements when the EDA expires
- Sears net direct investment: $675 million
In 2005, following the merger of Kmart and Sears, Roebuck and Co., Sears Holdings relocated the Kmart headquarter staff from Michigan to Hoffman Estates, IL. It did so willingly and without asking the states to compete against one another or asking for anything in the way of incentives from the State of Illinois. The result was yet another influx of jobs and new taxpayers to this region.
EDA Extension Impact to Sears and Local Taxing Jurisdictions
Sears has been proud to call Illinois home for nearly 125 years. Over that time, incredible changes have taken place in the state, national and global economies that have created more intense competitive pressures on American businesses that require us to consider a range of factors when it comes to business decisions. We have to do what is best for our company in the long term, including reviewing opportunities from other states. Times have been and remain very tough in the economy. All options will have to be assessed and difficult decisions made to compete in these conditions. We firmly believe that in this environment, we should be talking about how we grow the pie, not how we divide it as some have chosen to do in politicizing these issues.
The extension of the EDA is necessary, as part of a larger package, to keep Sears in Illinois. Without the extension, Sears, as well as businesses who might look to locate at the park along with us, will undoubtedly find other states’ job relocation proposals even more attractive. If the EDA is not passed and Sears leaves, the loss of thousands of jobs at the company, its vendors, contractors and nearby unaffiliated businesses, coupled with the very likely reduced value of commercial and residential real estate in the region, would leave local taxing jurisdictions in very difficult financial circumstances. It is our hope to avoid this outcome.
The extension of the EDA by the legislature and governor will not, in and of itself, provide a direct benefit to Sears nor will it negatively impact any taxing jurisdiction. The terms of an agreement related to the EDA, would not be finalized until AFTER the measure is passed by the General Assembly and signed into law.
Setting the Record Straight
Over the last several weeks, a number of inaccurate claims and representations have been made against a 15-year extension of the Hoffman Estates EDA. In the interest of ensuring that elected officials, the public and media have the facts they need for a complete understanding of the situation, we are providing the below facts:
Myth: Sears is bluffing about the importance of the EDA in its decision to stay in Illinois.
Fact: The extension of the EDA is crucial to the future of Sears in Illinois, its 6,100 employees, and 9,100 vendors, contractors and local businesses that provide services and goods to the company.
While it is our preference to remain in Illinois, we have received proposals from a number of states to relocate our headquarters and over the last month conducted site visits and facility tours at a pair of them. Severe challenges in the retail sector combined with the worst economic conditions the country has experienced since the Great Depression mean that without the EDA and other incentives Sears must be prepared to move all or part of its operations.
Myth: Sears has not stayed in communication with affected parties concerning the EDA.
Fact: Sears has met with and is continuing to meet with members of the General Assembly and the Governor’s Office concerning our future in Illinois. We have had productive and positive meetings to date.
Sears has also engaged in dialogue with the Village of Hoffman Estates, and Community School District 300 over several months on multiple occasions and consistently communicated to district leaders that at the appropriate time and, on a schedule determined by legislative leaders and the Governor’s Office, it would participate in discussions related to efforts to extend the EDA.
Myth: Passage of legislation to extend the EDA would do so on the current terms.
Fact: The EDA extension becoming law is only the first step in the process. It becomes the responsibility of the Village of Hoffman Estates to bring all taxing bodies together to determine the actual apportionment of incremental tax revenues. Sears has always and continues to maintain that District 300 should be treated fairly in this discussion.
Myth: Taxing jurisdictions have lost hundreds of millions over the life of the EDA.
Fact: Local taxing jurisdictions have received tens of millions of dollars more than they would have received had Sears not moved to Hoffman Estates. If the EDA had not been established, Sears would have not located here. Period.
Myth: Taxing jurisdictions will lose millions per year if the EDA is extended.
Fact: This claim makes several inaccurate assumptions, the most important being that the tax apportionment terms of the extended EDA would be identical to the current EDA. A new agreement will be negotiated after the EDA is extended and there is no basis for any local taxing jurisdiction to presume what the agreed upon apportionments will be.
Further, if the EDA is not extended and Sears leaves Illinois, local taxing jurisdictions stand to lose many times the amount they have received. Were Sears to leave it would be a tremendous loss for the state and a major blow to the region, devastating property values, reducing local government revenues, and harming the prospect for economic growth that is so urgently needed during this time of economic difficulty for our nation. Further, the region would need to take steps to attract another employer or employers to offset the job loss. In doing so, it would be competing with other states and regions on economic and non-economic terms to lure companies to the area.
Myth: The EDA is the same as a Tax Increment Financing (TIF) District.
Fact: The EDA is not the same as a TIF in one very important way: an escalating percentage of the increment above the baseline when the EDA was established goes to local taxing bodies. In a TIF, all incremental dollars go into a special fund to be used only for the benefit of improvements and investments in the TIF district itself.
Myth: If the EDA is extended it will make it easier for Sears to sell its property and leave the state.
Fact: The extension of the EDA is necessary, as part of a larger package, to keep Sears in Illinois - not to push us out of state. The terms of the agreement restrict our ability to freely pass benefits along to new buyers and we are required through the legislation to keep jobs here to experience any benefit. In fact, Sears has increased its workforce – and thereby its commitment – to the region under the terms of the current EDA.
Myth: Sears doesn’t deserve a corporate handout. It needs to pay its fair share.
Fact: Annually, Sears pays over $200 million in taxes to the State of Illinois with approximately $213 million being paid in 2010. Even if the EDA is approved, we expect that we will pay approximately $200 million a year or more in taxes for the term of the EDA.
Myth: Sears hasn’t paid property taxes in 20 years.
Fact: Sears has paid $250 million in property taxes and bond shortfall payments over the life of the EDA. Bond shortfall payments help Hoffman Estates to cover the cost of bonds issued by the Village to acquire the Prairie Stone Office Park property.
Myth: There has never been an audited report of how Hoffman Estates has spent revenues received as a result of the EDA.
Fact: Hoffman Estates has posted audited annual financial statements, which include information about revenues, expenditures and fund balances related to the EDA on its website, available at: www.hoffmanestates.com.