By: Geoff Dougherty

October 8, 2005, Chicago Tribune

A package of nearly $10 million in tax and other incentives has lured Mittal Steel USA to locate its American headquarters in Chicago--a move that cheers civic boosters while confounding economists who believe there is little value in such corporate payouts.

Though city and state officials involved in the deal said it would bring more than 200 jobs to Chicago, some 80 of those jobs are already held by Mittal workers in the city. The remainder will come from Mittal facilities in Indiana, Ohio and elsewhere.

"These are high paying jobs," said Jack Lavin, director of the Illinois Department of Commerce and Economic Opportunity. He noted that those 80 jobs could have been lost if the company selected another city for its headquarters.

"This is going to have a tremendous economic return," he said.

In addition to the jobs, which carry a payroll of $21 million, the headquarters will bring business travelers to Chicago and create additional work for accountants, money managers, attorneys and others who will do business with Mittal, Lavin said.

The department projects Mittal will ultimately fund about 600 area jobs and add $50 million to the economy next year. State tax revenue will increase by $9 million over five years, according to the department.

Mittal is planning to move into a new office building at 1 South Dearborn in January. The building is now under construction.

The deal is a feather in the cap for Chicago, which faced competition from Indiana officials who were offering an incentive package.

Mittal spokesman Dave Allen said the city's wealth of professional service companies and proximity to two airports sealed the deal.

"Virtually everything a corporation needs to survive is right here," said Allen. "Chicago is the right way for us to go."

Mittal is a Dutch steelmaker controlled by Lakshmi Mittal, an Indian-born billionaire who lives in London. A year ago, Mittal bought International Steel Group Inc., a collection of formerly bankrupt and near-bankrupt Rust Belt steel companies cobbled together by billionaire investor Wilbur Ross.

Among the mills run by ISG, and now Mittal's U.S. division, are those of LTV, Bethlehem Steel, Acme Metals and Weirton Steel.

The bulk of the incentive program will come in the form of $7.5 million worth of corporate state income tax credits and related benefits over 10 years. Additionally, the city is planning to provide the developer of 1 South Dearborn with $2 million to help pay for furniture, fixtures and equipment for the new offices.

Though the state believes the incentives will be offset by the jobs and tax revenue created by Mittal, others aren't so sure.

Among economists, the conventional wisdom on corporate incentives is that they don't help the economy, said Therese McGuire, a professor at Northwestern University's business school.

"A lot of people are down on tax incentives because there's not a lot of evidence that they are effective," she said. "They don't seem to be a good use of public money."

World Business Chicago executive director Paul O'Connor, who participated in the effort to lure Mittal, said he would be happy to do away with incentives.

"If we totally level the playing field, I'm all for it," he said. "But unilateral disarmament is not a good idea. You're up against competing jurisdictions that do it. A company doesn't ultimately decide on the basis of an incentive, but it can help bump them over the line."

And he has little doubt that offering tax cuts to lure companies like Mittal and Boeing Co., which relocated here from Seattle in 2001, eventually pays off by creating new business and buzz about the city.

"It's a pump-primer," he said. "Here's another company that's chosen Chicago."