Illinois loses out on new Toyota-Mazda factory

A factory expected to employ 4,000 workers will not be coming to Illinois. Intersect Illinois cites the lack of a statewide Right-to-Work law and a dearth of shovel-ready sites as the main culprits.

Illinois is no longer being considered for Toyota and Mazda’s planned North American auto assembly plant. The coveted 4,000-job factory will go elsewhere, likely to a southeastern state.

In an interview with Greg Hinz of Crain’s Chicago Business, an official from Intersect Illinois, the state’s privately run, nonprofit economic development corporation, indicated that the reason Illinois lost out was because of a lack of shovel-ready sites and a statewide Right-to-Work law.

“While we showed very well, particularly in the areas of workforce, and our proposal was very well received, in the end the site readiness of some other locations took us out of the consideration set going forward,” Intersect Illinois CEO Mark Peterson told Crain’s.

Two-thirds of global chief financial officers surveyed by CNBC in 2015 said a Right-to-Work law is either “important” or “very important” when deciding where to grow their businesses. This puts Illinois workers at a severe disadvantage for attracting manufacturing.

Over 1,100 businesses have blacklisted Illinois because it is not a Right-to-Work state, Jim Schultz, the former director of the Illinois Department of Commerce and Economic Opportunity, told Crain’s in 2015.

With the exception of Missouri, whose statewide Right-to-Work law has been suspended pending a voter referendum, all of Illinois’ bordering states have enacted Right to Work.

“The challenges with [manufacturing and HQ searches] is that although they are public in their media exposure, they are still very protected and confidential when communicating exactly what factors weigh in on final decisions. … [M]any national site consultants charged with making recommendations for corporate relocations and expansions will not even consider a state that is not a right-to-work state,” Peterson continued in the Crain’s interview. “In this case, the three states I am told are still in the running are all right-to-work states.”

Peterson later stated in his interview with Crain’s he would be working to increase efforts to make sure that possible manufacturing sites are shovel-ready. It is believed Toyota and Mazda examined Rochelle, Illinois, as a possible spot for the plant. And though a local economic development official claimed at least one site in Rochelle was “shovel-ready,” it was evidently not up to snuff for the decision-makers behind the Toyota-Mazda plant.

While Peterson’s revelation about the state’s failure to stay in contention for the Toyota-Mazda plant is disappointing, it is not surprising. Illinois’ lack of a Right-to-Work law puts it at a competitive disadvantage with other states for attracting manufacturing jobs.

While the ability of local governments to implement Right to Work is currently being challenged in the courts, Right-to-Work opponents have tried to stop local governments from being able to pass their own Right-to-Work laws in Illinois. One anti-Right-to-Work measure, Senate Bill 1905, passed both chambers of the General Assembly, but was vetoed by Gov. Bruce Rauner in September.

While Peterson’s interview with Crain’s makes it clear that Right to Work played a factor in why Illinois was not ultimately chosen for the Toyota-Mazda plant, there are other policies that make the Prairie State an expensive place for manufacturing.

Illinois has the highest workers’ compensation costs in the region, and some of the highest property taxes in the nation, both of which drive up costs for manufacturers. Illinois’ average workers’ compensation costs are 34 percent higher than the average costs in surrounding states. These factors, combined with those mentioned by Peterson, make it unsurprising that Toyota and Mazda took a pass on the Land of Lincoln.

Take candy maker Haribo of America, for example. Both Wisconsin and Illinois have state tax incentive programs in which companies get tax breaks in exchange for jobs and investment. However, Haribo ultimately decided to build its $242 million plant with 400 manufacturing jobs in Kenosha County, Wisconsin. But it elected to expand its corporate headquarters in Rosemont, Illinois, where it is expected to create 55 new jobs.

Both states had tax break deals with the same company. Yet, Haribo of America chose Wisconsin for its plant, even though it already had its corporate headquarters in Illinois. Wisconsin has lower workers’ compensation costs than Illinois, and it is also a Right-to-Work state.

Illinois needs pro-growth reforms to attract manufacturing jobs. Otherwise, more manufacturers will look to invest elsewhere.