Wisconsin Subsidizes Border Hopping, But Did It Need To?

February 21, 2008

Uline Shipping Supplies, a distributor of industrial packing materials, recently announced it will relocate its headquarters from Waukegan, Illinois to a new headquarters/distribution campus just 20 miles north in Wisconsin, for which it will receive up to $23 million in state and local business subsidies. The announcement has

renewed debate

in both states on the wisdom of providing such “incentives,” especially for companies taking a short step across state lines.

Uline will transfer 650 jobs based in Waukegan to Pleasant Prairie, Wisconsin,

an affluent outlying suburb

of both Chicago and Milwaukee. State and local officials have pledged

$6 million in grants, credits and forgivable loans

for the project, which is expected to create an additional 350 jobs in addition to the 650 transferred. Wisconsin has also designated the Uline campus an enterprise zone, providing

up to $17 million in further tax breaks

over 10 years.

The relocation is a blow to Waukegan, a small, economically depressed city in otherwise affluent Lake County. But, although Uline doubtless welcomes Wisconsin’s substantial public subsidies, it’s unlikely they are driving its relocation decision.

The key factor for Uline seems instead to have been finding a site big enough for both its headquarters and a new, much larger distribution center.

Uline chief financial officer Frank Unick said

the Pleasant Prairie site “gives us the opportunity to have significant space to accommodate future growth and to bring people together again who are currently located in a number of different Uline facilities."

While Wisconsin’s subsidies might not have been a big factor in luring Uline across the border, Illinois’ own subsidies –whether in the form of tax benefits like Single Sales Factor adopted to attract headquarters and manufacturing (see February 6 blog below), or of the

EDGE corporate income tax credits

Uline has been awarded in recent years —were also ineffective in keeping the company from moving.