Testimony of Good Jobs New York

Bettina Damiani, Project Director

At the New York City Industrial Development Agency Public Hearing

Regarding the Proposed Subsidy to Pfizer

June 9th, 2003

My name is Bettina Damiani, director of Good Jobs New York, a joint project of the Fiscal Policy Institute with offices in Albany and New York City and Good Jobs First, based in Washington, DC. Good Jobs New York promotes accountability to taxpayers in the use of economic development subsidies. Our website, (www.goodjobsny.org) contains the only publicly available database of the city's large corporate "retention" deals. In addition, we recently launched a new project called Reconstruction Watch, to help grassroots groups better understand the many incentive proposals being proposed for the redevelopment of Lower Manhattan; website www.reconstructionwatch.net.

New Yorkers thought they could breath a little easier with last week's news that the City would restore $90 million in budget cuts. This meant we could count on regular garbage pick-up, restored library hours and summer jobs for youth. In comparison, should the IDA vote to approve Pfizer’s $46 million subsidy, it will represent half of the cuts that were just restored.

Tomorrow, if the IDA board approves this project, city officials will declare victory for New York City in the latest battle among the states for jobs and tax revenue. But for the rest of us, two serious questions remain:

1)      Does a company's decision to locate jobs in New York City really depend on giving away our scarce tax dollars?

2)      If the deal goes through, what guarantees will we have that revenue lost to tax breaks will bring a public benefit in the form of good jobs for New Yorkers? With over 300,000 New York City residents unemployed, are we to believe this administration lacks the will to create genuine job opportunities for those New Yorkers?

Many factors influence business location decisions. Access to skilled workforce, customers, transportation, local cultural amenities, good infrastructure and prestige all play a major role. As the then mayor-elect Bloomberg pointed out when he turned down his proposed $14 million city subsidy to Bloomberg LLC, "Any company that makes a decision as to where they are going to be based on the tax rate is a company that won't be around very long...If you're down to that incremental margin you don't have a business."

Statements from both the Mayor and Deputy Mayor Doctoroff since then have renounced the "pay for jobs" approach to economic development, arguing instead that New York City is a high quality location that merits the higher cost of doing business here. Pfizer executives seem to agree. They walked away from larger tax breaks offered by Michigan and turned down already approved grants in New Jersey in order to bring employees to Midtown Manhattan. Clearly, Pfizer values the unparalleled opportunities offered by New York City more than it values tax breaks offered elsewhere.

If tax breaks are not the determining factor in a business's location decisions, then it becomes especially objectionable to offer breaks to one of the wealthiest companies during a budget crisis and a prolonged economic downturn. To put it in a different perspective, Pfizer’s   CEO received compensation of approximately $23 million in 2001. Adding insult to injury, many of the first thousand jobs expected to result from Pfizer's midtown expansion will come from out of state - doing little for unemployed New Yorkers.

For all these reasons, Good Jobs New York opposes providing tax breaks to Pfizer for their planned midtown expansion.

But, if the deal does go forward, it must include guarantees that New Yorkers will benefit. Meaning, the IDA's contract with Pfizer needs to incorporate stronger job standards and recapture provisions than past commercial retention deals required. Two examples from the pitfalls of the 1990's to be avoided are Bank of America and Merrill Lynch. Both received multi-million dollar tax breaks, together laid off thousands of workers, neither paid the city back a dime.

In the case of Bank of America, so many workers were laid off that the deal was terminated in 1998. Although it forfeited future benefits, its contract specified that if employment fell below 65% of the required job base as a result of so-called "non-relocation" (i.e. just plain firing people as opposed to moving them out of the area) then no recapture would be required.  Any contract with Pfizer should demand full repayment of benefits if it fails to meet its employment obligations and repay any administrative fees the city incurred on the deal.

Merrill Lynch's 1997 deal with the IDA demonstrates that strong recapture requirements are not enough to ensure that taxpayers aren't subsidizing large-scale layoffs. The large cushion built into base job requirements means that up to 22% of the jobs promised to be retained can be eliminated before future benefits are cancelled.

Any contract with Pfizer should seek to encourage the employment of New Yorkers, the people who are giving up their tax revenue to reduce the company's cost of operations.  Only with strong contractual provisions that guarantee that New Yorkers will reap benefits in the form of jobs could the $46 million price tag become a satisfactory investment.

If the Mayor wants to earn the taxpayer’s trust, at a time when sales tax and property tax have been increased, the IDA must stand up for the working people of this city and negotiate a deal with workers in mind.

Thank you for consideration of our comments.