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Dayton, legislators working to woo 'mystery' Fortune 500 company with tax incentives

dayton photo
MinnPost photo by James Nord
Dayton and lawmakers confirmed on Tuesday that state and Brooklyn Park officials have been working to entice a mystery Fortune 500 pharmaceutical company to come to Brooklyn Park by using a variety of business development tax incentives.

State leaders and local officials are looking to entice Baxter International, a Fortune 500 firm, to begin biopharmaceutical operations in an unused Brooklyn Park manufacturing plant by using a variety of business development tax incentives.

The move could mean 190 new jobs for Minnesota in the first phase of the project and an additional 200 workers in the second phase should it move forward, according to Brooklyn Park city documents.

It could also mean more than $300 million in investments to the manufacturing site if both phases are completed by the company, which sells bioscience and medical products.

Gov. Mark Dayton and lawmakers confirmed on Tuesday that state and Brooklyn Park officials have been working with the company for some time, but Dayton declined to release the name of the firm. Brooklyn Park officials reviewed a term sheet that the city’s economic development authority brought forward in late February.

The governor, who called it “a very significant company,” said revealing its name would end its consideration of Minnesota.

But Brooklyn Park City Manager Jamie Verbrugge confirmed to MinnPost and other reporters Tuesday afternoon that Baxter International of Deerfield, Ill., was the interested company. He said the company gave the go-ahead as it became clearer that its potential interest would come out publicly.

Verbrugge noted that the average salary of the first phase jobs would be $75,000, and said tax incentives of between $4,000 and $8,000 would be tied to job creation. If the second phase of the project moves forward, he said, the positions would be even higher-paid.

Dayton defended himself from reporters who pushed him to disclose information about a company that could potentially receive taxpayer dollars. “I’m not going to volunteer it,” he said.

The House bill establishing tax breaks for the company refers to a “Biopharmaceutical manufacturing facility exemption.”

Late Tuesday afternoon, Minnesota's Department of Employment and Economic Development issued a statement:  “The Baxter Healthcare Corporation recently acquired a facility, land, and equipment in Brooklyn Park from Genmab. We have been working with the company on a competitive economic development incentive package to attract a new industry, new jobs, and private investment in the state.  We are hopeful and excited about Baxter’s interest in locating in Minnesota.”

Rep. Melissa Hortman, a Brooklyn Park Democrat who authored the bill with the tax incentive provisions, said her city has been working to get a company into a pharmaceutical manufacturing facility that was sitting dormant until recently. Hortman also said she didn’t know the company’s name.

Genmab, a Danish biotech firm, recently sold the roughly 235,000 square-foot manufacturing facility and laboratory to Baxter. It shut down the site in 2009 after purchasing it from a company named Protein Design Labs for $240 million in 2008.

The specialized plant is used for cell-culture manufacturing. The company could invest $60 million in improvements to the facility as part of the first phase of development and double the size of facility in the second, according to the city term sheet. That construction would cost $100 million and equipment would cost $150 million.

“Right now, it’s … not mothballed,” Hortman said of the plant. “They’re keeping the thing running, because I think it's like if a school has a pool — you don’t empty it, you just keep it with water but you don’t run the whole system. They’re keeping it in condition that it can have somebody walk in.”

Rep. Ann Lenczewski, who said the provision would be heard as part of the House omnibus tax bill on Tuesday night, said the tax breaks include a sales tax exemption for capital equipment and property tax relief provisions. Dayton also said the company could get Minnesota Investment Fund dollars from the Department of Employment and Economic Development.

Lenczewski played down the uniqueness and scope of the state incentives. She said three other businesses were getting similar deals in the omnibus tax bill, including Emerson, which is moving into a Shakopee location.

“They’re not extraordinary tax benefits,” Lenczewski said. “This is nothing like the Mayo or the Mall of America or anything like that. What it is, is sort of your vanilla tax benefits.”

Most of the details around the deal were unknown, even among lawmakers working to make it happen. Hortman noted that Brooklyn Park officials were behind the nondisclosure agreement.

Hortman and Lenczewski, the bill’s two authors, remained in the dark as of Tuesday afternoon.

Lenczewski, who learned of the company’s interest months ago, said she pushed House Speaker Paul Thissen’s office to work with executive branch staff to get the bill's language. Lenczewski said Dayton, Thissen and Senate Majority Leader Tom Bakk sent a letter to the company expressing interest in recruiting the firm to Minnesota.

The House Taxes Committee chairwoman said the point of Tuesday’s hearing was to have a thorough airing of the tax plan for transparency’s sake, but Lenczewski said it’s unlikely lawmakers will learn many details.

“Either way, I was going to hear it because I wanted people to come to the microphones and tell us what they know,” Lenczewski said. “We’re all a little in the dark on this one.”

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Comments (2)

Neglecting the Home Grown for the Exotic Out-of-Towner

Now, let me get this straight. The governor is going to provide tax incentives--not a government responsibility but instead irresponsibility-- for a biomedical firm to move to Minnesota but he and the legislature balk at providing infrastructure--a government responsibility--to a medical firm already here, the Mayo Clinic. I guess to get a good deal, the Mayo Clinic will have to use the sports franchise playbook and leave, and then receive lots of goodies to come back.

Please explain the logic of neglecting a home grown firm that already is the largest non-government employer with deep roots in the state in favor of competing with other states in a tax give-away to lure a firm that obviously is available to the highest bidder, now and in the future.

It's public policy dissociative disorder - curable, but...

...requires a very long course of treatment, much longer than the attention span resources of the current political class.

Also, look at the numbers:

- a couple hundred jobs in this project vs. tens of thousands in the Mayo proposal;

- $300 million in this project vs. $ 5 billion in the Mayo proposal.

None of this weighs in any way *against* the new project - we welcome all such projects.

But the state's and some legislators' approach to these two proposals makes no economic sense when weighed on the same scale.

For the far smaller project, it's: "What can we do to help?" For the far larger project, it's "Boy, have you ever got a nerve asking for our help !!"

The only way you can maintain these incompatible views is to put up a firewall between the two, to hold down the cognitive dissonance.