The Crier

What Google + Pfizer Mean(t) to Ann Arbor

Pfizer Said Goodbye, Google Said Hello — What Happens Now?

Andy Kroll · The Exchange · Oct 18, 2007

With Michigan’s budgetary crisis temporarily averted, due in part to a last-gasp emergency extension and significant tax increases, state lawmakers now have the month of October to try to accomplish what they had failed to do in the previous eight months: agree upon a spending plan for the new fiscal year. When an agreement on a new budget is reached, it will likely be a patchwork mix of compromises and cuts with no intention whatsoever of solving the state’s broader economic woes. According to former state officials, the planned $440 million in cuts and income and sales tax hikes will not alleviate Michigan’s existing deficit, but merely allow for the state to break even and keep its head above water. For the time being, Michigan, once an industrial powerhouse in its Fordist heyday, is suffering from a crippling recession that, despite the best laid plans of state lawmakers, no balanced budgets or tax hikes will fix.

One area that has, more or less, weathered this statewide recession is Washtenaw County. So far this year Washtenaw County’s 4.4 percent unemployment rate is not only the lowest in Michigan, according to the Department of Labor & Economic Growth, but was also below the national rate of 4.5 percent. Ann Arbor was recently named a “City on the Verge” by business magazine Fast Company, and U-M’s hospital system was named one of “America’s Best Hospitals in 2007” by U.S. News and World Report. In addition, Grupo Aernnova, a Spanish aeronautical company, recently announced plans to open a facility in Pittsfield Township and invest around $10 million in the local economy.

Despite such encouraging signs as the lowest unemployment rate in Michigan, and the region’s relative economic stability, the past fourteen months have been somewhat turbulent for Washtenaw County and its citizens.

When Internet giant Google announced last summer its plans to open an office in Ann Arbor, the early statistics were staggering. For starters, the company would immediately bring an estimated 1000 jobs, which would likely bring another 1200 spin-off positions. Economists calculated that Google’s presence in Washtenaw County would generate over $2 billion in personal income over twenty years. For Ann Arbor area citizens, Google’s decision to do business in their backyard was just another piece of good news for a city familiar with, and accustomed to, economic growth and diversity.

Yet despite such encouraging signs, and the region’s relative economic stability, the past fourteen months have been somewhat turbulent for Washtenaw County and its citizens. Just six months after Google’s announcement, the area’s biggest and most recognizable company — global pharmaceutical corporation Pfizer, Inc. — said it would immediately begin shutting down its Ann Arbor facility. The New York-based company came to the area after acquiring Warner-Lambert in 2000, and with it the Parke-Davis research and development facilities on the city’s north side. Pfizer Global Research and Development, which emerged from the Parke-Davis purchase, has since featured prominently in the area’s economy for almost a decade. Needless to say, when Pfizer’s corporate headquarters announced last January its plans to close its two million-square-foot Plymouth Road facility over the next two years, the news shocked area residents and business owners. Many area citizens believed Pfizer to be one of the most important corporate partners in Washtenaw County, and swaths of local business owners bemoaned the loss of Pfizer’semployees and business.

The statistics surrounding Pfizer’s departure were equally alarming: nearly 2100 jobs — over one percent of the entire Ann Arbor metro area’s workforce — were reportedly being relocated to other facilities or eliminated altogether. Additionally, the company would completely vacate its state-of-the-art facility, and the city would be losing its single largest taxpayer. That a company synonymous with economic prosperity in Washtenaw County, and also a leader in the state’s burgeoning life sciences sector, would be gone in two years was a bitter pill for citizens to swallow.

The questions now are which move has had the bigger impact so far on Washtenaw County, what sector has been hit the hardest, and what is the future impact going to be?

Nearly fifteen months have passed since Google arrived and Pfizer began leaving Washtenaw County, and the important questions now concern the long-term economic effects the Google and Pfizer moves will have on the local economy. At this point, both companies are at very different points in their respective business cycles. While Pfizer gradually phases itself out of the local and state economies, Google is just beginning to establish itself in the community. These moves will most significantly impact four main sectors of Washtenaw County: the area workforce, the local real estate market, city tax revenues and local volunteer-based not-for-profit organizations.

While initial reports suggested that Pfizer’s departure would remove over two thousand jobs from the area, recent statistics say that total will be much lower. For Google, the company is in the early stages of the hiring process. It plans to expand the size of its Ann Arbor office over the next two to three years. The local government will take a hit as it loses the revenues brought in by Pfizer, Washtenaw County’s single largest taxpayer. In terms of the area real estate market, the soft period that many economists and experts predicted, resulting from the loss of a thousand or more Pfizer employees, has, in fact, already occurred. Thus, local real estate is now back on the upswing, having already rebounded from previously diminished property values.

And though rarely mentioned in the media, the not-for-profit community will lose a major benefactor in Pfizer, in addition to the volunteer hours put in by the company’s employees.
There will undoubtedly be visible changes in the Ann Arbor workforce, city and county tax revenues, the local real estate market and the not-for-profit sector. This investigation examines whether these changes will be beneficial or detrimental to economic growth of Washtenaw County, and whether they will fundamentally change the character of the economy.

The rest of the articles in this series will explore the impact of Pfizer’s departure and Google’s arrival on each of these groups.