By DIANE ROSS

Castle in the crossfire

The Department of Commerce and Community Affairs is the state agency charged with attracting, retaining and expanding business in Illinois. Can it do the job? Business groups are dubious. Director Castle says his reorganized agency has the resources to deliver

AS DIRECTOR of the new Illinois Department of Commerce and Community Affairs (DCCA), John Castle is caught squarely between business and the state in an increasingly bitter debate on Illinois' business climate. Business demands a strong advocate in state government, a super lobbyist who will put business interests first. The state insists that there is a limit to what government can do to improve the business climate. For Castle, a banker, businessman and one-time candidate for state comptroller, the crossfire has been intense.

Business wants worker's compensation (WC) and unemployment insurance (UI) costs reduced to what it calls a competitive level and claims Illinois is losing industry to competing midwestern states where WC/UI costs are lower. There is no doubt Illinois has lost some industry: Caterpillar, the state's largest employer, is expanding in Iowa. Until WC/UI costs are reduced, business wants aid from the state to offset them. Business also wants the powers of regulatory agencies reduced, chiefly those of the Illinois Environmental Protection Agency (IEPA), which, according to business, has made the cost of pollution control excessive. The position of the Thompson administration is that business has assumed government is anti-business merely because WC/UI laws have not been changed. The Thompson administration is in favor of reducing WC/UI costs to business, but the General Assembly is controlled by Democrats, and they will not easily give up the liberalized benefits gained in 1975. But Thompson can point to some actions that have helped business. Two years ago, lawmakers did exempt manufacturing machinery from the state sales tax. And it was Thompson, by executive order effective October 1, 1979, who created DCCA by merging the former departments of Business and Economic Development (BED), Local Governmental Affairs (LGA) and the Governor's Office of Manpower and Human Development (GOMHD). The Thompson administration sees the merger as its most significant pro-business move.

Complaints by business

Yet the creation of DCCA has not satisfied business. Indeed, it has led to increased complaints about the business climate. Business has put the administration on the defensive to such an extent that government must prove it is not anti-business before it can argue it is pro-business.

The administration's claim that it is not anti-business is based on the creation of DCCA, the goal of which is to create as many jobs as possible. Castle is convinced that a single agency can accomplish this goal more effectively than could three separate agencies. The merger was designed, he says, to build a foundation for economic development by helping local government provide the various incentives necessary for Illinois to compete effectively with other Midwestern states.

Although business is reserving final judgment, it generally believes that its interests took one step forward and two steps backward with the creation of DCCA. Business feels it must now compete with local government and labor for DCCA's attention. Labor also opposed the merger — less strenuously — for the same reason.

It is Castle's position that DCCA represents the strongest commitment state government can make to improve the business climate. Consequently, the state's case depends on DCCA's performance. In the business area, DCCA's role is to act as a broker, a negotiator between industry and local government. The merger is also designed to ensure the coordination of industrial, local government and labor programs that will enable DCCA to effectively broker the state's resources. It is this ability to commit the state's

4/August 1980/Illinois Issues

Photos by Ron Ackerman

resources, Castle is convinced, that will give Illinois the edge over other Midwestern states. This has been borne out, Castle claims, in the negotiations that brought the Cummins Engine Company — and 2,000 jobs — to Quincy this spring; DCCA was able to commit more than $2 million in state and federal job training funds.

Success with Cummins

Cummins is a fine example, business admits, but it is only one example. What about expansion? Retention? Will DCCA be able to save the 1,100 jobs that will be lost if the Hunter Packing Company leaves East St. Louis? Despite a year of hard work on Hunter's behalf, BED/DCCA's application for $20 million in federal urban development funds had yet to be approved by June 30, the deadline for awarding such subsidies.

The underlying question in the debate over the improvement of Illinois' business climate is this: Just how far can state government go to aid business? And whatever the distance, will it ever be far enough for business?

No one understands these questions better than John Castle. "The perception is almost more important than the facts," Castle said. "The business climate, as business sees it, is not a question of a single issue or even several issues. It is a question of a perceived attitude . . . not a single administration or a single session of the [legislature], but what has been happening in the state over a period of time. ..."

Business began to perceive government as anti-business in 1975, when the General Assembly rewrote the WC/UI laws, granting what business saw to be blatantly pro-labor increases in benefits. Five years later, lawmakers are still struggling with WC/UI.

"The business view generally held is that the current WC . . . and UI laws . . . overshadow any other problem or benefits that Illinois has to offer," Castle said. "I feel that that perception by business has become an excuse for many of those involved with industrial development [to say] that we are not getting the job done."

Castle contends these perceptions should have changed under the Thompson administration, which he sees as clearly pro-business. "The governor, himself, cannot change WC or UI trends," Castle said. "But he can give a message loud and clear to industry . . . that he is concerned about those problems and that as a leader he is willing to become involved in an attempt to alleviate such a situation." Castle believes Thompson has gotten that message across. And he thinks Thompson has helped to boost Illinois' business climate in other ways as well: by balancing the budget and increasing the year-end balance, and by encouraging lawmakers to exempt manufacturing machinery from the state sales tax and to refuse to broaden the application of product liability laws.

