North Carolina Town May Rescind Pfizer Tax Breaks After Layoffs

North Carolina Town May Rescind Pfizer Tax Breaks After Layoffs

March 13th, 2012 // 12:49 pm @ jmpickett

Recent cuts at pharmaceutical giant Pfizer’s Sanford, NC plant has some Lee County leaders rethinking already-contracted economic incentives with the company.

Lee commissioners talked this week over roughly $36 million in tax value reductions at the local facility that, on top of hundreds of layoffs expected by 2015, has officials mulling whether to halt incentive payments to the drug manufacturer altogether or demand a refund.

“I don’t know about going backwards, but I do know about going forwards we should not be making payment,” Lee County Manager John Crumpton said Thursday.

Officials said the drug company behind popular brands like Viagra, Lipitor and Celebrex sold off $31 million in equipment in the last fiscal year, on top of $5 million in depreciation. The loss in tax value amounts to about $270,000 less in county tax revenues a year.

Nevertheless, Pfizer remains — by far — the most valuable taxpayer in Lee County, totaling an assessed value of more than $307 million in 2011. That amount represents more than 6 percent of the county’s total value and remains far greater than the $40.9 million in value assessed on the Sanford plant a decade ago.

Pfizer cuts have been expected for some time since the company purchased its pharmaceutical rival Wyeth in 2009 and assumed control of the northern Lee County plant.

The facility included a workforce exceeding 800 in those days, but Pfizer chiefs announced their intentions to shelve half of those jobs by 2015 as part of a worldwide restructuring to trim manufacturing.

Crumpton said the manufacturer’s value today is less than it was when the county incentive contract took hold more than three years ago, a contract that promised five annual payments of $213,000 to the company in exchange for investment that included the construction of an administration building.

Local leaders prorated that incentive cash each year when Pfizer failed to meet its promised investment, Crumpton said, noting the county has averaged incentive dispersals of $88,000 to Pfizer over the first three years of the accord. But talk this week indicated that local leaders could cease those payments soon.

Board of Commissioners Chairwoman Linda Shook said Thursday she agrees the incentives should be halted for Pfizer, indicating leaders should also look to seek a refund for past payments.

Pfizer reps did not comment on the prospect of county leaders nixing company incentives when questioned Friday, focusing instead on the manufacturer’s launch of a $7.9 million biomass boiler at the Sanford facility in November, a boiler that officials say will cut greenhouse gas emissions.

“The biomass boiler, which generates steam for the plant while greatly reducing greenhouse gas emissions and power generation costs, is a great example of Pfizer’s commitment to the Sanford site,” Pfizer spokeswoman Grace Ann Arnold said in a statement. “The Sanford site produces key vaccine components for Prevnar and is in the process of becoming Pfizer’s primary site for clinical and commercial launch supplies of new vaccines.”

Commissioner Robert Reives said that, along with the Pfizer incentive questions, the county should review each of their incentive deals. “If we’re looking at one, we should be looking at them all,” Reives said.

The $36 million Pfizer downsizing had a dampening effect on seemingly improving local economic fortunes in the last fiscal year, offset by planned investments of $28 million from construction manufacturer Caterpillar and $8 million from French fragrance-maker Coty.

“We thought things were looking pretty good, then we got creamed pretty good with that $36 million,” Crumpton said.

Longtime critics of local economic incentives have targeted the notion of companies using the tax breaks to spark bidding wars for economic investment, and then perhaps failing to deliver on their investment or promised jobs.

Local incentive contracts, like the one inked with Pfizer, previously did not include written language promising a prorated decrease in incentives if the pledged investment is not completed, although Crumpton said the EDC and Pfizer have cut those tax breaks as a “good faith” effort when the promised company spending did not materialize. Recent reforms in the Lee Economic Development Corporation crafting the documents have yielded contracted “clawbacks” in such cases.

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