CHICAGO – Peoria, Illinois, its school district, and local county credits are expected to withstand the blow of Caterpillar Inc.'s decision to move its headquarters to downtown Chicago, S&P Global Ratings said.
The company and Chicago Mayor Rahm Emanuel announced on Monday Caterpillar's plans to move its headquarters and executive staff 150 miles to Chicago from its longtime Peoria home later this year.
Only a small number of employees will be relocated at first, after which the company will increase its Chicago staff to about 300, including new hires, S&P said. The company canceled plans to build a new headquarters complex in Peoria to replace its current building, which will now be maintained for office personnel who are not moved to Chicago.
"Although Caterpillar's relocation is not good news for the Peoria metropolitan area, it is our opinion that the move will not substantially affect the local economy or tax base because of the small number of people involved," S&P said in a bulletin published Wednesday.
S&P "will continue to monitor Caterpillar's impact on the local economy and the creditworthiness" of the city and neighboring entities "as events progress." The city carries a AA-minus rating and stable outlook, Peoria County is rated AA with a negative outlook and Peoria City School District No. 150 is rated A and stable.
Caterpillar makes up about 1.2% of the city's tax base, 1.7% of the district's tax base, and 1.6% of Peoria County.
"We consider Peoria's economy to be broad and diverse with significant employment in health care, higher education, trade and services. Although Caterpillar is the area's largest employer, the city's three hospitals and other health care providers have in total a larger workforce," S&P said.
About 2,600 people work in the headquarters. The company also operates four manufacturing facilities outside of the city bringing its total central Illinois employment to about 12,000. The company reports that the Peoria area will continue to have the largest number of Caterpillar employees in the world.
The company in September 2015 said it was planning a major restructuring as it sought to reduce costs and facilities internationally.
The impact of the company's move to Chicago on the local tax base, if any, is likely to be "inconsequential," but it "bodes well for Chicago's ability to attract and retain major company headquarters," S&P said.
It also provides Emanuel with another company to boast about following relocation announcements in recent years that have included Archer Daniels and McDonalds.
The companies have cited the proximity to O'Hare International Airport, transportation options, cultural amenities, and skilled workers as their reasons.