CME Group eyes Illinois exit; Emanuel confident it will stay
By Kathy Bergen and John Byrne Tribune reporters
3:46 p.m. CDT, June 9, 2011
“We’re investigating what would be in the best interests of our shareholders,” Terrence Duffy, executive chairman of CME Group Inc., said at the firm’s annual meeting Wednesday, noting that such a move would not mean CME would abandon its presence in Chicago, home to its markets for more than a century.
The state in January raised the corporate income tax rate temporarily to 7 percent from 4.8. Corporations also pay a 2.5 percent tax on income, called the personal property replacement tax, which is collected by the state and flows to local governments. The two rates taken together come to 9.5 percent, the third-highest rate in the U.S., according to the Tax Foundation, a non-partisan Washington-based research group.
Mayor Rahm Emanuel said he talked to Duffy and other company officials Thursday morning, and he’s confident CME Group will remain in Chicago. “I know their frustration. They acknowledged the city has been great to them, and the city is a place that they’ve prospered,” he said.
“I’m confident they will see that what has been a successful relationship will continue to be a successful relationship,” Emanuel said at a news conference at Harold Washington College’s downtown campus to announce new presidents for five City Colleges of Chicago campuses.
“CME has grown and been successful in Chicago, and it has grown and been successful while Chicago has grown and been successful,” Emanuel said. “And I believe we have many years ahead of both of us, as a city and the financial institution the Chicago Mercantile Exchange, growing ahead. And I’m confident they will see what has been a successful relationship will continue to be a successful relationship.”
Emanuel added it’s too soon to say whether he will head to Springfield to try to persuade lawmakers to make changes in the tax rate. “We’re not at that point,” he said. “I understand their frustration, we’re not at that point.”
The company estimates the hike will cost it about $50 million a year. At the meeting, Duffy said he has spoken with Illinois Gov. Pat Quinn about the tax increase.
Gov. Quinn was unclear if he has meet with Duffy on the issue, calling him a “good friend” and saying they engage in an “ongoing conversation and dialogue.”
“I really believe that the best place for these markets is right here in Illinois, in Chicago,” Quinn said. “I am sure we can work together. I do that with all kinds of businesses, large and small…If somebody has a particular issue or concern or interest in something, we sit down with them and work it out.”
Quinn said he is willing to discuss incentives to keep the company here, but warned that it must be a “two way street.”
“The taxpayers of Illinois are just not going to subsidize private companies unless they give something back to the people of Illinois,” Quinn said. “Jobs and economic growth (are) very important. A commitment to new investments and doing new things…it really is a negotiation where companies agree that they will do things for the people of Illinois.”
CME’s threat comes at a time when other Illinois companies, including Caterpillar and Sears Holdings Corp., have raised the possibility of leaving Illinois. Other states have tried to dangle lucrative incentive packages to lure companies, and Illinois has offered up many incentives to successfully retain big companies including Motorola Mobility. The result has resembled a national bidding war for some of Illinois’ top companies.
“We want to be in Chicago but are concerned about the corporate tax increases,” a CME spokesman said Thursday morning. The CME owns the Chicago Mercantile Exchange, the Chicago Board of Trade and theNew York Mercantile Exchange.
A CME move would send shockwaves through the local economy. Of the company’s 2,600 employees, about 2,000 work in Illinois. But the presence of the exchanges has a broad ripple effect, with some estimating it’s the source of another 60,000 to 100,000 jobs in law, accounting, trading and banking companies.
CME Group has four facilities in Illinois, including its corporate headquarters at 20 S. Wacker Drive; the Board of Trade building, which has a consolidated trading floor for the two Chicago exchanges; back offices at 550 W. Washington St.; and a data center in Aurora.
The company has received $15 million in city assistance to help with the renovation of its Board of Trade building.
CME Group reported $951 million in profits last year on about $3 billion in revenue.