Monday, December 04, 2006

Wellpoint Jobs Good News, But At What Price

The announcement today that Wellpoint will add 1,200 new jobs to the Indianapolis economy, at least 900 of which are good-paying jobs, is undisputably good news for our local economy. Wellpoint will add 900 jobs for its speciality pharmacy business which pay between $30,000 and $100,000 per year, averaging about $22 an hour. Another 300 jobs are part of the company's expansion of the managed care services the company provides for state Medicaid programs. That's the good news, and it is very good news. It's much better than the lousy, low-paying 1,000 call center jobs IBM promised in exchange for its $1 billion privatization contract with the state last week.

I have two concerns about the announcement. The first concern is that we're shelling out about $10 million in state and local incentives to attract these jobs. That's close to $10,000 per job. Wellpoint has already received significant state and local incentives for locating its corporate headquarters on the city's near-southside. Wellpoint has also been the beneficiary of significant contracts with both state and local governments. This is the same company that paid out over $200 million in bonuses, severance payments and vested stock options after it completed its merger with locally-based Anthem, including a $47 million retirement payout to Wellpoint's then-chief executive, Leonard Schaeffer. Other corporate insiders have cashed in over $150 million since the company's merger in exercising stock options. Was it necessary for taxpayers to subsidize the company, particularly in light of the exhorbitant pay and stock benefits it hands out to its top executives to add these jobs locally?

A second major concern this announcement raises is the leasing of the former United maintenance facility at the airport to Wellpoint for its pharmaceutical services division. This would be the facility into which local taxpayers invested $320 million to build a state-of-the-art aircraft maintenance facility for the more than 2,000 promised jobs. All those high-paying jobs are now gone, along with United's obligation to repay the subsidies handed out to it by state and local governments as a result of a bankruptcy court ruling. We're currently investing about $1 billion building a new midfield terminal. Does it make sense to enter into a long-term lease with Wellpoint to utilize this strategically-located facility at the airport for a pharmaceutical services division? Is this the best, possible use for this property? Were there not plenty of other locations around the city which would have been more suited for this type of use?

8 comments:

Anonymous said...

My read was that Wellpoint was using mostly office space at the United Facility (which has an aerospace related tenant already).

Anonymous said...

true, 9:10

and I'm betting there's a kickout clause, or the ability to move them if the airport expansion gets in the way

The point about executives and bonuses is very well-taken, Gary. I don't know if the mayor's office kept up on that situation, but I intend to ask them.

Effectively, we're paying for some of those bonuses.

With exec perks and giveaways like these, I'm not sure they needed the incentives.

But, they are good jobs.

Citizen Kane said...

I do not quite get why this was a good reuse for the United facility, and I really do not get why we are providing more incentives for someone to use a facility that was constructed with millions of incentives. I am so sick of the government buying jobs from companies that make bucket loads of money. You won't find a more cash flush industry than the HMO thieves. Instead of investing and reinvesting in education, people and infrastructure, they give money to wealthy companies and claim that they have accomplished something significant. A Neanderthal could give away taxpayer's money.

Anonymous said...

I am VERY familiar with how the facility is being used now and I will tell you that most, if not all, of the 'state of the art' equipment has been removed in renovation for at least one of the tenants currently in the building. It was almost criminal to see it go but it didn't fit the needs of those taking it over.

Sure United screwed over the city, but the facility sat empty longer than it had to because rather than getting a good price on it, the city was taking the 'purchase' price dividing it in to square feet and trying to charge businesses that rate and they all said SCREW YOU to Bart and buddies.

The city finally caved, how can they let such a facility sit empty? It was criminal - they had to chase the animals out that were living there.

Anonymous said...

10:47, I'm familiar with the lease negotiation details, too. They do not match your recollection.

It's OK to be against this incentive package. I think it merits review.

But don't invent "details."

Mayor Steve Goldsmith and Gov. Evan Bayh (well, their staffs)negotiated the United facility lease. Among the governor's negotiators: Fred Glass and Bart Peterson. I don't think Fred's negotiating abilities are stellar, as evidenced by the Colts' recent deal. (Gimme some of that)

But here's one thing they got, at Peterson's insistence, and over Goldsmith's objections becuase it was slowing things down: a United promise to pay back incentives based on a per-job promise, over time.

It was viewed nationally as a cutting-edge negotiating tool. Nobody knew United would go belly-up. As AI knows, bankruptcy judges are the most powerful people in America: they can void leases and contracts to benefit creditors willy-nilly.

Anonymous said...

This 'deal' buys the city a bit of insurance (if you'll pardon the pun) that Wellpoint doesn't experience substantial JOB LOSSES at its other Indy locations.

Perhaps none of you have ever experienced the turf battles that take place with a merger but the local 'Anthem' (now Wellpoint) is a company that has experienced 2 mergers (one with Wellpoint out of California and another with Wellchoice of NYC). Execs at those locations are vying to move jobs to those locations - jobs from Indy.
Additionally, much of the company's IT jobs are outsourced overseas and other jobs may follow. If this deal helps to retain a strong Wellpoint workforce in Indy - we all benefit from that.

As to the executive salaries - until consumers and employees stage a revolt - I see no change on that front. Wellpoint is in line with others. Or perhaps, I should amend that statement because I recently saw an executive salary/benefit listing and while several of Wellpoint's top competitors' CIOs were at the top of the list, Wellpoint's wasn't even listed in the top 100. Wellpoint is a Fortune 50 company.

Anonymous said...

Everything with Wellpoint looks rosey and delightful in your area. In Colorado they are making job conditions so deploreable and treating long-time employees so bad that they are ultimately forced to quit. CHEAP LAYOFFS -- they don't have to fufill future stock options, pay severence, etc. And their managers are rewarded for the loss! Don't work for Wellpoint. I don't care what the job is.
They ain't loyal!

Anonymous said...

As I write this comment, I am sitting in the airport facility you reference above. The first commenter is wrong - WellPoint is not using most of the space at the old United facility for "offices". The building now holds a state-of-the-art specialty pharmacy, unlike any other. Yes, there are offices and seas of cubicles in the building, but the large space was required to build a specialty pharmacy that services customers with costly drug needs throughout the country.

The close proximity to the airport is also key. Because most of WellPoint's pharmacy shipments are promised "overnight" to its patients, it's important to be strategically located to the airport.

The company has already hired 400 associates, and looks to add another 500. Salaries are more than fair, and benefits are unbelievable. Anyone who thinks this isn't good for Indianapolis, and Indiana in general, doesn't have all the facts.