ANN ARBOR, Mich. -- Freed-up land for growth and US$84.2 million in incentives helped convince Pfizer (www.pfizer.com) to commit to a $600 million, 600-employee expansion in Ann Arbor, Mich.
        The recently announced deal retains Ann Arbor's largest private employer and its largest taxpayer. Pfizer already employs more than 3,000 in that Michigan city. Facing overcrowding and, at first, the lack of a suitable site, the drug maker considered expanding in several other undisclosed states, Pfizer officials said.         Senior Vice President David Canter, director of Pfizer's Ann Arbor Laboratories, described the Michigan deal that came together as a three-way win.

        "This is a win-win-win solution that will benefit the state, the city of Ann Arbor and Pfizer," Canter said at the project announcement. "Pfizer now will have the land we need to flourish. This will bring the city of Ann Arbor and the state of Michigan economic growth and new jobs in the research and development sector, strengthening the Michigan Life Sciences Corridor initiative."
        The drug giant's commitment gives a high-profile boost to the state's drive to enlarge its life sciences cluster, Gov. John Engler said at the announcement in Ann Arbor. Engler and the Michigan Legislature created the Life Sciences Corridor 1999 to attract and expand the research, development and commercialization of biotechnology applications in the state. Michigan has committed to investing $1 billion over 20 years in the life sciences enterprise. The Michigan Economic Development Corp. (medc.michigan.org) is administering the $1 billion, drawn from the state's tobacco settlement funds.
        "Two years ago we launched the Michigan Life Sciences Corridor initiative with the vision of being one of the nation's premier life sciences centers," Engler said. "Today's announcement by Pfizer is a welcome confirmation that Michigan is attracting the important companies and investments that will make the Life Sciences Corridor vision a reality."

Pfizer Official: Incentives 'Key'

City and state incentives "were both key to successfully completing this deal," Canter said. Of the $84.2 million in incentives, $73.5 million was approved less than 24 hours before Pfizer's announcement.
        The incentives package, state and local officials explained, came from:

• A 20-year credit on the Single Business Tax (SBT) worth an estimated $25.8 million. Pfizer announced its expansion on the same day after the Michigan Economic Development Corp. earlier awarded the credit on the SBT, the only general business tax levied by the state.
• A 12-year abatement of the six-mill State Education Tax, valued at $10.7 million; and
• A 12-year abatement on Ann Arbor's property tax, approved the night before Pfizer's announcement and valued at $47.7 million.

        Ann Arbor's City Council (www.ci.ann-arbor.mi.us) set up the city's incentives to encourage investment in new facilities. New structures will create tax revenues while simultaneously signaling Pfizer's commitment, council members said.
        Ann Arbor's incentives require the company to invest a minimum of $100 million in property within five years. If Pfizer's total expansion investment reaches $800 million - a possibility that company officials have mentioned - Pfizer would be required to invest a minimum of $300 million in property.
        Ann Arbor's agreement further stipulates that Pfizer will not pay less than the total of its 2001 taxes during the expansion's five-year projected timeframe.
        Pfizer has committed to pay for the additional infrastructure and sewers required for the project. To curtail city congestion, the company also agreed to cut the percentage of employees who park at the site from 95 to 80.

Existing Operations at Popping Point

Other factors that swayed the deal Ann Arbor's way, Pfizer officials added, included the state's life sciences research institutions, the company's existing asset base in the area, and the ability to attract and retain high-tech employees.
        All the site selection attractions in the world, however, don't mean a thing without an appropriate site. And that at first presented a problem for Pfizer.
        The company had grown to the popping point at its Ann Arbor complex near the University of Michigan's North Campus. Those facilities were within 1 to 2 percent of capacity, explained Canter. The overcrowding had necessitated housing 800 Pfizer employees at five off-campus sites, four of them leased, one company owned.
        Pfizer had already begun a $300 million expansion program at its on-campus complex, which will add some 700,000 sq. ft. (63,000 sq. m.) of office and laboratory space. Over the longer term, though, only open acreage could satisfy the company's anticipated space needs, Pfizer said.

The University of Michigan's $27 million land sale was a key element in putting the Pfizer deal in place. Said UM President Lee Bollinger (pictured above), "We look forward to future collaboration that will bring promising research and scientific discovery, career opportunities for our graduates, and technology transfer initiatives benefiting the state's economy and the well-being of its residents."

UM Sells Adjoining 55 Acres

The plot that Pfizer acquired marks a victory for gown as well as town, according to University of Michigan (UM) leaders. UM owned a vacant 55-acre (22-hectare) tract, which lay adjacent to Pfizer's complex and was generating no tax revenues. The university's Board of Regents unanimously approved selling the land to Pfizer.
        Pfizer's Ann Arbor expansion "was critically important to the company, the university's commitment to life sciences and the community's continued economic health," said UM Executive Vice President and CFO Robert Kasdin, who was UM's point man in the land sale negotiations. UM President Lee Bollinger saw rich collaborative potential in the sale.
        "We were pleased to work with Pfizer in its purchase of the land that will enable the company's expansion," he said. "We look forward to future collaboration that will bring promising research and scientific discovery, career opportunities for our graduates, and technology transfer initiatives benefiting the state's economy and the well-being of its residents."
        Canter praised UM, the state and Ann Arbor for cooperatively facilitating the sale, which he called "a win for everyone."
        Pfizer bought the land for some $27 million, roughly $500,000 an acre. Proceeds will be utilized for supporting UM's Life Sciences Initiative, university officials said.
        To give its entire complex the same zoning, Pfizer will apply to have its new land and the two existing parcels near UM classified as PUDs (Planned Unit Developments), Canter said. Said Ann Arbor Mayor John Hieftje, "The future of life sciences research in our city is brighter than ever before."