Incentives offered in Ventana expansion - The Explorer: Pima Pinal

Incentives offered in Ventana expansion

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Posted: Tuesday, October 19, 2010 11:00 pm | Updated: 8:06 am, Thu Mar 24, 2011.

Following Ventana Medical Systems' announcement to add as many as 500 jobs in Southern Arizona, state and local governments have made public their plans to provide incentives to the company.

Ventana, a subsidiary of the Swiss pharmaceutical firm Roche, made the expansion announcement Wednesday, Oct. 13 at its Oro Valley facility. Gov. Jan Brewer came to Oro Valley to share the news.

Total incentives could top $13 million.

Roche has operations all around the world and in at least six other U.S. locations, some of which had vied for the expansion. Oro Valley won out in part because of Ventana's long history here, having been founded by a team of University of Arizona researchers in 1985. Roche bought Ventana in 2008 for $3.4 billion.

On Wednesday, Oct. 20, Oro Valley officials are discussing a financial participation agreement that would refund development impact fees Ventana would incur during an expansion.

"This is something we would bring before the council for consideration," said Oro Valley Mayor Satish Hiremath. Discussions to date have focused on possibly reimbursing up to $1 million in impact fees, he said.

"The agreement provides that the town will place in escrow the development fees to be paid to the town by Ventana … the FPA provides for the town to return to Ventana the actual value of the public infrastructure out of the escrowed development fees," up to a total of $1 million, according to the proposal before the town council.

The proposal also says the agreement would not have a net financial impact to Oro Valley.

"Any monies that the town must pay Ventana under the agreement will be offset by the town receiving public infrastructure in the value of the amounts paid," the proposal reads.

If enacted, the fee rebates would affect only those impact fees that fund public infrastructure such as roads. Fees for water or police likely would still apply, Hiremath said.

The mayor said the actual value of the rebates the town ends up providing could vary, depending on where the company expands.

"We really don't know, that's why we could not give an incentive on paper," Hiremath said.

If the company expands to an area already served with public infrastructure like roads, the local incentive would not be needed, Hiremath said.

"Part of the incentive, from my standpoint, is to expedite the development review process," Hiremath said. "That's a huge cost-saving that they are going to recoup."

According to town documents, the expansion plans include a $184 million capital investment that would ultimately have a $640 million economic impact on the region. The 500 anticipated new jobs, to be added incrementally by 2016, would pay a median annual salary of $75,000, according to town documents.

Ventana also would benefit from a state and federal tax re-designation.

Working through Tucson Regional Economic Opportunities, the company has sought federal Foreign Trade Zone designation. The label would provide the company tax benefits and reduced customs fees on internationally traded products.

The designation also would benefit the company on its state property tax burden. The state would change Ventana's property tax designation from Commercial Class 1 to a 6.2 classification. The change would effectively lower the company's property taxes by 75 percent.

Pima County Administrator Chuck Huckelberry has recommended the county supervisors support Ventana's Free Trade Zone application and accept the reduced property taxes for a period of 10 years.

Pima County Supervisors unanimously passed the incentives for Ventana Medical Systems on Tuesday, Oct. 19. "We felt it was appropriate to offer this as an incentive," Huckelberry told the supervisors. He said the new jobs and their salary range, which average 175 percent above local averages, made the agreement all the more attractive.

The county administrator said the contract had ample checks and balances, including some audit power for the county and penalties if the company does not meet the stated employment goals. The county also could call for a review of Ventana's free trade zone status if the goals are not met.

The county administrator estimates the tax break would benefit Ventana the equivalent of more than $8.2 million in Pima County primary property taxes over the decade-long agreement.

If the total amount of the property tax incentive isn't met in that time, the county has suggested the contract be extended an additional two years. The incentive is not to exceed $10 million.

Huckelberry recommended the board, and the other affected governments, approve the reduced tax take in agreement that Ventana would contribute a Payment in Lieu of Tax. The payment would ensure that local governments receive the same amount in taxes that they did prior to the free trade reclassification.

The benefit to Ventana would come in paying the reduced rate on its expansion.

Local governments impacted by the tax reclassification would have to approve the company's application for Foreign Trade Zone designation. The affected governments include Pima County, Amphitheater Unified School District, Pima Community College, Golder Ranch Fire District and the Joint Technical Education District.

State government also has said it plans to chip in to make the Ventana expansion happen. Brewer plans to dispense at least $2 million in federal stimulus funding for job training.

"This support was made available through Governor Brewer's exclusive authority over federal discretionary stimulus funds from the state fiscal stabilization funds," Brewer spokesman Paul Senseman told The Explorer in an e-mail.

Senseman said companies that expand in the state and provide what he called "a significant number of quality jobs" are considered for the funding.

In addition, Senseman said, companies benefiting from the governor's stimulus disbursements must pay at least 80 percent of employees' healthcare premiums.

Reactions to the Ventana announcement

"This decision by Ventana Medical Systems, a member of the Roche Group, to expand their U.S. headquarters in Oro Valley is a testament to the strong relationship Oro Valley has shared with the company for many years. The bioscience industry is a key target growth area for Oro Valley's economic development efforts, and to have Ventana lead the way is an honor. We congratulate all of the organizations that came together in the spirit of collaboration. We thank our state, regional and local public sector partners for realizing the possibilities that this company brings to all Arizonans."

— Oro Valley Mayor Satish Hiremath

"This announcement is a huge boost to the job market for all of Pima County, and demonstrates the success of Pima County's public-private partnership with TREO. This is a great addition to Pima County's bioscience sector, and I congratulate Ventana on their expansion. I thank every one who worked to make this possible."

— Pima County Supervisor Sharon Bronson, vice chair of the board and co-chair of the TREO board

"This is wonderful news for our region and I couldn't be more excited. A prestigious bioscience firm like Ventana Medical Systems is exactly the kind of company we want to see expanding at beautiful Innovation Park. It has tremendous significance for Oro Valley, Pima County and all of Arizona. Ventana's continuing success helps solidify our region as a leader in bioscience and provides our workforce with the type of high-tech, high-wage jobs we need to be attracting."

— Pima County Supervisor Ann Day

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