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OfficeMax, Office Depot want tax deal

CHAMPAIGN (AP) – OfficeMax Inc. and Office Depot Inc. want Illinois and Florida to compete to be the home of their combined headquarters if their proposed merger is approved by offering the best package of tax breaks that they can.

Naperville-based OfficeMax made its pitch to Illinois lawmakers Tuesday when executives testified before a state Senate Executive Committee hearing in Springfield.

The hearing was on the state’s pension crisis, but before addressing the issue, OfficeMax CEO Ravi Saligram and state Sen. Tom Cullerton pitched legislation that would give the new merged company unspecified tax breaks in exchange for maintaining at least 2,000 non-retail jobs in the state and making $150 million in capital investments. OfficeMax now has about 2,000 employees between its headquarters, a nearby distribution center and a call center in Peru.

Saligram said the two companies are just beginning the process of choosing a single headquarters. The merger, which was announced in February, is expected to be complete by the end of the year, he said. The deal still needs approval from federal regulators and shareholders.

“What we are trying to do right now is first decide all the criteria, and then try to get economic incentives on both sides so we can come to an informed decision,” Saligram said, adding that Illinois has been a good home for OfficeMax.

In a statement emailed to The Associated Press, a spokeswoman for Boca Raton, Fla.-based Office Depot said Florida has not yet made an offer.

“The companies have agreed to discuss incentives with state and local officials at the right time in the integration process,” Stephanie Sampiere said. “The Illinois state Legislature appears to be trying to gain an advantage by being the first to the table.”

Cullerton, a Villa Park Democrat whose district includes the distribution center, told the AP Wednesday that he needed to move quickly and decided to introduce the legislation during the special session on pensions rather than wait until later this year.

“Right now we’re in a competition,” he said, adding that he was waiting to hear back from the state Department of Commerce and Economic Opportunity about how much the agency could offer in tax breaks.

Department of Commerce and Economic Opportunity spokeswoman Sandra Jones would only say that the agency believes the new company would be well positioned if it stayed in Illinois.

Senators on the committee didn’t indicate whether they’d support or oppose such tax breaks.

Over the past few years, several Illinois-based companies have either hinted at moving due to concerns about the state’s financial wellbeing or threatened to leave unless the state cut their taxes.

In late 2011, Sears Holdings Corp. and two financial companies were given hundreds of millions of dollars in tax breaks and other incentives to stay.

Cullerton said he doesn’t expect whatever would be offered to the new company to be that large an amount.

Concerns about the state’s financial picture – including unemployment of more than 9 percent and the nearly $100 billion in unfunded pension obligations that the Legislature is trying to address – mean the state will likely have to make its best offer, said University of Illinois economist Fred Giertz.

Like many economists, he doesn’t like tax-break deals for individual companies, but in Illinois’ situation, “it’s pretty hard not to respond to this kind of situation when the chips are down.”

“If we were a well-functioning state, you could say let them stay if they want to stay and go if they want to go.” Giertz said.

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The legislation is an amendment to HB3271.

Online: http://www.ilga.gov

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Follow David Mercer on Twitter at http://twitter.com/davidmercerap

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