The Employee Owned Enterprise Advisory Council Offers New Alternatives For Illinois Business

By GEORGE H. RYAN, Lieutenant Governor, Chairman, EOEAC

In December 1985, the Illinois Development Finance Authority (IDFA) was provided a first grant by the General Assembly in the amount of $2 million to enable the Employee Owned Enterprise Advisory Council to fulfill its statutory role in retaining Illinois jobs and industry.

Since then, the Employee Ownership Assistance Program was fully implemented by the Council and IDFA. Together we provided supplemental financing to facilitate employee acquisition of manufacturing facilities whose current management was considering closing or out-of-state relocations. As structured, the program made direct loans available to employee owned enterprises for financing up to 50 percent of total acquisition costs.

Consider, for example, its first year of operations. The Council approved three projects totalling $1.5 million, with the loans resulting in the retention of 454 jobs. In addition, new employment opportunities were created for 197 Illinoisans.

The projects reflect a range of diversity: a small bakery equipment manufacturer in Salem, a medium sized agricultural components producer in Goodfield and a large retail advertising distributor in Peoria.

Moreover, two cities, Kewanee and Monmouth, were provided with a total of $80,000 in funds to conduct feasibility studies for determining the viability of employee acquisitions within their respective communities. Such funding was made available from the interest earnings of the initial funding to IDFA.

In accomplishing these tasks, the Employee Owned Enterprise Advisory Council developed a new frame
work from which Illinois industry and manufacturing can tap the State's resources to meet an ever growing demand for economic assistance. The Council instituted an application procedure which minimizes delays in the review process and has worked with local development associations to better familiarize business with this new program.

Worker-owned companies are proliferating throughout the State and for good reasons. Employee ownership increases productivity, keeps profits and business within Illinois communities and, most importantly, retains jobs.

AN OVERVIEW

The Employee Ownership Assistance Act (Public Act 82-991 approved and effective September 10,1982) was designed to encourage employees of plants which are about to be closed or relocated to acquire the facility and to operate it as an employee-owned business. Through implementation of this Act, Illinois is in the forefront nationally as the first State to have a structured resource which provides the essential financing to Illinois business. The State has been filling this gap as a means not to finance unsuccessful or improvident industries, but rather to provide funding to prosperous businesses with a solid financial history which may cease to operate in Illinois due to changes in ownership or corporate re-structuring.

The Department of Commerce an Community Affairs (DCCA) can provide basic information, general assistance with regulations and other services to employees involved in an acquisition attempt.

October 1987 / Illinois Municipal Review / Page 9

In situations in which a plant closing or relocation is imminent, the employees would form an ownership association for the purpose of assuming ownership and control of the plant. The employee ownership association would develop a plan to purchase the facility, collect financial and product marketing information and seek private funding for the purchase of the facility.

Should the association fail to receive adequate funding for the take-over from private sources, the employee ownership association may then seek assistance from the State.

Application for State support must be provided to the Employee Ownership Advisory Council and to the Illinois Development Finance Authority (IDFA). The Employee Ownership Advisory Council is a seven-member body chaired by the Lieutenant Governor and composed of individuals representing business, labor and community interests. The Advisory Council provides information on employee ownership and reviews and approves applications for assistance in conjunction with IDFA on a regular basis. For further information, please write:

Lieutenant Governor, George H. Ryan
State of Illinois Center
100 West Randolph Street
Suite 15-200
Chicago, Illinois 60601 •

Page 10 / Illinois Municipal Review / October 1987