Wednesday, August 15, 2007

DarthDoyle's "Business Climate"

Oh, yah.

Just jump right in here, folks, the water's fine.

Kathy Stepp points to a revoltin' development, however:

A couple of years ago- Abbott Labs bought some prime real estate on I-94. Since then, democrat politicians have been patting themselves on the back, talking about this wonderful deal with Abbott that will bring lots of jobs and tax revenue to Kenosha County. Even Governor Doyle was down here in early 2006 touting the 2500+ jobs he created in Kenosha County.

That was then. This is now:

...the deal is on paper and is ready to be presented to the Village of Pleasant Prairie board. It was placed on the agenda for 4 straight meetings starting in May. Now, the whole thing is currently on hold.

No one, not the village administration or Abbott Labs can give an answer as to what the hold up is on this project. The village administrators are hoping the deal gets presented sometime soon, Abbott Labs is hoping by the end of the year.

Kathy fingers a likely culprit:

Governor Doyle released his budget several months ago that included massive tax increases on Wisconsin businesses. To make matters worse, the state senate democrats followed up the governor’s tax increases by not only passing the massive tax increases proposed by the governor, but they added an additional $90 million in taxes on businesses.

Frankly, Kathy, I think that the health-care deal is the holdup. Somebody would have to be NUTS to commit to a $100MM+ project without any idea of the variable costs.

4 comments:

m.z. forrest said...

If it's a lease back arrangement, like a lot of these things are, the current market financing dynamic could be in play, i.e. whoever Abbot Labs would want to own the facility that they would lease may be sitting on financing. I'm skeptical whether taxes are really an issue considering that the competition is Illinois. I'm also doubtful that Healthy Wisconsin has anything to do with it; Abbot Labs isn't in a low wage/low margin business. May coincides with their 52 week high. $1.3B in nonrecurring charges probably didn't help matters in 06Q4.

Dad29 said...

Pish-posh on 'leaseback' being a problem. Any bank on Earth will take Abbott's 10-year lease as a Triple A guarantee of the mortgage for the property.

I agree with you on the tax question--it's probably not a factor.

Health Wisconsin IS a factor. It makes no difference what Abbott's margins are, and the fact that they have a large group of highly-paid professionals makes things worse--remember, the health tax rises lock-step with salaries.

That means that Abbott will be breaking negative (paying more in Wis Health Plan tax than insurance premium) for anyone earning over ~$95K/year who has a family plan.

Remember that the employee also must contribute 4% of salary; depending on Abbott's current premium-split arrangement, it's likely that any employee earning more than ~$96K will also have to pay more than they do now.

That, my man, means something in a company full of MS and PhD types.

M.Z. Forrest said...

My understanding is that it is Soc Sec wages, presently $97,500. Anyone earning over that wouldn't be taxed additionally, nor would the company. At 10.5% for the employer, the employer would be contributing at most ~$10K. The employee would contribute at most ~$4000. I would assume that Abbot is in the top 5% or so in benefits it provides given its status and competition for employee retention. If I'm not mistaken, they offer same sex partner benefits, so they aren't exactly skimping. If we treat Abbot as average, let's say their employer cost is $7000 per employee presently. This would mean HW would be a net negative for them is their average Soc Sec wage exceeded $65,000, which is certainly possible.

I guess I wouldn't fully discount the idea that it could HW related. I'm just betting that it has more to do with their present economic conditions. They presently maintain 3 facilities in Canada, not to mention having employees in other countries. This isn't exactly virgin territory for them.

m.z. forrest said...

BTW, have you been checking the overnights in Asia? It could be ugly on Wall Street tomorrow.