Gurnee waiting for AKHAN; tax deal announced a year ago not in place

 
 
Posted11/18/2015 5:15 AM
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  • Adam Khan, founder and CEO of AKHAN Semiconductor, showed off a sample of his company's product in a packed Gurnee village hall on Sept. 16, 2014. Earlier in the day, the state of Illinois issued a new release about a financial incentive agreement for AKHAN despite a deal not being in place.

      Adam Khan, founder and CEO of AKHAN Semiconductor, showed off a sample of his company's product in a packed Gurnee village hall on Sept. 16, 2014. Earlier in the day, the state of Illinois issued a new release about a financial incentive agreement for AKHAN despite a deal not being in place. Steve Lundy | Staff Photographer

  • A contract is pending for this building at the 940 Lakeside Drive in Gurnee where AKHAN Semiconductor is supposed to start operations.

      A contract is pending for this building at the 940 Lakeside Drive in Gurnee where AKHAN Semiconductor is supposed to start operations. Paul Valade | Staff Photographer

  • This building formerly occupied by Kenall Manufacturing building in Gurnee is where AKHAN Semiconductor originally was supposed to locate corporate headquarters and production.

      This building formerly occupied by Kenall Manufacturing building in Gurnee is where AKHAN Semiconductor originally was supposed to locate corporate headquarters and production. Gilbert R. Boucher II | Staff Photographer

  • Adam Khan, founder and CEO of AKHAN Semiconductor, spoke to politicians and community leaders about his company locating in Gurnee on Sept. 16, 2014. Earlier in the day, the state of Illinois issued a new release about a financial incentive agreement for AKHAN despite a deal not being in place.

      Adam Khan, founder and CEO of AKHAN Semiconductor, spoke to politicians and community leaders about his company locating in Gurnee on Sept. 16, 2014. Earlier in the day, the state of Illinois issued a new release about a financial incentive agreement for AKHAN despite a deal not being in place. Steve Lundy | Staff Photographer

  • AKHAN Semiconductor is making plans to move into the 940 Lakeside building in Gurnee. A contract is pending on the building in the Tri-State office park.

      AKHAN Semiconductor is making plans to move into the 940 Lakeside building in Gurnee. A contract is pending on the building in the Tri-State office park. Paul Valade | Staff Photographer

  • This news release was issued Sept. 16, 2014, to announce an agreement for state financial incentives to help AKHAN Semiconductor locate in Gurnee. Such an agreement didn't exist when the announcement was made, according to the Illinois Department of Commerce and Economic Opportunity.

      This news release was issued Sept. 16, 2014, to announce an agreement for state financial incentives to help AKHAN Semiconductor locate in Gurnee. Such an agreement didn't exist when the announcement was made, according to the Illinois Department of Commerce and Economic Opportunity. Bob Susnjara | Staff Photographer

It was a little more than a year ago when a host of politicians and community leaders expressed excitement over a state economic incentive deal that would help bring a cutting-edge technology company and new jobs to Gurnee.

"Similar to Silicon Valley, we think this will become the Diamond Prairie," Gurnee Mayor Kristina Kovarik told a packed village hall audience as she sought support from other government officials to provide $2.3 million in local financial assistance on top of roughly $3.5 million in income tax breaks expected from the state for AKHAN Semiconductor.

As it turned out, the Sept. 16, 2014, announcement by the Illinois Department of Commerce and Economic Opportunity was about an agreement that didn't exist at the time and still hasn't been reached with AKHAN, according to the agency's responses to Daily Herald open-records requests.

"Only recently has AKHAN requested the completion of the incentive package transfer," company executive Christopher Fox said, "and has been working diligently with the Department of Commerce and Economic Opportunity in completing the transfer."

AKHAN is scheduled to host local, state and federal politicians as part of a ribbon-cutting ceremony for its planned move into a Gurnee business park Friday. Plans call for AKHAN to have a corporate headquarters and a manufacturing facility to produce cutting-edge, diamond-film semiconductors for the aviation, defense, telecommunication and power industries.

Announced quickly

The state's AKHAN announcement came a little more than a month before ex-Gov. Pat Quinn, a Chicago Democrat, lost to Wilmette Republican Bruce Rauner in the general election. While the strategy behind the news release is unclear, one of Illinois' top political experts said it would not have been unusual if Quinn's administration rushed good news just before the election in an effort to gain votes.

