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Office Depot move raises tax-break issue again

Published: Tuesday, Dec. 10, 2013 11:21 a.m. CDT • Updated: Tuesday, Dec. 10, 2013 11:52 p.m. CDT
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(AP file photo)
Illinois will lose 1,600 jobs after Office Depot said Tuesday. It will keep its headquarters in Florida after its merger with Naperville, Ill.-based OfficeMax. The move comes just a week after the Illinois state legislature declined to give the company millions in tax breaks.

CHAMPAIGN – Illinois will lose 1,600 jobs after Office Depot said Tuesday that it will keep its headquarters in Florida after its merger with Naperville-based OfficeMax. The move comes just a week after the state Legislature declined to give the company millions in tax breaks.

The state senator who sponsored the bill that would have given Office Depot a tax package worth $53 million regretted that lawmakers didn't agree to the deal. But some experts said that, given the state's bad financial situation, not offering tax breaks might have been a smart move.

The company's announcement led one Republican gubernatorial candidate to call on Gov. Pat Quinn to hurry lawmakers back to Springfield to act on another set of tax breaks that Archer Daniels Midland Company has asked for as it considers locations for a new headquarters. The governor's office did not immediately say if that was under consideration.

State Sen. Tom Cullerton, who sponsored the Office Depot bill, said the company's decision was disappointing.

"It's a small setback, but it definitely does not mean Illinois is closed for business," Cullerton, a Villa Park Democrat, said.

Office Depot spokeswoman Karen Denning said Illinois' lack of an incentives package was partly behind the company's decision. Other factors included taxes and the ability of the existing 625,000 square-foot facility in Florida to accommodate all of the new company's employees. That facility is almost twice as big as the OfficeMax facility in Naperville.

Office Depot doesn't yet have a timeline for moving its operations in Naperville and other headquarters staff in the Chicago suburb of Itasca to Boca Raton, Denning said.

The company has an existing incentives package from the state of Florida but officials there have not commented on any potential new tax breaks or other perks.

Dave Roeder, a spokesman for Illinois' Department of Economic Opportunity, said the agency offered to work with the company on incentives that didn't require lawmakers' approval, but "the company did not pursue those options with us."

The Senate passed bills last week that would have provided $53 million in incentives for Office Depot, $30 million in tax breaks for Decatur-based ADM as it considers Chicago and other locations outside Illinois and another $5 million for Washington-based chemical distributor Univar if it moves to Illinois. But the House never acted on those bills.

Even with reform legislation aimed at the state's $100 billion pension shortfall that was passed and signed into law last week, the state still has major financial problems, said Therese McGuire, professor of management and strategy at Northwestern University's Kellogg School of Management. Tax-break deals made under pressure from individual companies look "desperate," she said.

"Given where Illinois is today, and given that this whole business of firm-specific tax breaks is a race to the bottom, it's not a bad play to say that maybe it's not always right for Illinois to give these tax breaks."

Illinois over the past few years has been a target for other states looking to poach companies and, in some cases, agreed to high-dollar deals to keep firms such as Sears Holdings Corporation in place.

State Sen. Bill Brady, a Republican running for governor, on Tuesday called on Quinn to quickly bring lawmakers back to Springfield for a vote on ADM's tax breaks.

"We have to do what we can to keep job creators in the state of Illinois," Brady said in a news release. "The Senate did its job and passed incentives for Office Depot Inc. and ADM. The House adjourned without taking up either measure and now we've lost out on the jobs that would be created by having a major corporate headquarters in our state."

ADM spokeswoman Jackie Anderson would only say the company expects to make a decision on a new headquarters soon.

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