Here’s a great article on the downside of using eminent domain for economic development purposes from the most recent edition of Governing magazine, an exceptional magazine for those of us on the inside of government. I think this story is not so uncommon. Please, don’t enjoy this, but do learn from it.
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Eminent Domain Outrage in Connecticut
A struggling town made a big bet on a big company – and got left holding the bag.
By William Fulton | January 2010
William Fulton
is the President and CEO of Solimar Research Group and a member of the city council of Ventura, California. E-mail him at bfulton@cp-dr.com.
There has been no more notorious economic development effort in America in recent years than the campaign by New London, Connecticut, to persuade the pharmaceutical giant Pfizer to relocate in and revitalize the city’s blighted Fort Trumbull neighborhood. The New London-Pfizer deal gave rise to an infamous eminent-domain case, turned the whole question of eminent domain into a national political issue, and gave aggressive urban redevelopment efforts all over the country a black eye.
Now, however, the worst has happened in New London. Less than a decade after spending $300 million to build a big R&D plant along the Thames River, Pfizer is pulling out. And New London is forced not only to ask itself what it got for its money but also to ponder what options a city has when it lays all its bets on one company, and the company is gone after less than a decade.
Downsizing in the wake of a merger with Wyeth Pharmaceuticals, Pfizer is closing the New London facility and consolidating its research and development across the river, in Groton. New London will be left with an empty Pfizer building and the mostly vacant Fort Trumbull neighborhood nearby, which was never redeveloped as the city had hoped.
New London and the state of Connecticut spent, by one reporter’s count, $160 million on the Pfizer deal. And the full cost isn’t in yet. The state and the city will continue to pay 80 percent of Pfizer’s property taxes for two more years.
From Pfizer’s point of view, the retrenchment to Groton makes sense. The facility there is only seven miles away by car. From the region’s point of view, Pfizer’s move is about as soft a blow as one can imagine. Some people will be laid off, but most will simply travel to work on the east side of the Thames River rather than the west side. Pfizer has been operating in Groton for more than 60 years. But from the standpoint of New London’s local government and fiscal condition, it’s an enormous blow.
Bringing Pfizer in – even at considerable cost – did make some sense in the beginning. A faded 19th-century city surrounded by seaside affluence, New London had reason to hope that spending money and political effort to direct investment to older parts of the city might revive them. Certainly nothing else had solved the problem.
So New London delivered an old carpet factory to Pfizer. At least partially at Pfizer’s request, the city condemned most of the adjacent working-class neighborhood around Fort Trumbull in hopes of attracting ancillary development. Suzanne Kelo, a resident of the neighborhood whose house was condemned as part of the project, sued on the grounds that taking a citizen’s property in this manner for private development, rather than public use, was an improper exercise of governmental authority. The city defended its actions all the way to the Supreme Court, and ultimately prevailed, but the decision was so unpopular among New London residents that local leaders were reluctant to use their newly won power.
What did New London buy with all this money, hassle and bad publicity? Is it possible that the whole exercise somehow laid a foundation for long-term prosperity? That’s a hard case to make.
Unlike other locales that attract and later lose a plant, New London did not get a skilled new labor force or a chain of suppliers. Those were already present because Pfizer had been across the river in Groton for decades. Nor did New London ever get the “urban village” that it was expecting to create around Fort Trumbull, which could have attracted other investment. Pfizer wanted the urban village, but it doesn’t exist, partly because of the city’s caution in the wake of the Kelo controversy.
Just about the only thing New London has left for its money and effort is the Pfizer building itself – which is still owned, at least for the moment, by Pfizer. “Basically, our economy lost a thousand jobs, but we still have a building,” Councilman Robert Pero told one newspaper reporter. Then he added, “I don’t know who’s going to be looking for a building like that in this economy.”
It’s always a tough call in economic development whether to invest in existing economic infrastructure or go after the home run with the big company that can turn your town around. New London went for the home run. That was understandable; the city had been on the skids for decades and Pfizer represented a quick victory. In the end, however, the New London story reaffirms what may be the most important lesson in economic development: The measure of success is not in the company you attract but what you’ve got when the company leaves.
