Arbor Update

Ann Arbor Area Community News

Will the UM buy the Pfizer site?

18. December 2008 • Chuck Warpehoski
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The Ann Arbor News reports that the University of Michigan is expected to announce plans to buy the Pfizer site for $108 million.

Upside: The UM anticipates it will bring 2,000 jobs over the next decade.
Downside: Unlike Pfizer, the UM doesn’t pay property taxes. According to the News:

Pfizer is Ann Arbor’s largest taxpayer. Pfizer paid $14.1 million in taxes last year, just under $4 million of which went to the city of Ann Arbor.

(Thanks to David Cahill for the tip on this story)

  1. What does this do for the K-Dow joint venture? K-Dow was suppose to announce their decision as to where they were going to locate at the end of this year. It has now been delayed until early next year. Has the decision by U of M to buy the Pfizer site caused the delay for K-Dow?

    Do we want K-Dow to locate in Ann Arbor? If U of M buys the Pfizer site, does this prevent K-Dow from locating in Ann Arbor or is there another location for them in Ann Arbor? Or, can they rent space in the Pfizer site from U of M? Is it better for U of M to buy the Pfizer site or would it be better for K-Dow to buy it? So many questions.


       —Michael    Dec. 19 '08 - 01:11AM    #
  2. There is also something about this in Crain’s

       —Nancy Shore    Dec. 19 '08 - 01:54AM    #
  3. press release

    ANN ARBOR, Mich.—In a move that will directly create at least 2,000 jobs during the next decade and accelerate expansion of the University of Michigan’s research activities critical to the state’s economic development, the U-M Board of Regents today approved the purchase of the Ann Arbor property of pharmaceutical firm Pfizer Inc….”

       —Bruce Fields    Dec. 19 '08 - 03:47AM    #
  4. Time to renew consideration of a city income tax?

    I watched the News’ online videos of interviews with Hieftje and Greden, both of whom saw this as a good thing in the long term. I don’t quite understand why, except for Greden’s explanation that the site’s infrastructure probably limited potential buyers. I would guess that it would at best be a wash—the U wouldn’t pay taxes on the property, but they’d assume responsibility for the infrastructure and services for that area. Otherwise, Pfizer would have continued to pay some amount of taxes until a private buyer or buyers eventually purchased it, when a similar (perhaps lower) number of new jobs likely would have created (though probably not with salaries as high as what the U will provide.) I suppose the impact on the housing market would have been lower (or at least slower) in that case.

    Care to expand on your thoughts here, Leigh?

       —Steve Bean    Dec. 19 '08 - 08:25AM    #
  5. I believe there are long-term benefits with short-term problems.

    In the long-term, I believe this deal is a great win for the community because: (1) The UM will create stable high-paying jobs; (2) The new UM workers will buy houses in the region, thus stabilizing home values and the residential property tax base; (3) The new UM workers will shop at local stores, give money to local charities, etc., (4) There will likely be spin-off jobs created in other high-tech industries; and (5) There was no viable alternative for the site in the near future. I am told that K-Dow is still seriously considering the Ann Arbor area, but ruled out the Pfizer site some time ago.

    In the short-term, this will create serious challenges for the local governments because: (1) The City will lose over $3,000,000 in annual property tax revenue, including more than $1,000,000 in general fund revenues (police, fire, etc), and more than $300,000 in parks millage revenue — these translate into real cuts in services; (2) The City must maintain a high quality of life. After all, that’s what ultimately draws good talent to the UM. Will we be able to do that if we lay off police officers, close parks, etc.?; (3) The UM’s anticipated job growth will occur over ten years. How do we pay to maintain City services in the meantime?

