Medline Industries has received $39.3M in tax credits in last 15 years
A case study on the insider’s game of EDGE tax credits
Apparently, Governor-elect Bruce Rauner didn’t make himself clear enough during his visit with Gov. Pat Quinn on Nov. 20, when he called for a hiring freeze and a limit on unnecessary spending – Quinn continues to dole out big-ticket tax credits and other benefits to companies seeking corporate handouts.
Medline Industries made headlines last week as Quinn’s most recent Economic Development for a Growing Economy, or EDGE, tax credit recipient. The credits, distributed through the Department of Commerce and Economic Opportunity, or DCEO, are valued at $17.5 million.
Medline is not new to the EDGE program. For nearly 15 years, the medical-supply company has been threatening to leave Illinois should the state refuse to provide them with special tax subsidies. This will be its fourth EDGE agreement with the DCEO. As a result, the company has received more EDGE tax credits from the DCEO than all but three other companies since 2001 – a total of $39.3 million.
In 2014, Medline received a $4.8 million tax break in the form of EDGE tax credits. The company has received more than $3.5 million in these credits annually since 2009, and has averaged nearly $2.5 million annually from 2001-2008. And now, the DCEO hands out another $17.5 million to supplement ongoing tax credits from previous EDGE agreements.
In October 2000, shortly after the enactment of the EDGE program, then-Governor George Ryan announced the first Medline EDGE agreement. The deal was this: Medline would invest $14 million in its existing headquarters in Mundelein, Illinois, create 243 new jobs and retain 920 jobs in return for the promise of EDGE tax credits. The announcement didn’t identify the value of the tax credits being offered.
The DCEO’s records indicate it was August 2001 by the time Medline entered the EDGE agreement. The revised commitments were to invest $12 million, create 25 new jobs and retain 920 jobs. Over the next 10 years, until the agreement expired, Medline received more than $27 million in EDGE tax credits from the DCEO.
Medline entered a second EDGE agreement in September 2006. The company committed to building a new $30 million distribution facility in Libertyville, Illinois, to replace an existing facility in Mundelein and to retain 100 jobs. No new jobs were required to qualify for the tax credits. Over six years, Medline has received $483,055 in EDGE tax credits from the DCEO under this agreement, with four more years remaining.
Then, seemingly in preparation for the expiration of its first EDGE agreement, Medline entered into a third EDGE agreement in June 2009, in which it committed to invest $11 million for new office facilities, create 35 new jobs and retain 607 jobs. Oddly, this commitment came at a time when Medline employed over 2,000 people. Over the last three years, Medline has received $11.8 million in EDGE tax credits from the DCEO under this agreement, and still has seven more years to go.
And now a fourth EDGE agreement, even as two of the previous agreements are still in effect. The new agreement is based on Medline’s commitment to invest $60 million in facilities, create 100 jobs within two years and another 100 jobs within five years, and retain more than 1,600 current jobs, according to Crain’s Chicago Business.
In all, compiling every Medline commitment in the first three EDGE agreements, the company had to create only 60 new jobs. The new agreement gives the company five years to create 200 more jobs. To its credit, the number of jobs it created far exceeded that number. But that was to its benefit, too, because the more jobs created, the more Medline received in tax credits.
So, even after substantial investments on its part and sizeable subsidies on the state’s part over the past 15 years, Medline still told the DCEO it wasn’t sure it wanted to stay in its longtime Illinois home.
But after the agreement was inked, Medline’s CEO said, “This agreement is a pledge and a testament of our continued commitment to our customers, our employees, and the state of Illinois.” Yes, a pledge and commitment contingent upon the ongoing payment of “respect” by Illinois taxpayers in the form of special state perks. Where will the commitment stand when the payments come to an end?
Medline is just one of many companies that have figured out that if they threaten to leave the state they’ll get tax breaks. In fact, the law requires them to make the threat in order to qualify for EDGE tax credits. Unfortunately, the threats ring true in an Illinois business tax climate that is otherwise not very welcoming.
Hopefully, Rauner will focus on fixing the real problem – the troubled business climate in Illinois – rather than continuing the pattern of his predecessor, who continues to give special benefits to those willing and able to play the game.