"Business believes that business is overregulated," Castle said, "[it] probably is. But I think those regulatory problems stem more from federal laws than state laws. Illinois does have some [pollution control] requirements that are more stringent than the federal requirements," Castle granted. "On the other hand, the IEPA, particularly now, under the direction of Mike Mauzy, has proven itself to be very sensitive to the needs of . . . business. And it has — and is — more than willing to work with industry to bring about compliance at the least cost."

'The business climate, as business sees it, is not a question of a single issue, or even several issues. It is a question of a perceived attitude . . .'

DCCA as ombudsman

Castle believes that DCCA can serve as ombudsman with state regulatory agencies. "We are able to cut through red tape occasionally and get a decision a little faster, or reconsideration of an adverse decision. . . . But this is happening on a case-by-case basis, very quietly, without gaining a lot of publicity." Castle feels, however, there is little state government can do to reform the regulatory process since most of the reforms business wants are possible only at the federal level.

Castle claims he does not want to use the national economy or the federal economic policy as an excuse for the business climate, but he believes it is fair to remind business that state government has no control over those situations. The recession, of course, affects Illinois, and slumps in national industries, specifically steel fabrication, produce corresponding slumps in dependent Illinois industries. Even the downtrends in the grain and livestock markets have repercussions in Illinois where food processing is one of the fastest growing industries. And federal economic policy directly affects Illinois since Illinois consistently ranks first or second as the nation's top exporter.

In the long run, Castle said, business could hinder state government's effectiveness by contributing to the "constant barage of negative publicity . . . without mentioning the positive aspects. Some of it certainly emanates from the Illinois State Chamber of Commerce [ISCC] and the Illinois Manufacturers' Association [IMA]," he said. Yet Castle is aware of the role

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the ISCC and IMA have staked out for themselves: To be critical of state government action and inaction as it affects business. Castle says DCCA's problem with the ISCC and the IMA lies in their expectation that DCCA should be business' advocate in state government, serving its interests exclusively.

Effective as broker

Castle is convinced DCCA will prove more effective in the long run as a broker than it would as an advocate. With its comprehensive mandate, Castle believes DCCA will go far beyond its predecessors.

DCCA has retained BED's old programs aimed at attracting, retaining and expanding industry, LGA's old programs providing technical assistance to local government and help in developing housing and other community resources, and GOMHD's old programs aimed at buying jobs outright using federal funds provided under the federal Comprehansive Employment Training Act (CETA).

Under DCCA policy, however, these programs will be geared toward "preparedness," which Castle sees as the cornerstone of economic development. Castle believes communities should be prepared for industrial development before companies come calling. The problem lies in convincing business that preparing communities statewide is a better approach than the traditional strategy of snagging companies one by one. Castle says "preparedness" actually looks at industrial development from the "client's" — industry's — point of view.

"We would like to have a role that is active rather than passive," Castle said. "What we have done in the past ... is to basically catalog what the community has [to offer] and put [the] information in suitable shape to give to the industry [which] has expressed an interest in locating in the community. We ought to go a step further and say, 'Here are the kinds of industries that might be interested in locating in your community.' We are very interested in working with communities . . . who say, 'We would like to get more business . . . and here is the kind of business we want. How do we do it?'"

Castle says DCCA can provide this kind of advice, which BED, LGA and GOMHD could not. "I think this agency offers an opportunity to insure cooperation between all the programs. ..." he said. "My perception is that there was a lack of coordination among the three [former] agencies . . . which diminished the capacity to get this job done. At the higher levels, BED was not that interested in working actively with other agencies to dissolve business problems. At lower levels, the truly working levels, quite a bit did go on."

'The commitment of job training money was impressive to Cummins, and it represented another effort by the state to get them here. We were willing to commit dollars and willing to say right now we will do it'

Castle calls the "opportunity for cooperation" the strongest advantage of the merger: Three programs will be coordinated under one policy. When industry or local government seeks help, they contact a single agency whose staff can answer all their questions. Then, when they are ready to negotiate, they sit down with a broker who can commit all the state's resources. Personnel from the industrial development, local government development and employment development programs are working together on a case by case basis to learn each other's roles so that eventually, individual teams will specialize in developing different areas of the state. However, Castle does not expect the teams to reach peak effectiveness for another year; it takes time for the three staffs to understand each others' roles.

Castle says DCCA's team approach "enables us to commit our resources and programs more quickly than our competitors can. The long and short of it is . . . industry . . . can sit down at this table and get commitments right now as to what we will do with all those things over which we have control, or at least our pledge that we will assist them in working with local government and save them some time and trouble." But after nine months of operation, Castle can point to only one shining success: Cummins. In conjunction with other state and federal agencies DCCA secured a $6.9 million federal Urban Development Action Grant (UDAG) from the U.S. Department of Housing and Urban Affairs (HUD). Designed to provide the capital Cummins needed to renovate facilities. The grant was the largest of its type ever awarded to a city of Quincy's size. Castle says DCCA's commitment of more than $2 million in additional federal job training funds could never have happened under DCCA's predecessors.

