Business

Cities poaching jobs from each other with taxpayer subsidy

Monday, May 09, 2011

"There's no honor among thieves," says Brisbane city manager Clay Holstine. Holstine's losing one of his town's largest employers, along with $2.1 million in tax revenue. The southern San Joaquin Valley city of Visalia is the winner, using tax breaks and incentives to woo VWR, a laboratory supply company to schools and the biotech industry.

Brisbane has been home to VWR for almost 50 years, employing more than 100 blue collar workers making $20.75 an hour under a Teamsters Union contract. City officials, though, say local VWR managers won't talk to them to see what incentives they might offer to stay put. VWR has already broken ground for a new 500,000-square foot distribution center, which it says is logistically ideal for quick delivery to clients in Northern and Southern California. The new warehouse should open some time next year.

About two dozen of VWR's Brisbane employees showed up for a hearing this morning, co-chaired by Rep. Jackie Speier, whose district includes Brisbane, and California State Treasurer Bill Lockyer. Speier and Lockyer are angered by an old state law that allows redevelopment agencies to offer tax incentives to employers to companies already operating in California. The incentives, they believe, were intended to attract companies and to stimulate job creation from out-of-state employers.

"This is not about ripping out the jobs in one community and transplanting them in another community," said Speier. "That's not what it's about, and it's being abused here and I think we need to address it."

David Gaytan, a 28-year warehouseman at VWR, says he has a wife, three children and a grandchild to support. His wife was laid off from her job. A co-worker, Donald Dugyawi, held his hands in prayer during the 90-minute hearing. He told us later he was praying for his job.

Brisbane is also a victim. VWR generates 18.5 percent of the city's general fund revenue, mostly from sales taxes. That's enough to cover 67 percent of the annual police department budget and 88 percent of the fire department budget.

"It's just not good for anybody, and I don't think that in a sober moment a city like Visalia would look at this and say this is good either," said Holstine.

VWR is headquartered in West Chester, Pennsylvania. It was acquired in 2007 by a Chicago based investment firm, Madison Dearborn Partners. Lockyer said that the state employees' pension plan, CalPERS, has a $610 million investment in Madison Dearborn.

A VWR spokeswoman said no one was available for an ABC7 News interview; however, the company issued a statement indicating, "We do not anticipate benefitting from any hiring or employment incentives or credits at this time, and the possibility of obtaining such credits did not impact our decision to build in Visalia."

San Francisco attorney Julian Gross, who testified at the hearing, said that VWR would be eligible for a $37,500 tax credit for every employee hired. There are other incentives available, such as accelerated depreciation for equipment investments.

With construction underway of the new Visalia warehouse, it's unclear what can be done to stop VWR's move from Brisbane. Assembly member Jerry Hill said he plans to introduce legislation later this week in Sacramento that would impose a penalty for any company that benefits from redevelopment agency incentives that result in jobs shifting from one California city to another.

Brisbane officials say no one at VWR will return their calls, email or letters.

"They need more than a slap on the hands, so I'm hoping they're going to rethink this move altogether because I'm going to make it living hell for them moving forward," said Speier.

(Copyright ©2014 KGO-TV. All Rights Reserved.)

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Tags:
brisbane, jobs, taxes, jackie speier, business, david louie
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