By Julia Scott
Federal and state lawmakers are accusing a major medical supply company of betraying its workers and ripping off California taxpayers with its plan to abandon a plant in Brisbane and move to Visalia for some hefty tax breaks, and they have vowed to stop it.
Rep. Jackie Speier, D-Hillsborough, state Treasurer Bill Lockyer and Assemblyman Jerry Hill, D-San Mateo, heaped outrage on VWR International at a hearing Monday in Brisbane. They said it's obvious the medical-products supplier is using a tax loophole to lay off all the workers at its Brisbane distribution center and reopen in Visalia, where it can earn millions of dollars in sales tax credits and gain state-subsidized tax breaks for hiring new, nonunion employees.
More than 150 union workers will lose their jobs when the new Visalia plant opens in 2012, and many of those workers were in the audience Monday.
Brisbane itself would be lost without VWR, which supplies 50 percent of its sales tax and 18.5 percent of its general fund -- $2.15 million annually. That would wipe out its police and fire services, for instance.
"For a small community like ours to lose a company like VWR, it will literally destroy us," said Brisbane Mayor Clarke Conway.
As devastating a blow as that would be for Brisbane, lawmakers decried the wider implications for other communities and California taxpayers. Visalia is one of 53 designated special enterprise tax zones, and relocating there would enable VWR, which reported $3.6 billion last year in sales, to earn a $37,000 credit for each local worker it hires for up to five years. The company would also withhold a substantial chunk of sales taxes.
Lockyer said that, based on the evidence, the enterprise tax program has amounted to a $2 billion taxpayer subsidy to private enterprise. In the case of VWR, he said Californians would essentially be paying the company to lay off union workers in one town to hire lower-paid workers in another in the form of a hefty tax break, he said -- all while the state faces a record $26.6 billion deficit.
"The whole thing should be shut down, and the money should go to police and fire services," Lockyer said.
Californians won't just be subsidizing the VWR move -- they'll actually be investing in its parent company. In 2007, VWR was acquired by Madison Dearborn Partners, a Chicago-based private equity firm, for $4 billion. During the hearing it emerged that the California Public Employees' Retirement System, CalPERS, has invested more than $600 million with Madison Dearborn.
Speier said the tax zones have been misused, and the law ought to be repealed. "It is a job-destroying law and a taxpayer rip-off," she said. "We are robbing one community in order to enrich another."
But altering state tax law is notoriously difficult, requiring a two-thirds majority vote in the Legislature. Gov. Jerry Brown inserted a provision to repeal the law in his original budget in January, but it didn't survive.
Hill announced he has crafted a bill that would close the tax loophole by requiring any California company that wants to relocate within California as part of an enterprise tax zone to offer the jobs to its own workers first. The law would take effect this tax year and prevent VWR from reaping any benefits from moving to Visalia. But it would require a two-thirds majority vote.
A spokeswoman for VWR said the company's decision to leave Brisbane was prompted by the need to expand and by Visalia's location in central California. She said the company will not accrue any employee tax breaks or other benefits from moving to a tax enterprise zone, and that the chance to capitalize on those tax credits did not affect the company's decisions. When presented with information from lawmakers challenging that statement, she said she would call back with more information.
Workers at the VWR plant in Brisbane earn a minimum wage of $20.75 per hour, plus an hourly pension contribution of $4.33. They and their families are covered by a company health care plan. They said they weren't given a chance to follow their jobs to the Central Valley.
"They don't want to take union employees," said John Thomas, a 15-year employee of VWR.
But VWR disputes that claim.
"As recently as October 2010, VWR negotiated with the Teamsters in good faith regarding the opportunity to have current Brisbane associates who wish to work in the new facility in Visalia and also negotiated enhanced severance benefits for those who do not. Despite VWR's efforts, no agreement has been reached," a spokeswoman said in a statement.
Local representatives for VWR have apparently refused to speak to Brisbane officials or acknowledge letters, emails and phone calls from the city. People found out that the company was planning to move through the grapevine. Up until this point, the company had been a corporate citizen of Brisbane for 50 years without issue.
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