Pfizer, the world’s largest pharmaceutical company, plans to lay off or relocate up to 1,400 New York City employees, seven years after receiving millions of dollars in tax breaks to create jobs in the city.
On Monday the company, which has already scrapped about 2,000 positions, also put its office tower at 685 Third Avenue up for sale. Pfizer officials said the company’s world headquarters would remain in the office tower at 235 East 42nd Street, near Grand Central Terminal. The company, which has been based in New York City since its founding in 1849, has about 4,400 employees here.
But the company’s decision is a remarkable turnabout in Pfizer’s once robust expansion plans for New York and an embarrassment for Mayor Michael R. Bloomberg and state officials who had provided the drug-maker with the tax breaks in 2003.
Government officials often give the breaks, or what critics call corporate welfare, to companies that forgo plans to leave the city, or that invest in new equipment and jobs. But some economists argue that those scarce resources could be better spent on transportation, education and other things that create a better environment for all employers.
“This is another example that shows how useless these corporate retention deals are,” said Bettina Damiani, director of Good Jobs New York, a private advocacy group. “Major companies don’t make location decisions based on tax breaks.”
The Bloomberg administration has been far more stingy than Mayor Rudolph W. Giuliani’s was in granting tax breaks to corporations threatening to leave New York. It has also worked to strengthen the penalties for companies that violate job-retention agreements.
Under the terms of its deal with Pfizer, the city will seek to recover double the $12 million in tax breaks that the company ultimately used if Pfizer eliminates more than 450 jobs, said David Lombino, a spokesman for the city’s Economic Development Corporation.
Pfizer bought another major pharmaceutical firm, Wyeth, last year in a $68 billion deal. Last week, Pfizer reported better than expected earnings in the first quarter of the year.
“A reduction in Pfizer’s New York City work force resulting from their merger and restructuring would of course be disappointing,” Mr. Lombino said. “But we’re encouraged that they are choosing to maintain their global headquarters here and will continue to employ thousands of New Yorkers.”
Mr. Lombino said the city had recaptured $48 million since 2002 from 85 companies that did not live up to the terms of their deals. The city also could have demanded that Metropolitan Life repay $24 million, or double the tax break it received in 2001 when it announced it was moving employees to Queens. After the company moved some workers back to Manhattan, officials settled for $5 million in 2008 and a promise from MetLife to keep 1,750 employees in New York City.
Joan Campion, a spokeswoman for Pfizer, acknowledged that the company had talked to the city about repaying the tax benefits. She said she did not know the exact number of jobs that would be cut, or moved to other offices. A government official who had been briefed on the company’s plans, but who declined to be named because he was not authorized to reveal them, said that between 800 and 1,400 jobs would leave the city.
“It’s all a part of consolidating our footprints in buildings we own,” Ms. Campion said. “We’re moving a number of our people to other Pfizer locations” in New Jersey and Pennsylvania.
Pfizer will move its remaining workers into adjoining buildings at 239 and 219 East 42nd Street.
Pfizer was in the midst of buying Pharmacia for $60 billion in 2003 when Gov. George E. Pataki and Mayor Bloomberg held a news conference with company officials. They announced that Pfizer would invest $1 billion in New York City over 15 years, buy and renovate the building at 685 Third Avenue, create 2,000 jobs and retain 5,500 workers in New York.
In return, the city and the state provided the company with tax breaks and other incentives worth up to $47 million, although it used only $12 million. Pfizer’s New York City payroll reached a high of 6,500 in June 2005, according to city officials, but has declined ever since. In 2008, the company closed its longtime manufacturing plant in Brooklyn. That same year, the city ended the tax breaks because of low employment levels and forced the company to return $2.7 million in benefits.