    The income tax issue is fascinating. I expressed support for one five years ago because: (1) About 60,000 people commute to the City every day, and they use our roads, but pay nothing in taxes; (2) The income tax would result in the elimination of the City’s 6+ mill general operating property tax millage, which means that some (or maybe all) of the new income tax paid by homeowners would be offset by a dramatic reduction in property taxes; and (3) The income tax exemption could be set high enough to mitigate the impact on low-income renters who wouldn’t benefit from the property tax reduction.

    I would be very interested in hearing what people think about an income tax.

       —Leigh Greden    Dec. 19 '08 - 09:36AM    #
  6. Thanks much, Leigh. Busy day, eh?

    After watching the interviews with Mike Finney, of SPARK, and Jesse Bernstein, of the chamber (both by Stephanie Murray, of the News, who does those quite well, by the way), I have a better understanding of the big picture of how this will stabilize both the residential and commercial tax base as well as the customer base for businesses in the area. Your comments reinforce that. Also, the potential for spin-off companies (which you mentioned in your interview), along with new service businesses and residential development would probably be realized faster than otherwise, restoring the tax base more quickly.

    I have a number of thoughts on both sides of the income tax question, but I’ll limit my comments for now. First, I think that Ann Arbor’s situation as home to a holder of much land area that can’t be taxed may be different than Detroit’s or perhaps that of other cities that have instituted an income tax. Maybe we’re more well suited to it in that sense. Perhaps even more so because that landowner is also the largest employer and pays high wages on average.

    Another thought came to me after reading on the Chronicle site about the Wall Street meeting between the U and neighbors in the Lowertown area. We could potentially do two things with tax dollars assessed on income (is that the right term?):

    1) use some of that money to somehow ‘buffer’ neighbors from the U’s activities—both during construction projects and after; and

    2) use some of it to create a physical and social environment that would potentially obviate the need for undesirable things (from a community standpoint) that the U says are necessary, like the planned parking structures. For example, if we used tax dollars to improve the transportation system (mass transit, roads, sidewalks, bike lanes, car sharing, etc.) to the point that driving would truly become the last choice of commuters, then both the residents and the U could be satisfied. We need to make those kinds of investments eventually, anyway, right?

       —Steve Bean    Dec. 19 '08 - 10:19AM    #
  7. One of the knocks against the income tax is that it would require a lot of renters to start paying the income tax while their landlords enjoy a windfall in reduced property taxes (and no, I don’t expect the landlords to pass along the reduction in property taxes in reduced rents). By implementing the income tax, the city has effectively increased the tax burden on renters with no return in benefit. While renters don’t directly pay property taxes, it’s always factored into the rent they pay so most are already contributing their share in taxes to city services.

       —John Q.    Dec. 19 '08 - 10:28AM    #
  8. Without the sale, I wonder how much longer it would have been before Pfizer started taking down the buildings on the site to reduce its tax burden (as it has done elsewhere)? Right now, what fraction of the taxes on the site are for the land vs the structures?

       —mw    Dec. 19 '08 - 05:51PM    #
  9. The city website has Pfizer property tax information for 2008. Just click on property assessment data under services on the home page and follow the links to the on line assessment data. For 2008, taxable and SEV are the same for the real property-147.755 million. The land is 38.4% of the total. In 2006 the land was 30.2% of the total.

    If you summarize the real and personal property tax detail, it shows about 3.6 million in Pfizer taxes and collection fees going to the city in 2008, with just over 2 million of that going to the general fund. The real property portion of 2008 taxes going to the city is just under 2.3 million with about 1.3 million going to the general fund. The city expected Pfizer to remove all it’s equipment so the best case for the 2010 budget would be real property taxes of 2.3 million with some up or down valuation adjustment.

       —karen sidney    Dec. 19 '08 - 08:17PM    #
  10. I believe that Pfizer was challenging its assessments too.

       —John Q.    Dec. 19 '08 - 09:11PM    #
  11. The income tax discussion is great, and to keep it accessible to all visitors, I’ve posted several of the comments in a new thread.

       —Matt    Dec. 19 '08 - 09:42PM    #