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|Sentry Deal Raises Questions on Incentives|
|News/Features - Local News|
|Wednesday, 27 September 2000 18:00|
The Davenport City Council last week tentatively approved a $3.7 million incentive package for Sentry Insurance to relocate from Moline, claiming that without the deal the company might have left the Quad Cities altogether.
But that scenario was unlikely, and the city is handing over a lot of money to a company that promises new jobs but plans to lay off as many as 100 workers, too.
Sentry bought John Deere Insurance Group last year and since then has operated in Moline in space leased from Deere and Company. The Quad City Development Group (QCDG) contacted Sentry shortly after the sale, and according to QCDG Vice President Rob Lamb, the company decided in “mid-summer that they were going to look for a new location.”
At the outset, Lamb said, the company was considering multiple options, including leaving the area. But “fairly quickly, they got to the point where [they said], ‘Yes, we want to stay in the Quad Cities.’”
But not on the Illinois side of the river. Dale Iman, Moline’s city administrator, said he isn’t happy the company is leaving his city, but “I’m less happy with the fact that we weren’t even given the opportunity to compete. … They absolutely would not entertain an offer from the Illinois side.”
Dan Carmody, of the Rock Island Economic Development Corporation, said his organization made an inquiry to Sentry several months ago but was told a decision had already been made. Lamb said Sentry wanted to go to the Iowa side of the river but didn’t have a specific location in mind. “They wanted to set their own nameplate out there” and separate the company’s local operation from its Deere history. Lamb would not say whether Sentry considered Iowa sites outside of Davenport.
Len Adams, Davenport’s economic-development specialist, said he understood that Sentry wanted to move to Iowa because of a more favorable climate for the insurance industry. Adams said Sentry considered two sites in Davenport but did not know if the company looked at locations in Bettendorf or elsewhere.
The River Cities’ Reader gave Mary Weller, a spokesperson at Sentry’s Wisconsin headquarters, a list of questions about the company’s site-selection process. Weller faxed a response from Peg Sullivan, Sentry’s director of real estate and field services: “After acquiring John Deere Insurance Group last September, we started looking for a new location for our dealer insurance operations. Davenport approached us with an attractive that allowed us to stay in the Quad Cities area.” The statement does not address several of the questions asked, including whether the company considered any sites outside of Davenport.
Davenport officials were quick to defend the deal, saying that even if the company wasn’t serious about leaving the Quad Cities, the city had to make an offer.
“How many jobs do you want to bet that they wouldn’t leave?” Adams said.
“I think it’s worth the risk,” said Mayor Phil Yerington. “Those are jobs that did not leave the Quad City area.”
The package given to Sentry includes $1.45 million in Tax Increment Financing to assist in the construction of a $10 million building in the Crow Valley Business Park in northeast Davenport. McCarthy Bush Real Estate will build and own the facility, and Sentry will lease it initially for 10 years.
The city’s contribution will come from the sale of bonds, which will be paid off through real-estate taxes as the property value increases. The city also plans to chip in a $100,000 no-interest loan.
The state will be providing two chunks of money: $700,000 in Community Economic Betterment Account (CEBA) funds, along with job-training money and income-tax credits totaling $1.4 million.
The job-training money will fund a partnership between the Eastern Iowa Community College District and Sentry, which will together develop “custom” training programs for new employees. The money also covers half the salary of some new employees during on-the-job training periods, Adams said. The community-college district issues bonds to generate funds, which are then used to reimburse Sentry for training expenses. The bonds are repaid by diverting new employees' payroll taxes from the state to the community-college board.
The city council will likely vote on several components of the incentive package in the coming weeks. A public hearing is scheduled for October 16 on the bond sale, with city-council consideration probable October 18.
According to a spokesperson for the state’s Department of Economic Development, Sentry must maintain 250 jobs and create 95 new positions over a three-year period, with a median pay rate of $21.86 per hour – more than $42,000 a year. The department reviews individuals’ employment data annually to ensure compliance with the CEBA agreement.
The city most likely will not adopt separate measures to monitor job creation, Adams said: “We try to piggyback as much as possible on CEBA.” But there’s a question of how many jobs are really being created. Sentry currently has about 350 employees, according to a September 22 memo from Adams to Yerington, but the company’s new Davenport facility might have as few as 250 employees. “Layoffs of clerical staff are planned,” Adams wrote. “We do not know the exact number of people to be laid off in Moline.”
In a conversation with the River Cities’ Reader, Adams was quick to note that “they’ve also said they’re thinking of more than 250” employees when the new building opens in the spring.
According to Sentry’s application for CEBA funds, the company plans to add 62 claims personnel, 30 underwriters, and three marketing personnel, all starting at approximately $18 an hour.
“We felt that this project was such an incredibly good project in terms of the quality and number of jobs,” Adams said.
Lamb claimed incentives aren’t as crucial to decisions about location as some people think. “There are very few companies that the first thing they do is look at what incentives they can get,” he said. “Incentives are more of a deal-closing thing.”
“We showed we were willing to do the most to bring them here,” Yerington said. “We have to lure people here.”
“This is above all a competitive business,” Adams said.
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