Kraft plan a plus for Champaign

Kraft plan a plus for Champaign

Kraft's request for a property tax break as part of its plan to build new warehouse space deserves support.

It's no surprise that city council members in Champaign Tuesday approved plans for a property tax subsidy aimed at assisting Kraft Foods in building a $38-million, 760,000-square-foot warehouse on the site of the old A.C. Humko plant.

While some may blanch at the idea of providing financial aid to a multibillion-dollar corporation through the establishment of a tax increment finance district, the downside of not doing so is too great to risk.

If Kraft follows through on its plan to build the warehouse on the now-abandoned property adjacent to its current location at the corner of Mattis and Bradley avenues in north Champaign, it will benefit the city in a number of ways.

They include:

— Restoring the now-abandoned Humko site to a productive role that adds to the property tax base. This may be a one-time opportunity because there are few development options for this location. Just clearing the property will cost an estimated $4.2 million.

— Opening up 400,000 square feet of space at Kraft currently used for storage to prospective new food lines. That would mean more jobs at Kraft, and the impact there in terms of personal income and taxes paid is obvious.

— Protecting the 1,200 jobs Kraft currently provides by further cementing the company's ties to the community.

On the other hand, if the city had rejected Kraft's request and the warehouse is not built, the company could look elsewhere both in the short and long term. The ugly reality is that companies' needs change, and, as a result, plants come and go. There's no sense in giving Kraft one less reason to remain here for decades to come.

Since Humko closed in 2008, the assessed value of the property has declined from $1.5 million to $661,000.

Creating the TIF district would freeze the amount of property taxes various taxing districts, like the schools, receive. As the property increases in value with the warehouse construction, Kraft's tax payments would be deposited in a TIF fund controlled by the city, and then paid out by the city to the various districts as well as Kraft. Once Kraft receives $3.6 million in payments — it's estimated that would take anywhere from 8 to 12 years — the city's obligation to Kraft would be complete and the TIF could be dissolved.

The plan's benefit is that taxing districts other than the city of Champaign won't lose a penny while Kraft would receive what amounts to a $3.6 million property tax rebate.

That's a lot of money, but it's not prohibitive given Kraft's planned investment and its economic spin-off, current Kraft jobs protected and possible new jobs created, restoration of the Humko site to productive use and an increased property tax base.

City economic development director Bruce Knight characterizes the plan as "win-win," and, under all the circumstances, he is correct to do so.

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Lance Dixon wrote on September 05, 2013 at 8:09 am

Wrong, news-gazette! We are all being duped into more corporate welfare. They would buy the site anyway, without the free money from Champaign taxpayers. Everyone says "Well, in 12 years the deal ends and Kraft's tax responsibilities will go back to normal." Wrong! Once the corporate welfare starts, Kraft will keep going back to the well for more free money. All they need to do is "renegotiate" and threaten to cut jobs unless they get more tax relief (free money, I call it). 

As pointed out in the opinion, they are a multi-billion dollar corporation. Let them buy their own building. Our police, firefighters, and teachers need that tax money more than Kraft. 

tuscola2 wrote on September 05, 2013 at 12:09 pm

Corporate welfare, plain and simple. Why not offer IL residents who are current on their property taxes a waiver for 5 years? Might make it worth staying?

Orbiter wrote on September 07, 2013 at 9:09 am

This "too big to fail" mindset has GOT to stop!   Kraft is a huge corporation and saw its stock price rise over 15% in the last year and paid out dividends. When did any of us get a 15% rate of return on our savings?  Or a 15% increase in our paycheck?  We certainly can't afford to subsidize Kraft. They do not need corporate welfare and that they are threatening our city with their departure is a bigger insult than when Jimmy John threatened to move his HQ elsewhere.

 

Kraft is a great company and I don't wish them harm or failure, but they should continue to make their tidy profits by producing quality food products, not by leeching off the taxpayers of their host cities.

AJohnston wrote on September 11, 2013 at 10:09 am

Let's make sure when this plant *is* built, that it's built using local labor instead. Too many local jobs are going to out-of-state contractors who employ workers who give very little back to our community.