Sears and “Job Blackmail:” an Early Warning Sign of Job Loss?

August 26, 2011

What does it say when a faltering company asks for a huge taxpayer subsidy?

Sears Holdings Corporation (the successor of Sears, Roebuck & Co. that includes Kmart and Lands’ End) is playing “job blackmail,” threatening to relocate its corporate headquarters and 6,000 jobs from a Chicago suburb to Virginia or Massachusetts. (Three large companies have extracted

subsidies of $100 million or more this year

by threatening to leave New Jersey, Ohio and Illinois.)

The problem is, Sears—a troubled company that is majority-owned by a hedge fund investor—has already been to the taxpayer trough, leaving a terrible economic development legacy. Twenty-two years ago, it threatened to relocate from its famous Sears Tower in Chicago’s Loop to Texas or North Carolina. Instead, as a retention payoff, it got a subsidy package worth an estimated $178 million to relocate 29 miles northwest to the distant, affluent suburb Hoffman Estates. In a

2003 report

, we labeled the move state-subsidized sprawl.

To qualify Sears for the deal, the Illinois legislature had to pervert the state’s tax increment financing (TIF) law to allow for “greenfield” TIFs, since Hoffman Estates was far from “blighted.” When states loosen the rules for programs such as TIF and enterprise zones, Good Jobs First

has documented

, they often become drivers of suburban sprawl, undermining the inner cities and older suburbs they were originally intended to revitalize. Many of Illinois’ subsequent problems with its 800+ TIF districts trace back to that dark event.

And get this: Illinois TIF districts last 23 years. That means Sears’ deal expires in 2012, so here is the company demanding a new deal.

In my opinion, Sears should quit threatening to abandon Illinois and quit demanding massive tax breaks from Illinois, Virginia, Massachusetts or any other state.

I think Sears owes it to Illinois taxpayers—and to every other Illinois business—to gratefully honor its 23-year, $178 million subsidy and stay put. By threatening to leave just as its subsidy expires, Sears apparently feels entitled to permanent special treatment, above everyone else paying their fair share to sustain vital public services.

Virginia Gov. McDonnell and Massachusetts Gov. Patrick should shun Sears and tell it to stay in Illinois. The prospect of a corporate headquarters and thousands of “new” jobs may be alluring, but chasing footloose companies is perilous business: any state that rewards Sears’ behavior will anger its longstanding, loyal employers and encourage companies to threaten to leave.

If Illinois were to lose its Sears tax base and another state were to forego its Sears tax base, the only winner would be Sears Holdings Corporation.

As an old plant-closing expert who trained all 50 states' Dislocated Worker Units on how to spot the early warning signs of corporate disinvestment prior to layoffs, my antennae go way up when I see a company seeking tax breaks while botching the business basics. Sears has been losing market share for several years: it should keep its headquarters staff intact, forget about quick-fix tax breaks and—while it still can—repair its business model, reinvest in its stores, and secure the jobs of its incumbent workforce.