Early this week, Pfizer announced it will close down the research facility the company had built in 2000 for almost $300-Million in New London, Connecticut. City fathers cited the Pfizer facility in arguing for the use of eminent domain to clear nearby property of private homes for a huge development Pfizer was to be part of. A few years ago, the U.S. Supreme Court approved condemnation for that commercial project (as opposed to a highway or sewer plant). Homeowners had begun the legal battle, not wanting to give up their homes.
There aren't too many Alabama elected officials who will get into a public battle over condemning someone's home for a shopping mall (yes, I remember Alabaster and Wal-Mart in 2003), so that's not the lesson from what happened to New London. The lesson for Alabama is not to trust developers. Companies exist for one purpose. It is not to provide taxes to the local municipalities. It is not to give people jobs. It is to make a profit.
Pfizer is closing the big new building just as the ten year tax abatement they received as an incentive ends. If the city and state officials signing that contract knew Pfizer would end up merging with another company and abandoning the new HQ, would they have signed? The lesson is to presume companies will do whatever is in their self-interest.
We love to throw cash and other incentives at companies that promise to locate in the state. Elected officials love it because it's mostly not their money, and they can brag about all the development they brought in when they run for reelection. But we must be sure to make those incentives have lots of taxpayer strings attached. If the comapny closes, or if their employment falls below a certain level (as is happening to Pfizer in another area), they have to make compensation. The lure of winning a new plant could make it tempting to be less than dilligent about that part of a contract. Let's make sure they remember New London.
well said
ReplyDeleteIn Alabama, our incentives have what are called "clawbacks," meaning if the company doesn't live up to it's part of the bargain, then the company must pay the incentives back.
ReplyDelete"Pfizer is closing the big new building just as the ten year tax abatement they received as an incentive ends."
ReplyDeleteHey!
I have an idea!
Let's play "stoopid elected official"!
We can pretend that we don't know these things will happen, and that "companies exist for one purpose... to make a profit."
In my opinion, the city should condemn the property, resell it at public auction, charge all losses back to Pfizer, and send a tax bill for the entire cost of the Kelo v New London ordeal.
The time for "incentives" is long gone.
It's time for some "dis-incentives," like severe penalties for moving overseas, increased tax rates for overseas production, and severe penalties (for example, quadruple overall costs and profits, payable in 30 days to the locality) for such actions as exhibited in this case.
This is quite simply a case of short-term profits, versus long-term gains.
The only thing the good people of New London, CT need now is a kiss... because they've already been screwed.