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Illinois circling the drain? This boom town begs to differ.

Crain's Chicago Business

Wednesday, October 11, 2017  |  Column  |  Tim Jones

Economy (34)

The economic lifeblood of this rural whiz-by of a town is frozen French fries. And bacon. And fabricated steel, ethanol, hydroponic tomatoes and the production of passenger cars for Metra.

About 16,000 freight cars roll through each year, picking up and delivering grain and other goods. Soon, boutique whiskey distilled in a onetime downtown theater will also be added to the local gross domestic product.

And just maybe, someday, in the not too distant future, gleaming new Toyotas and Mazdas could come off a production line that Illinois hopes will be built on what is now 1,000 acres of corn and soybeans.

Tiny Rochelle, 80 miles west of Chicago at the intersection of Interstates 88 and 39, is on an industrial roll, blissfully ignoring a common narrative among political and business elites that economically maligned Illinois is circling the toilet bowl.

That list of Illinois naysayers has even included Gov. Bruce Rauner, who has openly complained his state is "slowly, slowly starting to become southeast Michigan," and that Chicago, the state's economic engine, is in "deep, deep yogurt."

The hyperbole distorts a far more complicated economic picture for Illinois in which communities like Rochelle play a starring role. Federal data indeed show the state lags others in the region in some key economic metrics, yet the numbers also portray Illinois as a business creation superstar compared to neighbors.

The sheer number of businesses calling Illinois home is up 28 percent since 2001, according to data from the Bureau of Labor Statistics. That compares to 17 percent for Wisconsin, 8 percent for Indiana and 4 percent for Ohio. Michigan is down 9 percent.

SMALLBUSINESSPOWERINGGROWTH

Most of the growth in Illinois is in small businesses, yet the data also show Illinois has done better than neighboring states in retaining its roster of very large businesses.

Read more:

Illinois really is in the hunt for Toyota plant, chamber chief says

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Jason Anderson, who heads Rochelle's business development agency, says the supposed bad rep of Illinois hasn't hobbled recruitment efforts a bit—nor has a $130 billion pension hole, $16 billion in unpaid bills and the worst credit rating among the states.

"No one we've dealt with has ever brought that up," said Anderson, who leads the Greater Rochelle Economic Development Corporation, or Gredco, which has attracted companies like Nippon Sharyo, Boise Cascade, Tyson Foods, and Hormel. The town is also home to a 1,200-acre intermodal rail park run by Union Pacific, a shipping point that often sends goods to the Pacific Rim.

Now Rochelle is going after an eye-popping grand prize: the proposed $1.6 billion joint-venture auto assembly plant from Toyota and Mazda, which could employ about 4,000 workers and has attracted bidders from more than a dozen states.

Anderson was in Japan recently to make the pitch for Rochelle. Unlike Chicago, which is reportedly considering at least 10 sites to try to lure Amazon.com's new headquarters, Rochelle already has a spot reserved for the Japanese automakers: a 1,000-acre plot that right now is sprouting soybeans and 6-foot-high corn. The sewer and transmission lines are ready. The water tower is up.

Wikimedia Commons user IvoShandor
Photo by Wikimedia Commons user IvoShandor

"We've built everything from cornfields here," said Richard Ohlinger, a retired banker and life-long resident of Rochelle who serves as president of Gredco. "They can start pushing dirt tomorrow if they want. It's shovel-ready."

Rauner, who led the trade mission that Anderson attended, is getting behind the Toyota/Mazda bid, as well as Chicago's pursuit of Amazon. So, for the moment, the bad-mouthing of Illinois is forgotten and forgiven as politicians put their best pitches forward in pursuit of jobs.

INTERNALCOMPETITION

For more than three decades, states and local governments have been bidding against each other for manufacturing plants and other facilities.

Setting aside long-term financial concerns, the Wisconsin legislature recently approved the biggest corporate subsidy package ever awarded to a foreign company, $3 billion in state aid to Foxconn Technology Group, which plans to produce LCD display monitors and employ as many as 13,000 people at a site in Racine County, a half hour drive from the Illinois border.

