(Marion, IL) — June 24, 2010. Governor Pat Quinn today signed a bill into law to establish a business development tax credit and controversial commercial construction bonds to bolster Southern Illinois’ economy, which has seen unemployment range from 12 to 15 percent during 2010.
The legislation, Senate Bill 2093, will create the Angel Investment Tax Credit to support direct investment by Illinois entrepreneurs and start-up companies and it will double the state’s existing New Markets Tax Credit for new investment into small businesses in underserved communities.
In addition, the law creates the controversial – Sales Tax and Revenue (STAR) bonds – to help develop a major retail and entertainment complex near Marion in Southern Illinois.
“This new law will bring investment, spur economic development and create jobs across Illinois,” said Quinn.
Under the new law, investors may claim 25 percent of an investment into a qualified Illinois business venture – up to $2 million in investment for a $500,000 credit. The program is capped at $10 million in tax credits, which will drive $40 million in investment.
“Passage of this measure sends a strong signal that Illinois – always among the best in research – will take its rightful place as among the best in generating and attracting high-paying technology jobs,” said David Miller, CEO of the Illinois Biotechnology Industry Organization.
The new law doubles the cap on Illinois’ existing New Markets Tax Credit program – from $10 million to $20 million. The program provides tax credits for new investment into small businesses in low-income communities. The increased cap could generate $125 million in private investment into Illinois businesses.
Illinois began its New Markets Tax Credit last year and exhausted the $10 million cap within six months.
Senate Bill 2093 also creates the STAR bonds pilot program to allow a portion of the sales tax revenues generated by a major retail and entertainment complex near Marion to repay its development and construction costs.
The proposed 400 acre shopping and entertainment complex will be near Interstate 57 north of Illinois 13. The STAR bonds would help finance the cost of building the $378 million project. The legislation calls for the creation of at least 500 jobs during the first five years of the pilot program.
The STAR bonds program, however, has drawn fierce criticism and opposition. Chicago Sun-Times columnist and Capitol Fax publisher Rich Miller has described the legislation as “the worst bill ever”.
In withering criticism, Miller wrote on May 4, 2010:
The STAR bonds concept is simple. Developers use anticipated and actual state sales tax revenue generated by a commercial project to finance that project. It sounds pretty good on its face. Hundreds of millions, even billions, in development for places that need the jobs and the businesses. But the consequences ain’t so good. First, studies have shown that these huge subsidized projects would just cannibalize businesses and customers from surrounding areas. It was no accident that every local mayor surrounding Glen Carbon hotly opposed this project.
Second, and more importantly for our purposes, the state will never be able to stop this idea from spreading. Do you think Chicago, or Rosemont, or wherever will avoid lobbying to get their own STAR bonds districts? Chicago, for instance, could phase out its TIF districts, put that local property tax money back in their budgets and then replace them with STAR bond districts, which takes tax money out of the state’s budget. Won’t happen, you say? Bull. Chicago has the clout and the incentive to do just that. And if they get it, others will, too.
Considering the horrific shape that the state budget is in, this is a complete fiscal disaster in the making.
In addition to Miller’s criticism, AFSCME Council 31 also opposed the STAR bonds legislation:
SB 2093 would rob the state treasury of more than $280 million in lost revenues over the next 20 years in order to subsidize the development of an entertainment complex in Southern Illinois.
Despite the fact that state funding for hundreds of human service agencies all across Illinois is being slashed, legislators from every area of the state voted in support of the STAR bonds measure which would cost Illinois taxpayers approximately $12.5 million annually for the next 25 years.
State sales taxes may only be used to finance up to 50 percent of the development costs, according to the governor’s press release.
Senate Bill 2093, which was sponsored by Senator Gary Forby (D-Benton) and State Rep. John Bradley (D-Marion), takes effect immediately except for certain provisions that take effect on July 1 or January 1, 2011.
“Most importantly, this bill will put people back to work in Southern Illinois,” said Forby.
“This has the potential to be the largest economic development project in the history of our region,” said Bradley.