Faith in merger

"If we had been operating under the old system with three separate agencies," Castle said, "the director of BED would have had to go to GOMHD, hat in hand, and say, 'How much do you think you can commit?' The director of that agency would have had to say, 'Well, how important is this project ... in relation to all the other things I am doing?' The commitment of job training money was impressive to Cummins, and it represented another effort by the state to get them here. We were willing to commit dollars and willing to say right now we will do it.

"We feel we did an excellent job in our support role," Castle said, "We are not the ones that made it happen, but I am not so sure it would have happened without our help."

Despite its success with Cummins, DCCA faces a more difficult test with Hunter. Winning the Quincy UDAG grant apparently hasn't given DCCA an advantage in winning a larger UDAG grant for East St. Louis. When DCCA announced June 27 that the fate of its application was unclear, Hunter simultaneously advised employees the meat packing plant would close in six months. Negotiations, however, continue.

Castle knows DCCA needs publicity and he plans on a promotion effort unrivaled by DCCA's predecessors. Castle said that a high-calibre advertising campaign, promoting Illinois as the Midwest's major market, will be a top priority for DCCA's industrial

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development programs. In a major policy move, the agency will bring promotion of domestic programs up to the level previously enjoyed by the foreign programs run by the agency's Brussels, Hong Kong and Sao Paulo offices. Business has often accused BED of publicizing the foreign investment and foreign market programs, the "glamour" side of industrial development, at the expense of domestic programs for attraction, retention and expansion.

Castle said that promotion of industrial development, local government development and employment development services will have higher priority under DCCA than its predecessors. "I think they [industry and local government] need to know what services are available at the state level," Castle said. "That is the greatest failing of this agency . . . and its predecessor agencies. Local government needs to know what services are available free; fiscal management . . . grants ... all those types of things. [Industry] ought to know that we can assist them in meeting their needs, from international marketing to finance, to just some basic technical assistance."

With promotion a top priority for industrial development programs, Castle hopes to convince business that DCCA will deal with what business sees as the major industrial development issues.

Program for finance

DCCA has initiated a new finance program for industry, commerce and small business, which Castle says will demonstrate DCCA's commitment to finance as "part of the total [industrial development] package.

"We are now very much involved in assisting businesses to obtain financing through industrial revenue bonds, pollution control bonds and the [U.S. Department of Commerce's Economic Development Administration] EDA program," Castle said. "EDA is an innovative program; the finance concept involves the creation of a secondary market for EDA-guaranteed loan paper. That is a state initiative ... to make a federal program more effective. And that is... an endeavor BED would not have . . . seen as part of its mission."

Castle also hopes to convince business that DCCA has committed the staff and resources necessary to deal with the loss of industry which expands elsewhere in the Midwest. Attraction/retention was the priority under BED, but expansion, which Castle sees as "truly a third category," will share priority equally under DCCA.

'EDA is an innovative program; the finance concept involves the creation of a secondary market for EDA-guaranteed loan paper. That is a state initiative...'

Despite his faith in promotion, Castle obviously fears business has been prejudiced by a United Press International series by Marcia Stepanek this spring which charged DCCA with mismanagement in its industrial development division. Castle admits there was some truth to the charges. "As far as management is concerned, communications — vertical and horizontal — have not always been the best," he said. "The problems in that division — and there certainly were problems — were communications problems, problems in terms of setting objectives, people really understanding what their roles were, where they fit in, what they were supposed to do, that sort of thing." Castle said the problems stemmed from an apparently less-than-effective choice as division chief, a person who was evidentually replaced. "Those problems are being dealt with now . . . and there has been a significant improvement [under a new division chief]," he said.

Castle refuses to dismiss the mismanagement charges as an unavoidable consequence of reorganization. And he maintains services did not suffer from the apparent lack of communication. But some degree of confusion is inevitable during any reorganization and to the degree that communication is lacking, the delivery of services will be hampered. DCCA may have delivered the services provided under BED's old programs, but communication and reorganization problems help explain why it has taken almost a year for industrial, local government and labor personnel to coordinate programs.

Waiting for success

Reorganization generally causes budget problems. In DCCA's case, it operated for nine months under the three budgets of its predecessors (BED, LGA and GOMHD were funded separately because the merger did not take effect until the fiscal year was three months old). This circumstance put DCCA a year behind in preparing its first budget.

Business and government struck a truce of sorts when the merger took effect, agreeing that DCCA needed two years to prove itself. But a year has passed and DCCA — and its director — are under pressure to produce. At 42, Castle, an attorney turned banker, businessman and bureaucrat, is no novice. Nor is he without ambition. LGA director from 1977 until 1979, he took a leave to campaign for state comptroller in the 1978 election. He defeated former House Speaker W. Robert Blair in the Republican primary, only to be defeated by Democrat Roland Burris in the general election. Castle stayed with the Thompson administration, and was Thompson's choice last year to head DCCA. No one needs to tell John Castle he could easily become a casualty in the war over Illinois' business climate. To survive, he needs another Cummins . . . and another . . . and another . . . and it wouldn't hurt to save Hunter either.

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