The recently announced departure of Pfizer pharmaceuticals from New London, Connecticut, has stirred up an enormous controversy that is still reverberating across the blogosphere. In case you were vacationing in outer space and didn’t catch it, about ten years ago, the Pfizer pharmaceutical company was a force in motivating New London Connecticut, to condemn and raze a 91-acre lower middle class residential neighborhood for redevelopment that would serve the well educated, well paid Pfizer employees working at its nearby, $300 million research center. The Supreme Court gave this caper its blessing in Kelo v. New London in 2005.
Now, Pfizer is saying ta-ta. It has announced that it is shutting down that research facility and moving out of town. It leaves behind some seriously pissed-off Connecticut and New London municipal folks who blew $80 to $100 million on the Kelo caper with nothing to show for it, except maybe a mountain of bad publicity and ill will directed at it and the courts that approved this fiasco — which, in our book, is a case of just deserts. We blogged about that at http://gideonstrumpet.info/?p=324 .
It now turns out that, though overshadowed by the New London debacle, the same thing is happening in Winston-Salem, North Carolina. There the state committed $318 million to induce Dell computers to build a new desktop computer plant that — so it was said — would generate 8000 local jobs. That was in 2005. It never came close — 1500 jobs was more like it, and several hundred workers have been laid off. But who’s counting?
Now, it turns out that with customer demand for desktops in decline (in favor of laptops) Dell is shutting down its Winston-Salem plant and leaving town. Unlike the schmucks in New London, the North Carolina folks negotiated a deal with Dell, that requires a return (or clawback, to use a fancy new word) of at least some of the advanced funds. So much for the myth of the canny New England Yankees. What that clawed-back figure will be is at best unclear at this point, but it appears that North Carolina DOT spent $9.3 million improving roads serving the Dell plant, and the state popped another $3.6 million to train workers for Dell, all in non-refundable funds. Plus another $1.3 million to screen job seekers at the Dell facility. Altogether some $18 million in public money will not be repaid.
Dell, we learn, promises to pay back whatever it owes, but what it owes is unclear and falls short of the state’s total expenditures.
The silver lining of this debacle is that North Carolina did not use eminent domain to force people out of their homes in order to acquire land for Dell, as did New London. At least, that’s our understanding. But the moral is clear: the government entity that would generate money by subsidizing wealthy private enterprises that by rights should be paying their own cost of doing business, is asking for it when the market turns south and the promises of a bigger economic pie turn into pie in the sky.