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The company, in fact, has begun the
process of budgeting payment of the initial tax bill when the
first phase of the expansion is completed next year, according
to Arnie Caine, project manager. What that amount will be will
not be known until the value of the new buildings is determined.
County tax records show that the
company, with about 1 million square feet of
building space in its existing complex, was billed, and presumably paid, $371,307 in
county property tax and $800,996 in school tax this fiscal year. First phase of
its expansion involves about 350,000 square feet, or about a
third of the present area, on state-owned land. Eventually, the
company will add about 1.8 million square feet there.
The tax
issue came to light as part of an effort to determine the
full extent, in terms of direct and indirect costs, of the
public commitment to supporting the expansion and highway and
other infrastructure costs associated with it. As Delaforum
previously reported, that is approaching $150 million.
Delaware
Economic Development Office data noted that Astra Zeneca is
leasing the property commonly referred to as the Blue Ball
Triangle, for a token $1 a year. Since the option evidently was
available for the company to purchase the property for a buck
and be done with it, the question arose as to why a long-term
lease arrangement was worked out instead.
One
obvious explanation would be that the land would remain
government property and therefore be exempt from taxes. That, it
turns out, may have been only partly correct.
A
knowledgeable county sources initially told Delaforum that a tax
exemption was not in the cards because the law provides that it
applies only when government property is used for 'governmental
purposes'. As specifically listed in the county code, none of
those purposes would seem to apply in this instance.
The same
source, however, later came back to say that the county lost a
court case in 1975 when it challenged a tax exemption for the
Delaware Turnpike rest stop near Newark. Superior Court ruled
that property, indeed, was tax exempt. Its apparent reasoning
was that the law exempted both government property used for any
purpose and property owned by another entity and used for a
recognized 'governmental purpose'. An example of the latter
might be a privately owned property leased for a purpose like a
state service center. For whatever its reasons at the time, the
county evidently did not appeal the decision to a higher court.
The
situations, the source was quick to point out, are not the same.
In the court case, the Delaware Turnpike Authority, a
government agency, owned both the land and the buildings and the
commercial entities which operated the restaurant and motor
vehicle service station were concessionaires. With Astra Zeneca,
the state will own the land but the buildings will belong to the
company.
As
Delaforum now understands it, the county government's position
is that it is assumes taxes will be due and looks to collect
them in the normal course of events. How much the tax bill will
be is uncertain because it is, of course, not possible to assess
the buildings until they are finished. The earliest any tax on
them would be due would be at the end of September, 2002.
"My
impression is that we are going to pay our county and school
taxes," Caine said.
He
explained that the purpose of the lease arrangement was to take
full advantage of the state corporate income tax incentive which
applies to all corporate expansions. Any company which increases
its Delaware workforce in an area targeted for economic
development is entitled to a credit of $650 per new employee
plus $650 for each $100,000 of new investment. One of target
areas listed in the law is any property "owned by any level of
government or its agencies."
Astra
Zeneca is looking to increase its headquarters workforce by
nearly 3,000 people by the time the expansion is completed in
2007. The company has estimated its investment in the expansion
will come in somewhere between $200 million and $250 million.
Addition
of a significant number of relatively high-paying jobs -- which
will contribute not only taxes but also to the general economy
of the state -- was given as the reason the Delaware Economical
Development Office and the Governor Thomas Carper administration
went to great lengths to attract the merged pharmaceuticals
company's North American headquarters after European-based Astra
and Zeneca combined.
The lease
arrangement with its resultant jobs and investment tax credits
was part of the incentive package, Caine said. As far as can be
determined, state officials have never disclosed the complete
contents of the package and related costs in a single document
or place.
A
Delaforum attempt to pull together cost information discovered
that the known total
is almost two and a
half times what the state of Illinois and the city of Chicago
combined expect to put up to lure Boeing Co.'s world
headquarters to the Windy City. And the
Illinois
legislature reportedly is having second thoughts about approving
the full amount of its share of that purse.
The latest Blue Ball
Project accounting showed $127.1 million worth of roads,
stormwater management and park development. That was up from $80
million projected a year ago.
The new figure does
not include what will be involved if Delaware Transit Corp.
plans to establish 'park-and-ride' bus service into
Pennsylvania, where the employees the company plans to place in
its expanded
Delaware
offices and laboratories live, materialize. That was put at
$149,400 for initial capital costs and first-year subsidy.
Blue Ball spending
would be on top of $16.9 million in land acquisition and an
estimated $5 million fiscal impact of an annual state tax credit
matching the federal research tax credit. The state research
credit was specifically enacted by the General Assembly as part
of the Astra Zeneca arrangement although other 'qualified'
companies could take advantage of it.
While state economic
development officials and others can correctly assert that the
company will not receive anywhere near the full $149 million
Delaforum calculates is the total state commitment, it cal also
be argued that the Blue Ball Project and the road building would
not have occurred -- or would not have occurred anywhere near as
soon -- had the company not been convinced to expand at the
Zeneca site in Delaware rather than the Astra site near Wayne,
Pa. State transportation secretary Nathan Hayward confirmed that
in a talk before the Council of Civic Organizations of
Brandywine Hundred.
Be that as it may, the
$61 million package that convinced Boeing to choose Chicago over
both Denver and Dallas as site for its headquarters, being moved
from Seattle, consists of $41 million in state grants and tax
breaks spread out over 15 years and city tax relief amounting to
$20 million over 20 years. Legislative leaders in
Springfield are
calling for eliminating from the state package such things as
paying some of the aerospace giant's moving expenses. By way of
perspective, it should be noted that Boeing has promised to
bring only about 500 jobs with it. |
