NCPA - National Center for Policy Analysis


September 30, 2009

Central planning failed in the Soviet Union, is still failing in Cuba, and is being phased out in China, but it apparently remains alive -- though not well -- in Hoffman Estates, a northwestern suburb of Chicago, says Steve Stanek, a research fellow with the Heartland Institute.

  • The village board has announced foreclosure proceedings against the 11,000-seat Sears Centre arena, less than three years after it opened.
  • The homeowner's association board had backed a $55 million loan for a private firm to build the arena.
  • Now that firm cannot make the debt payments and could close the arena any time.

Hoffman Estates has a long, sorry history with business "incentives," says Stanek:

  • Over the past 20 years village officials have given hundreds of millions of dollars of handouts to the Sears Centre and other select businesses, distorting business decisions and imposing their will like Soviet commissars.
  • Hoffman Estates jumped into the tax subsidies quagmire in 1989 when it helped Sears move 5,000 jobs out of Chicago to its current headquarters, largely through tax increment financing.
  • Sears has received more than $200 million in Tax Increment Financing (an alluring tool that allows municipalities to promote economic development by earmarking property tax revenue from increases in assessed values within a designated TIF district) subsidies taken from schools and other local governments.
  • To cover the lost tax money, local governments force others to pay more.

Economics professors Richard F. Dye of Lake Forest College and David F. Merriman of Loyola University of Chicago studied 235 communities in northeast Illinois -- including Hoffman Estates -- and found those with TIF projects "actually grew more slowly than municipalities that did not use TIF."

We should not be surprised, says Stanek.  Whenever government takes money from taxpayers and diverts it to politically favored businesses, taxpayers and other businesses suffer.

Village officials have described the Sears Centre as "a great community asset."  In fact it is a great drain on the community, responds Stanek.

Source: Steve Stanek, "The Central Planning Failure of the Sears Centre," Heartland Institute, September 25, 2009.


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