Questions persist about the economic wisdom of the incentives and the long-term costs to taxpayers. The state's nonpartisan Legislative Fiscal Bureau said in an August report that state taxpayers in Wisconsin wouldn't recoup their investment in Foxconn until 2043, at the earliest.

Chicago has joined a long list of cities competing for Amazon's second headquarters, which offers a potential motherlode of jobs—eventually 50,000, the company says. That tantalizing prospect is expected to provoke break-the-bank offers from municipalities already under stress from pension debt, crumbling infrastructure, schools, public safety and other demands.

"There's an increasing recognition that they aren't working," said Michael Hicks, an economist at Ball State University in Indiana, who studies incentive packages and their impact.

"The benefits don't often flow to where the employer locates. They go to where the workers live, and municipalities need to be very careful about incentives," Hicks said.

CASEINPOINT

Rochelle offers a good case in point. The north side residential area of town, with modest wood-frame homes, looks like an incidental appendage to the burgeoning industrial park on the south side.

Like many rural Illinois towns of comparable size, shopping has moved to the outskirts while the downtown is dotted with second-hand stores and a couple of bars. A 60-year-old Ford tractor sits in a parking lot with a for-sale sign on it, a block from city hall.

This was probably the unavoidable fate for Rochelle 30 years ago, when two meat-packing operations and a yarn manufacturer went belly-up, taking with them the best-paying jobs in town. A thriving farm community during the first half of the 20th century with double-digit population gains every 10 years, the town peaked in 2010 and is slowly losing residents, even as jobs increase.

"We're not a residential bedroom community. We're a place you come to work," Ohlinger said.

That's because of moves the town, partly through Gredco, began making more three decades ago. The nation's worst farm crisis since the Great Depression hit in the early 1980s. A combination of tight money, record crop production and high debt taken on by farmers triggered a foreclosure crisis. Land values dropped as much as 60 percent.

Ohlinger, who farms 300 acres of corn and soybeans, said Gredco bought farmland at cut-rate prices and set it aside for industrial development. Abandoned packing houses and factories were converted to warehouses, which eventually were used for cold storage.

n 1986, the city secured state money to build a short line railroad that connected two existing long distance rail lines that ran through town. That enhanced Rochelle's strategic location—at the crossroads of two interstate highways, 25 miles from a freight airport in Rockford. And 80 miles from Chicago, the nation's third-largest market.

"They put together a combination of interesting things," said Norman Walzer, a senior research scholar at Northern Illinois University's Center for Governmental Studies. "They had the foresight to connect the railroads in a prime location. They bring in the business and ship it out."

"Most people who work there don't live there. It's a regional industrial park," Walzer added.

Infrastructure development—roads, water lines, sewer, fiber connections, power—have totaled $40 million. Last year the town extended the length of the local airport runway to make it easier for visiting executives to fly in and check out business prospects.

THEREALATTRACTION

"They're not coming in to see the town," Ohlinger said while driving around the ethanol plant in his white pickup truck. "They want to see the infrastructure, and that's where we take them."

The tangible benefits are reflected in $75 million spent on a new high school and grade school. Even as residential tax revenue has declined, the assessed equalized valuation in Rochelle has more than doubled since 2003, according to state records, jumping to $225 million in 2015 from $100 million 12 years earlier.

"Rochelle has not had to give away the store," Anderson said, noting that the city "has given nearly nothing" to attract the new industries and plant expansions and has relied on grants, and state and private funding.

While the immediate focus is on the Toyota/Mazda assembly plant, other projects are underway, including a 14-story frozen food warehouse, currently under construction.

The auto plant "is not a one-shot deal," Ohlinger said. "If it comes we're happy. If it doesn't, so what? We're just onto the next one."

TimJoneswritesfortheBetterGovernmentAssociation.