RALEIGH, N.C. (AP) - The megadeal that lured a Danish drug company to the state could exceed $130 million, according to documents obtained by The Associated Press, highlighting the underreported scale of sweeteners local governments offer to employers.
The deal that steered about 700 pharmaceutical production jobs with Novo Nordisk to Johnston County includes $110 million in tax rebates and infrastructure spending not previously made public.
The ultimate tax break could be worth even more, according to state company recruitment documents provided to the AP following a public records request. That’s because most of the tax breaks were based on an expected investment of $1.2 billion - though Novo Nordisk USA President Jesper Hoiland said the company plans to invest $1.8 billion.
It’s not clear if the county leaders who approved the deal knew the bottom-line figure of how much they gave up in future tax revenues. It wasn’t specified in the incentives agreement county commissioners approved in August. The total became clear after the AP compared state recruiting documents with the county agreement and interviewed economic developers.
Asked if he knew the total value of the local incentives he and fellow Johnston County commissioners approved, board chairman Tony Braswell pegged it at almost half the real size before allowing that “it could be $100 million.”
Local government incentives are often expressed, as Johnston County did, as rebates off a local tax rate and rarely a near-bottom-line figure as state business recruiters listed for the Novo Nordisk package, said Sarah Curry of the conservative John Locke Foundation in Raleigh.
“It really isn’t telling the taxpayer how much they’re forking out in incentives,” said Curry, who found inconsistent reporting by local governments for studies she authored this year on the extent of incentives pledged by North Carolina’s counties and large cities.
The deal approaches what may be the state’s largest known local commitment - the estimated $165 million local tax break that was part of the total $262 million offered Google in 2007 to build its Caldwell County computer server farm.
The Novo Nordisk offer “is certainly one of the largest in terms of those incentives,” but that’s proportional to the huge $1.8 billion investment, said Ernie Pearson, president of the North Carolina Economic Developers Association and the lawyer who negotiated on behalf of Novo Nordisk.
Disclosing the scope of corporate incentive deals is up to government officials, not the companies, Pearson and a Novo Nordisk spokesman said.
Novo Nordisk was promised nearly $19 million in state tax breaks, grants and worker training, Gov. Pat McCrory’s administration said in August. State documents show a further $10.5 million in promised road and other infrastructure spending by the state and a nonprofit that spends part of the state’s cigarette lawsuit settlement money.
State records also show Johnston County, a largely rural county that includes Raleigh suburbs, agreed to forego $95 million in future real estate and personal property taxes. The county also agreed to reimburse Novo Nordisk more than $2.2 million for its land purchase and up to $3.5 million for the company’s costs of mitigating any environmental damage caused by building the plant.
The package was assembled to tear the jobs away from Massachusetts and its estimated $111 million bid, state documents show. A Massachusetts business development official didn’t return calls seeking comment.
Johnston County officials predict they’ll collect an extra $15 million in new tax collections over a decade and $45 million over 20 years after the tax rebates. The county didn’t evaluate broader costs related to the big development, Braswell said.
“We have to calculate which is better - zero money for the tax base if a plant’s in Massachusetts, or we get part of it and it’s here in Johnston County,” Braswell said.
With local leaders agreeing to pass up collecting so much of the property taxes Johnston County could have received, the local benefits for landing the plant and its jobs depend heavily on how much of the new employment goes to existing residents, said Mitch Renkow, a North Carolina State University professor who specializes in local planning and public finance.
Many of the good-paying biotech jobs will be filled by workers driving from their homes across the broader Raleigh-Durham metro area, Renkow said. And the long-run effects if there’s a flood of new residents could result in costly new demands for school construction and other public services, he said.
“Residential land uses generally receive more in county services than they pay in taxes and other revenue streams. So this might be a source of future pressure on local government finances, to the extent that new residents mean new homebuilding,” he said.
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