Skip to comments.The Business Lesson of Pfizer and Ann Arbor - Should cities offer select 'corporate welfare'?
Posted on 04/13/2012 1:30:00 PM PDT by MichCapCon
In 2001, drug manufacturer Pfizer Inc. was trying to get only the second tax abatement in the city of Ann Arbors history and the first since 1982.
Frustrated by the City Councils tepidness to award the incentives, then-Pfizer Senior Vice President David Canter said the council seemed anti-business and implied that the drug manufacturer would completely abandon Ann Arbor if a deal wasnt forthcoming.
The City Council eventually worked out an $84.2 million tax incentive deal over 20 years. However, just six years later, Pfizer announced it was closing its Ann Arbor facilities by 2008.
Pfizers announcement left city officials stunned and media reports followed about the devastating impact the companys departure would have on the local economy. Pfizer was thought to be a rock of Ann Arbors robust economy. It was the citys largest taxpayer and The city's largest private employer with more than 3,000 workers.
Now, in 2012, Ann Arbor has proven there is life after Pfizer, which raises the question of how important it is to provide big name companies tax incentives in fear of them leaving.
The big business news rarely translates into significant economic impact, said James Hohman, a fiscal policy analyst for the Mackinac Center for Public Policy. The general knee-jerk reaction is, Youve got to do something for these big businesses. But in reality, they dont account for much. If state policy wants to encourage actual economic growth, then it needs to continue broad-based policy reforms.
The city of Ann Arbors unemployment rate was 5.5 percent in June of 2007 before Pfizer announced it was leaving. By July 2009, the unemployment rate had jumped to 10.3 percent.
I don't think you can say that the loss was overstated, said Don Grimes, a University of Michigan economist, in an email. Pfizer did eliminate 2,000 jobs in Ann Arbor. Add to that the jobs lost as Borders downsized and eventually went into bankruptcy liquidation, the loss of jobs at the Ann Arbor News, the loss of thousands of jobs in auto manufacturing plants (mostly in the eastern part of the county), and even the loss of white collar auto jobs elsewhere in Southeast Michigan, many of whom resided in Ann Arbor, and its hard not to conclude that Washtenaw County was hit by a tsunami of job losses.
By November 2011, Ann Arbors unemployment rate had dropped to the 5.5 percent of the Pfizer days. The unemployment rate was 5.9 percent as of January 2012, the most recent data available.
In June 2007, Washtenaw Countys private-sector employment was 127,959. In 2010, it decreased to 112,006. In September 2011, it was up to 120,058, according to the most recent data available. Ann Arbor's overall population has remained virtually unchanged since the 2000 census.
The interesting question is, Why hasn't [sic] there been bigger negative consequences? Grimes said. But, the city of Ann Arbor appears to be thriving.
Grimes said he thinks the "better educated" residents of Ann Arbor were able to reinvent themselves in new jobs.
My hunch is that a lot of the former Pfizer workers, Borders workers and white collar auto industry workers made the same sort of transformation. My guess is that the unionized blue collar workers were not as successful in transforming themselves, but that would be the hypothesis to be tested by (a) research project.
I think Ann Arbor might be a great example of how people successfully adapt to challenge, the eastern part of the county less so I suspect, Grimes said. The so-called job security of those auto industry union contracts may have allowed the workers to forget their entrepreneurial spirit. If your job/income is not so secure, I think people are always thinking about doing something else and thus when you lose your job/income the person is better prepared (mentally and psychologically) to make the necessary adjustment.
Ugh. Ann Arbor, 3.5 square miles of idiocy surrounded by sanity.
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When the politicians cut any of these deals, there should always be a proviso that if the corporation leaves before the agreed upon term (20 years in this case) ALL tax benefits are erased and they have to pay the backlog of taxes as an “exit tax”.
It's easy for the employed writers of this article to say that Pfizer didn't really make any difference in that community other than offering jobs while they were in town and after they pulled out, that town is still alive and remaining static.
I wonder how the "uneducated" hourly employee who used to work for Pfizer feels about that?
Ann Arbor also has a very large number of taxpayer supported jobs both at UofM and municipal.
If given a choice between vaporizing Detroit or Ann Arbor, Detroit could sleep easy. Detroit is kind of a mindless uncaring leech but Ann Arbor is an angry, arrogant, and demanding leech.
Answer to the headline:
No, because it will cumulate with the corporate equivalent of Obama.
I found the article to be pretty unconcerned about a net loss of 7,000 jobs. That is not unimportant. Now, the town may still appear prosperous [20,000+ college kids will support a lot of retail,] but Pfizer's loss along with the others mentioned certainly must have had an impact somewhere.
That doesn't mean I agree with these sorts of tax deals.
I know what you're saying, but if my employer is getting tax exemptions to stay on site, I really don't care just as long as I can keep my job........
FWIW, I went thru a plant closing in Detroit and the ultimate sale of the corporation to a Canadian automotive group. Fortunately I had the time and service to be eligible for retirement benefits a year later. There were many others in the plant who weren't so lucky.........
That of course has nothing to do with the circumstances surrounding Pfizer but at least I can relate to those folks who lost their jobs while the city of Ann Arbor and its elites continue on as if nothing happened.......After all, Pfizer is an evil corporation.
Of course -- perfectly understandable. But businesses that locate in a town only because of tax breaks are a dicey proposition. Not dissimilar to solar panel manufacturers who go into business only because of government subsidies.
I suspect there’s something unconstitutional about a town or city giving a “tax break” to an company it’s trying to secure (or keep). Probably falls under Equal Protection - the idea that one company can get a free ride on property taxes essentially means that the other companies (and homeowners) have to pick up their bill.
This crap needs to end. If a city wants to attract business, then let them make it a business-friendly place for ALL companies, not just the ones trying to find a new place to hang out (a little Ann Arbor lingo).
“If given a choice between vaporizing Detroit or Ann Arbor, Detroit could sleep easy. Detroit is kind of a mindless uncaring leech but Ann Arbor is an angry, arrogant, and demanding leech.”
Back in the 1980s, I sometimes thought about how easy it would have been for the Soviets to launch a surprise attack on a Saturday morning and hit up all of the colleges having football games. They would have wiped out the next generation of US leaders, and they could have even done it with conventional weapons (assuming their targeting was right on).
Then it occurred to me how stupid that would be...since the people they would be vaporizing would be the ones to carry their water in the generation, like Obama’s bunch. So Saturday football games were safe after all.