Allergan is up for a record amount of economic development incentives to expand its Waco plant, but local officials said they didn’t hesitate to make the offer.
Waco City Council last week signed off on a tax deal unprecedented in size and length for this community — worth $13 million over 20 years for the $177.6 million plant expansion.
McLennan County commissioners in June will consider a similar deal worth $8.1 million over 20 years.
For both entities, the tax grants represent about two-thirds of the new tax revenue coming from the expansion.
Meanwhile, the Waco-McLennan County Economic Development Corp. is also recommending a $4 million cash contribution toward the project from the city-county incentive fund. Only one project has received a bigger cash incentive. The Baylor Research Innovation Collaborative got $5 million in 2009, and Sherwin-Williams also received $4 million for its distribution center last October.
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Waco Mayor Kyle Deaver said he doesn’t consider the incentives excessive, given the long-term benefits of having a highly regarded company expand here.
“The council is all on board, given the extraordinary nature of the investment by Allergan and the quantity and quality of the jobs — retaining 660 full-time jobs with benefits, with at least 75 created,” Deaver said. “I think it does have the potential to cause other Fortune 500 companies and pharmaceutical companies to take another look at Waco and say, ‘If Allergan made this decision, why did they look at Waco?’ ”
Allergan, based in Ireland with 40 manufacturing sites around the world, chose Waco for a product line expansion that includes medications for degenerative eye diseases. The safety and regulatory standards for such medicines will require the company to spend some $22.5 million on testing, verification and equipment calibration before the expansion area opens in 2020.
The plant at 8301 Mars Drive is already one of Waco’s largest employers, with about 750 employees at peak times. The new investment would add 322,000 square feet to the plant, nearly doubling its size, and could employ up to 250 more people, Allergan officials have said.
Allergan’s site selection process was highly competitive, said Kris Collins, the Greater Waco Chamber of Commerce’s senior vice president for economic development. Collins said she doesn’t have access to information about incentives other communities offered, but Allergan leaders have said Waco’s incentive package was a factor in its selection.
‘Competitive proposal’
“They were definitely looking at other sites domestically and internationally, and they needed to be able to compete in the global economy,” she said. “It was important for our site team to put together a very competitive proposal.”
Collins said this may be a record amount of incentives for a single project in Waco, but the incentives aren’t out of line given the size of the investment. In this case, the $25 million in tax cuts and incentives represent about 15 percent of the total project cost.
She said 20 percent of total project cost is usually the upper limit for local incentives.
“It’s the largest single business investment announcement we’ve had in the last 15 years — bigger than what L-3 has done, bigger than Sanderson Farms,” she said, referring to the aerospace contractor and the chicken-processing plant, respectively.
The 20-year “business grant agreement,” which is similar to a tax abatement, will taper off gradually, starting at 90 percent and plateauing at 50 percent in years 11 to 20.
The county would sacrifice $8.1 million in taxes during that time while reaping $4.1 million in new tax revenue.
The city would forgo $9.9 million while receiving $6 million.
The plant will continue to pay taxes on its existing facilities, to the tune of about $800,000 a year.
Meanwhile, the $4 million upfront contribution from the city-county incentive fund would leave another $4 million in that fund. The fund will be replenished this fall with another $3 million in regular annual contributions split evenly between the city and county.
“That should be enough to get us through the year,” Collins said.
She said landing Allergan helps Greater Waco’s economy and reputation grow.
“It means having long-tenured, steady, high-end employers like Allergan that are investing and helping grow the tax base, employing highly skilled individuals at very competitive wages,” she said. “They’re attracting talent to the community. The more they continue to grow here, the more they have critical mass here, and the more the community sees opportunities not only for manufacturing but for research and development.”