Kent Redfield, an emeritus professor of political science at the University of Illinois at Springfield, said the word "agreement" may have been used because it would not have sounded as positive to announce AKHAN had a tentative deal that could become final several months later. Redfield reviewed the state's AKHAN announcement for the Daily Herald.

"There is pressure in a campaign," said Redfield, a consultant for the Illinois Campaign for Political Reform. "You manipulate how you do announcements and how you present them."

However, former Department of Commerce and Economic Opportunity Director Adam Pollet bristled at the suggestion the Quinn administration rushed the AKHAN agreement announcement for political purposes.

"The timing of this announcement -- including DCEO's conditional approval of performance-based terms, the CEO of AKHAN's agreement to those terms and the selection of Illinois as the site for the company's new facility -- was driven entirely by the public notice requirements for the village of Gurnee and AKHAN's stated timeline for real estate acquisition," Pollet said.

"Any suggestion otherwise is a disservice to the hard work of the village of Gurnee, local legislators, AKHAN and DCEO in undertaking a worthy project to create jobs in Lake County."

Pollet sent a Sept. 12, 2014, letter to AKHAN indicating approval of the $3.5 million in financial inducements subject to all legal and other requirements. He asked that AKHAN not say anything about the tax credits before the state of Illinois news release was distributed four days later.

"Under its agreement with the Illinois Department of Commerce and Economic Opportunity (DCEO)," the release read in part, "AKHAN would invest at least $15 million and create at least 80 jobs in two years. The company estimates that it might employ 250 people within three years."

However, Department of Commerce and Economic Opportunity Freedom of Information Act officer Sheila Chernis confirmed an agreement has yet to be struck and that AKHAN representatives didn't get far in the application process.

"They filled out an application, but nothing was ever finalized, so an agreement was never sent to them to sign. AKHAN was unable to fulfill the requirements to come in and use the programs," Chernis said.

One of the few Gurnee-area critics of AKHAN, Warren Township High School board member Liz Biondi, joined Catherine Campbell in abstaining on a vote in October 2014 that resulted in approval of $90,000 in property tax breaks for the company over five years.

Before the vote, Biondi questioned the lack of publicly available information about AKHAN. She said the lack of the state incentive agreement now calls into question whether Warren officials did enough research before the board majority approved the property tax breaks.

"I believe that we are in the business of educating students, not promoting businesses," she said.

What's next

Kovarik said she's confident the state will approve an agreement for AKHAN to receive the income tax breaks based on investment and job creation under the Economic Development for a Growing Economy program. The EDGE program is available to companies weighing a project in Illinois against sites outside the state.

"I believe, and I have no indication otherwise, the state supports high-tech manufacturing," said Kovarik, who added she believes AKHAN is committed to Gurnee even if it doesn't land the state incentives.

On Nov. 10, the Rauner administration announced several changes in how the state will handle the incentives. For example, the state now must send a letter to a company officially offering the incentives and outlining specific requirements it must meet for job creation and investment.

AKHAN has had a partnership with Argonne National Laboratory to develop technology using energy-efficient diamond film as semiconductors. Argonne announced in November 2014 it granted an exclusive licensing agreement for the technology to AKHAN, which is expected to become the first U.S. company to fully develop the process.

Company founder Adam Khan has said the use of diamond semiconductors, rather than silicon, means devices can be made thinner and operate at higher temperatures, benefiting smartphones and "wearable" technology such as Google Glass.

Approved early this year, Gurnee's end of the incentive package requires the village to reimburse a maximum of $1.5 million in sales tax to AKHAN over five years, unless the dollar total is reached earlier. AKHAN would receive the money only if it generates sales tax, according to the agreement.

Lake County would provide a maximum of $530,000 in sales tax reimbursement to AKHAN as part of the local incentives. There would be no financial obligations if AKHAN doesn't sell anything, County Administrator Barry Burton said.

AKHAN was supposed to use the tax inducements to bring employees from Hoffman Estates and California to the Gurnee company headquarters and factory. After a Gurnee village board meeting in June, Khan said AKHAN expects to have about 80 workers, up from an originally projected 54.

Documents show the entire $2.3 million package of local incentives would include property tax abatements from the Warren and Woodland school districts, Gurnee Park District and Warren Township government.

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