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Tax breaks slated to lure Baxter International expansion

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Baxter International Inc.
Baxter International Inc. is shown Monday, Nov. 5, 2001 in Deerfield, Ill. The company is weighing an expansion to a vacant biotech facility it has purchased in Brooklyn Park, Minn.
AP Photo/Fred Jewell

Aiming to attract jobs, the state of Minnesota and the city of Brooklyn Park, Minn., are proposing a slate of tax breaks to a Fortune 500 company that makes and markets medical devices, pharmaceuticals and biotechnology.

Baxter International of Deerfield, Ill., is weighing an expansion to a vacant biotech facility it has purchased in Brooklyn Park. To lure the company, the Dayton administration and state and local economic development officials have asked state lawmakers to approve incentives that include a sales tax break on capital equipment and tax breaks of $4,000 to $8,000 per job for 190 jobs.

Brooklyn Park City Manager Jamie Vergbruge, said he hopes the incentives will convince the Baxter International officials to build in the city.

"They made a significant step forward by purchasing the facility," Vergbruge. I think that whether they continue progressing is going to depend on the ability to bring the financial agreement and the state legislation to fruition."

The proposal also includes a $5 million forgivable loan. Initially, Gov. Mark Dayton and officials with the Department of Employment and Economic Development declined to identify which company would receive the taxpayer subsidies. They asked state lawmakers to consider the legislation without knowing what company was seeking them.

"It's a very significant company," Dayton said early Tuesday afternoon. "I'm not going to give their name because I've been told if we violate that confidence it would basically end the discussion for their consideration in Minnesota, so I'm not going to voluntarily provide that information."

Baxter International spokeswoman Deborah Spak acknowledged the company's interest in Minnesota. In a written statement, she cited the importance of the state's decision on the proposed incentives.

"Future decisions on additional investments will be made over time to expand on the technical capabilities of the site and equip the site for biosimilar production," Spak said. "Incentives may impact these future decisions and additional investments."

The secrecy around the company and the tax breaks led to some intrigue at the Capitol. Lawmakers early Tuesday referred to the company as "Project Fern." Some knew about it. Others were in the dark.

House Speaker Paul Thissen said he, Dayton and Senate Majority Leader Tom Bakk sent a letter to the company promising the tax breaks. But Thissen told reporters Tuesday morning that he did not know the name of the company -- just that it could bring jobs to Minnesota. 

Even the chief author of the bill knew little about it.

"I don't know if they're making face lotion or curing Alzheimer's," said state Rep. Melissa Hortman, DFL-Brooklyn Park.

Hortman said early Tuesday that the city of Brooklyn Park and the state Department of Employment and Economic Development have tried to lure a biotech company to fill a vacant manufacturing facility. She said the space has been vacant for five years after its original occupant failed to win federal approval to manufacture a drug.

"For whatever reasons, they didn't make it all of the way through the FDA approval process, so the property was bought by a company called Genmab and has been kind of mothballed since then," Hortman said. "And the city has been working really hard to bring a company into that spot."

Such secrecy surrounding an economic development plan is highly unusual. For example, a proposed subsidy for the Mayo Clinic's expansion has received multiple hearings and scrutiny.

Even state Rep. Ann Lenczewski, chair of the House Tax Committee, was left in the dark. She told reporters she didn't know the name of the company but was asked to carry the subsidy in the tax bill. Lenczewski, DFL-Bloomington, said she's not sure the subsidy will convince the company to come to Minnesota.

"These have been done in the past and they generally fall through," she said. "I don't know if this is a good chance of this happening or a very small chance of this happening. I'm not on the inside of it. I'm on the process part."

Lenczewski's bill would provide a sales tax exemption for materials, supplies and capital equipment for the expansion of a biopharmaceutical manufacturing facility. It notes that the company needs to manufacture biologics, make an investment of at least $50 million.

Dayton suggested that other state funds also would be used to lure the company to Minnesota.