Amazon’s tax breaks needed to create jobs
A recent report about the value of economic incentives for Amazon highlights wide disparities in taxes and wealth between towns in the south suburbs and other regions.
The Better Government Association and public radio station WBEZ-FM tallied the value of tax breaks granted by Markham, Matteson, University Park and other Chicago area municipalities where the online retailer has recently built or is building 36 facilities.
The incentives were valued at $741 million total, the study found. The report noted a big difference in the value of incentives depending on location.
“Amazon collected less than $100 million in public incentives for the 15 ware
houses it built in predominantly white communities but won more than $640 million in taxpayer incentives for the 21 projects built in communities with larger nonwhite populations,” BGA/WBEZ reported.
Some reading the report might formulate an opinion about south suburban municipal leaders who approved the tax incentives.
“They’re giving away the store,” would be a logical conclusion.
However, a different but equally valid conclusion might take the form of a question.
“Why does the store cost six times as much to build in the south suburbs compared to other areas?”
It is misleading to look at the values of economic incentives for new commercial and industrial developments without considering the context of tax rates, school funding and other factors, officials said.
“We all know that Cook County has high tax rates,” said Derrick Champion, city administrator and economic development director for Markham. “When you’re dealing with low- to moderate-income areas like Markham, Dolton (or) Lynwood, we have to have something in place to lure economic development.”
Property tax rates in the south suburbs are among the highest in the nation. Park Forest had Cook County’s highest tax rate in 2019, at 35.7%, according to the Cook County clerk. Burr Ridge had the county’s lowest rate, at 7.1%.
“Why that is is a long story, but it’s a fact,” said Reggie Greenwood, former executive director of the Chicago Southland Economic Development Corporation.
The long story might cover how steel mills and other manufacturers once employed thousands in good-paying jobs throughout the south suburbs. Breadwinners provided for families that spent their paychecks in local stores to buy food, clothes and other goods.
Industry shrank over the past 50 years. Mills and factories closed, then retail stores closed up shop. The loss of jobs has been linked to higher rates of crime and other quality-of-life concerns in many communities. Homeowners bear a greater share of the tax burden due to the lack of business investment.
The lack of commercial investment causes higher tax rates that bring in revenue needed to fund schools and other services. To make a long story short, gradual decay has characterized the region for about half a century.
“The only way you can create a path to revitalize the Southland is to leverage the unique attributes you have,” Greenwood said. “One of them is location next to infrastructure.”
The region’s strong assets include access to interstate highways and cross-country rail lines.
Markham, for example, is in a triangle bordered by interstates 57, 80 and 294.
“Markham is strategically placed in a highway maze that can get you anywhere in the United States,” Champion said.
Four years ago, the 140acre Markham site where Amazon is building a 3.8 million-square-foot fulfillment center south of 159th Street was a residential neighborhood. The city and a developer assembled nearly 1,000 different parcels for the project.
A bottom-line oriented business such as Amazon might like the location, but any conversation about potential development would quickly turn to tax rates.
Tax rates in 2019 were 25.5% in Markham, 18.3% in Matteson and 20.8% in University Park.
Tax rates in 2019 were 10.3% in Bensenville, 9.1% in Des Plaines and 8.9% in Rosemont.
You need not be a math whiz to understand that tax incentives have greater values in towns with higher tax rates.
That does not mean local municipal officials are better at negotiating with developers in towns with lower tax rates. Nor does it mean that elected officials are more generous to big corporations in towns with higher tax rates.
High tax rates generally are not the fault of local officials. If a community has a high tax rate, that does not mean that local officials are less thoughtful about spending public funds. The property tax system is complex. Incentives are an essential part of the system.
There is universal agreement that private business investment is the best way to ease the tax burden on homeowners, and that equity has to be a part of any conversation about taxes in Cook County.
“In order to get any development you have to be able to level that difference with tax incentives,” Greenwood said.
South suburban officials say it’s more important to consider the impact of Amazon’s investment than the value of tax incentives that were needed to seal deals.
Each of Amazon’s facilities in Markham, Matteson and University Park will employ at least 1,000 people at jobs that pay at least $15 an hour. Caravans of workers will parade into buildings for shifts every day. They will spend money at local gas stations, restaurants, convenience stores and other shops.
“To have a company like Amazon come here is going to create a tsunami of other opportunities,” Champion said.
Amazon is paying for a new fire engine, painting a water tower and improving parks and roads in town, Champion said. The Amazon project is expected to have a ripple effect. Buyers will scoop up vacant homes to live closer to where they work, he said.
“Because of Amazon bringing in all that extra traffic now, businesses are now calling in asking how can we be a part of what’s going on in Markham now,” Champion said.
“There are a lot of other revenue streams that are starting to come in.”
Champion said Amazon’s emphasis on robotics at its new south suburban facilities will create educational opportunities.
“When you have this kind of technology in one of the largest robotics facilities in the country, you want to make sure kids know about that” Champion said. “We want to create a talent pipeline.”
Amazon’s Markham facility is in Bremen Township High School District 228. The district’s four high schools offer a career and technology education curriculum track that includes studies in engineering, manufacturing and material processing.
Greenwood helped establish an annual robotics competition among area high school students. The 2019 event involved more than 300 competitors, he said. No event was held this year due to the COVID-19 pandemic.
“Our program is designed to create a platform where manufacturing and logistics companies can have a positive mentorship with young people in high schools to help them see that there are careers available paying family wages,” Greenwood said.
South Suburban College in South Holland, Prairie State College in Chicago Heights and other community colleges in the region offer courses in logistics and related studies. Greenwood recently assumed a new role as director of the Supply Chain Innovation Center and Business Incubator at Governors State University in University Park.
“Another huge opportunity is that Amazon facilities are going to have a need for robotics maintenance technicians,” Greenwood said. “This is a higher-end career. There are a substantial number of jobs at Amazon to maintain the robots.”
Ted Slowik is a columnist for the Daily Southtown. tslowik@tribpub.com