Neighboring States Would Welcome Any Move in Massachusetts to Claw Back at Fidelity

Friday, March 18, 2011

If I were Rhode Island Governor Lincoln D. Chaffee or New Hampshire Governor John Lynch right now, I'd be hiring moving company trucks, plastering them with signs that shouted, "Fidelity, We Love You!", and having them drive the streets of metropolitan Boston for 24 hours straight.

Fidelity Investments, you see, is in the dog house at the Massachusetts State House after announcing on March 15th that it was going to close its office in Marlborough, transfer a bunch of employees to offices in Rhode Island and New Hampshire, and eliminate some jobs altogether.

The moves will impact, in total, about 1,100 good-paying Fidelity jobs in Massachusetts.

Immediately, there were calls at the State House for the abolition of tax benefits granted to the mutual fund industry in 1996, a law change posited on Fidelity's promise to increase its Massachusetts workforce by five percent for five years, which the company did.

At least one outraged legislator says the state should consider "claw back" measures to regain some, if not all, of the revenue Fidelity gained through employment-linked tax breaks.

It's understandable that folks at the State House are disappointed, but before they give into anger and retaliate in some fashion against Fidelity, they may want to ask themselves some pointed questions, such as:

  • What leverage do we have here?
  • Could we make the employment picture worse by taking a hostile stance against the mutual fund industry?
  • What's to stop Fidelity from leaving the Commonwealth entirely?

Those who manage investments in mutual funds are dealing in money, but not of the cash variety. It's all electronic. The main tools of their trade are computers and telephones, which you can set up anywhere.

Fidelity is headquartered in Boston because the company-founding Johnson family happened to be Massachusetts people. There's no geographic imperative holding Fidelity to its Massachusetts base.

To use the playground analogy, the Johnsons can take their bat and ball and go somewhere else if the big boys in Massachusetts don't want to play nice with them.

A more tempered response to the Fidelity contretemps came from Steve Levy, who represents the city of Marlborough in the Massachusetts House and was worried about the high office vacancy rate there even before the company said it was leaving.

According to the State House News Service (SHNS), Levy said state government should stop giving tax breaks to individual corporate sectors and focus on the overall cost of doing business here so that the state can compete with its neighbors.

"We still have a lot of work to do in Massachusetts to be competitive and keep jobs here," the SHNS quoted Levy. "We'd like to see them consolidating in Massachusetts rather than moving out of Massachusetts.

"Massachusetts lacks the competitiveness to compete for jobs. It's the overall business climate: utility costs, workforce costs, unemployment insurance and workers comp. In the past, we've targeted specific industries, but I'm more a proponent for lowering costs across the board."

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