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IL Manufacturer Bails After Six Years, Millions in Incentives

There was no mechanism in place to protect the state from this exact scenario.

Another small town has fallen victim to an increasingly common problem – a business on the receiving end of significant local and state tax incentives closes its doors well before the money has been recouped, leaving the local community holding the bag.

Recently, we reported on the closure of the Nippon Sharyo railcar plant in Rochelle, IL. The Japan-based company employed 600+ workers at its peak, producing cars for Chicago Metra and the double decker Amtrak cars that eventually led to their downfall: In 2015, California ditched a $325 million contract they had with Nippon Sharyo after the cars they produced failed to pass crash tests.

By 2018, the factory was down to 54 employees. Finally calling it quits, the company expressed gratitude towards the community in which it set up shop in 2012, thanking the city for its “exemplary partnership.”

But a story in Illinois’s Alton Daily News highlights some elements of this “partnership” that didn’t work out so well for Illinois, specifically an agreement that doled out $4.7 million to the manufacturer in training funds, grants and tax credits.

On top of this, the Illinois Department of Transportation got in the game, shelling out $5.5 million to build a rail spur to the factory.

According to the report, there was no mechanism in place to protect the state from this exact scenario – where the manufacturer packs its bags after just a few years, leaving an empty factory.

That said, the state is doing its best to be optimistic, stressing the additions to the rail infrastructure have been a boon and that its use by other local businesses means that it is at capacity. Secondly, Jason Anderson, economic development director for the city of Rochelle, said that former Nippon Sharyo employees were so well trained in welding, machining and parts manufacturing that they were snapped up already by other local businesses in need of skilled workers.

But in possibly the most glass-half-full take on this whole thing, Anderson says that the company vacating their plant was actually, in a way, “a big, big plus for the city of Rochelle” because they were out of real estate and had nothing left to sell. He expects the building to be occupied once again in the near future, this time with significantly less “financial involvement” from the region.

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