FARGO — The city's policy of giving tax breaks to new and developing businesses and apartment complexes caused a flap at the Fargo City Commission meeting Monday night, Aug. 12.
Commissioners Tony Gehrig and Dave Piepkorn sparred over a tax break for Aldevron, a biotechnology company that is booming in Fargo as the worldwide demand grows for its plasmid DNA for commercial, clinical and research-stage cell and gene therapies that are producing breakthrough treatments for diseases.
The company is planning a $43 million new building and addition to its current facility at 4055 41st Ave. S. on its 14-acre campus.
Gehrig, who opposes all property tax breaks for companies, said his "point is that if the city offered a low, sustainable, predictable tax rate," they'd have more business come here and stay in the the long term.
Piepkorn, who also serves as deputy mayor, said the problem is that "we are in competition to get business to come here and stay here. It would be different if everybody else wasn't doing it (offering tax breaks). We are in competition all day, every day."
He then talked directly about Gehrig, noting the "phenomenal salaries" that Aldevron was planning to pay its new workers ranges mostly from $15 to more than $35 an hour and saying that "to bitch about that, that's a little bit disingenuous. It sounds political. If you don't want to do that then we'll lose business."
Gehrig usually asks developers at city commission meetings if they would complete a project without the property tax breaks. Most usually hedge on that question.
He did ask Brian Walters, who is president of the antibody unit for Aldevron, the question Monday night.
Walters replied that they were so deep into the project that they probably might go ahead, with groundbreaking scheduled for possibly next week, although he didn't know what the decision of management would be.
He told Gehrig and reiterated in an interview Tuesday after the meeting that it wasn't a point that his company decision makers had even contemplated because they assumed the city would follow its tax policy and grant the break as the company met all of the criteria.
Gehrig said that he thought it was great that the company was expanding here. "This isn't a business problem; it's a government problem," he said.
Despite the heated discussion, the city commission approved the tax break on a 4-1 vote.
After the meeting, Gehrig was still upset and in a phone call said that the 10-year tax break would amount to about $620,500 the first five years, with the company paying 50 percent or about $310,250 for the next four years before paying the full amount after 10 years.
He compared it to a tax break given to FedEx to move its operations to Fargo from Grand Forks with a $660,000 incentives package.
"And that made national news," Gehrig said. "This is even more than that."
In total, the tax break would amount to $4.6 million over the 10 years.
However, Mayor Tim Mahoney who was the only other one on the council to comment on the Aldevron issue, said the company has another plant in Wisconsin and one in Germany and that he was thrilled they chose Fargo over the other two.
"It's good for the community," Mahoney said.
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Walters also told commissioners in an application that the company is hiring 100 more employees, paying an estimated 100 workers to build the project and buying $26 million in machinery and equipment for the plants. They will also still pay taxes on the $3 million value on the land.
He pointed out that the company was simply following the city's tax policy, but that in the long run if another project came up, they might look elsewhere without the city's current tax policy.
He said they factor many things into a project and that tax breaks were one of them.
"We are grateful to the city" for what it's doing, he said.
Walters also pointed out that the company received a similar PILOT tax break in 2016. At that time, the company said it would create 105 jobs within five years.
At this time, the company has hired an additional 192 people in just three years, with Walters noting that they have exceeded the criteria for that tax incentive already.
With the new project, he said they once again expect to hire another 100 people in three years, with a payroll rising from $17.8 million to $25.4 million.
Ultimately, the company could have as many as 1,000 employees compared to its current 300 workers.
Walters said the recent acquisition of a majority interest in the company by a private equity firm headquartered in Sweden doesn't change the plans for the project or projections. Global investment firm EQT announced the agreement July 31.
The dollar amount of the deal was not announced. However, the deal will provide Aldevron the financial backing it needs to expand production, research and development, as well as for other growth opportunities, EQT said in a news release.
Aldevron has said with the project it will increase its biotechnology production capacity tenfold, quintuple its warehouse space and create a research and development center.
Aldevron’s founders and management, as well as private equity firm TA Associates, will retain a minority interest in the firm
Aldevron was founded in 1998 by CEO Michael Chambers and John Ballantyne.