Playskool closing may change the way cities woo firms
The toy factory doesn't need Samuel Sosa anymore. Last week, Playskool Inc. laid off Mr. Sosa, a painter and 12-year employee. ''This was my first job,'' says Santia Oliveras, standing outside the two-story brick factory on Chicago's West Side. She still has her job for the moment. But the factory is due to shut down permanently in February.Skip to next paragraph
Subscribe Today to the Monitor
Ordinarily, the closing of this Chicago factory would be a sad, local story with a familiar ring. The toy operation is moving to Massachusetts. Some 700 jobs, mostly to women and minority workers, are being lost. But the Playskool move has become more than that.
In what may be a precedent-setting case, the city of Chicago has gone to court, charging that Playskool broke a promise to create new jobs.
''We've had our share of plant closings,'' says Robert Mier, commissioner of the Chicago's economic development department. ''But this one struck a community chord.''
The case, which has its share of twists, including an anonymous letter to the mayor that started the controversy, revolves around an industrial revenue bond. These bonds, known as IRBs, are popular lures used by state and local governments to keep existing businesses in the area and bring in new ones.
In the case of Playskool, the measure eventually failed. In 1980, the company received a $1 million IRB through the city. It used the money to buy new equipment. In return, Playskool said it would add 446 new jobs at the Chicago plant.
The bank-financed bond helped Playskool. It had a low interest rate. And because it passed through the city's hands, the money came tax-free. Unfortunately, the new jobs never materialized. In fact, the number of workers dwindled from 1,150 to 700.
Then, last January, the mayor's office received an anonymous letter, apparently from an employee, who said the plant would close. This was denied by Playskool's then president, who reportedly said the plant was profitable. But in September, Hasbro Industries Inc. bought Playskool's parent company, Milton Bradley Company. Twelve days later, the company announced the Chicago factory would close.
Talks between city and company officials were not fruitful. Company representatives said one thing and did another, Mr. Mier charges: ''There was that . . . feeling of a trust or understanding between the public and private sector, and that the trust had been breached.''
Reluctantly, the city sued, charging that Playskool just wanted the IRB money and had never intended to create new jobs. The suit got support, even from the neighborhood's nonprofit economic development group, which includes many business people.
''The plant was being phased down almost to the day the bond was let,'' charges James Lemonides, executive director of the group, called the Greater North Pulaski Development Corporation.
Company officials refute the accusation.
''If there never is an intention to build the business . . . I think that constitutes fraud,'' says Stephen Hassenfeld, chairman and chief executive of Hasbro Bradley Inc. But Milton Bradley did try to keep the plant afloat, he adds , putting in at least four different management teams and investing some $43 million in the plant since 1972.