The Durham City Council Gave a Biotech Company $77,000. Here’s Why That’s a Bad Idea. | Durham County | Indy Week
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The Durham City Council Gave a Biotech Company $77,000. Here’s Why That’s a Bad Idea. 

In terms of municipal budgets, $77,000 is not a lot of money.

That's why it was an easy decision, last Monday, for the Durham City Council to approve an incentive package for Almac, a UK-based company that serves the biotech and pharmaceutical industries. The company intends to expand its operations in Durham to the tune of seventy-seven new jobs. The council voted unanimously to give Almac the money, contingent upon the jobs materializing. (The state is chipping in with a matching contribution from the One North Carolina Fund.)

But the fact that $77,000 is not a lot of money is also the reason why it was a poor decision to give it.

Almac already employs 289 workers at a facility in north Durham. Earlier this year, it opened a new clinical trials facility in Research Triangle Park. It's clearly committed to its presence in this region. And for good reason: besides the usual reasons why the Triangle is an attractive place to do business—relatively cheap, good quality of life, access to major east-coast transportation hubs—it's also home to a huge amount of pharmaceutical and biotech talent, thanks to RTP and the world-class universities in the area.

click to enlarge ILLUSTRATION BY SHAN STUMPF
  • Illustration by Shan Stumpf

Are we supposed to believe that Almac would have scrapped its plans to add those seventy-seven jobs here if the city didn't pony up a measly $77,000? Or that Almac would have taken its new jobs out of the state entirely unless it received a combined $150,000 from Durham and the state of North Carolina?

That's what the city would have us believe. In recommending the move, Darrell Solomon of the city's Economic & Workforce Development Department told the council that Almac "indicated that if this is not incentivized here, they do have options elsewhere, primarily at their U.S. headquarters."

Almac's global vice president of operations, Donna Christopher, tells the INDY that Almac was "getting attractive offers from other states" and cited the company's headquarters—in Souderton, Pennsylvania—as one of the other potential locations for expansion. Asked if the company would have canceled its plans for an estimated $6 million expansion in Durham over an incentive worth 2.5 percent of that investment, Christopher referred the INDY to Simon Grattan, an Almac manager in the UK.

In an email, Grattan wrote, "The Almac Group operates on a global basis and so has the opportunity to expand its companies in a number of countries. Within the U.S., the HQ is in Pennsylvania and a further site is in San Francisco. In making their final decisions on where any expansion will take place, the Group Board will take into account a range of factors, of which incentives clearly will play a significant part."

"They like Durham, we like Durham, and looking at the small amount of money they were asking for, it seemed like a no-brainer," says Durham council member Charlie Reece. "And I trust our staff that vetted this, and their recommendations. This is just what it takes to bring these opportunities to Durham. I don't like it. But this is the world we live in."

Is it? Or does it only appear that way because governments believe businesses when they tell them it is so?

"It's hard to blame businesses, who are by nature always looking after their bottom line, from being tempted by these [incentives]," says Jon Saunders, director of regulatory studies at the conservative John Locke Foundation, which has long argued against these types of incentives. "That's why we think government shouldn't get involved in this kind of thing. Our studies, and the studies of many economists, have found that cities and states do not benefit from these deals in the long term when you take into consideration the full costs and benefits."

Indeed, the nonpartisan Institute on Taxation and Economic Policy concluded in a 2013 report that "tax incentives are rarely the deciding factor in whether a business chooses to hire or invest within a state's borders." And a 2015 analysis by the policy resource center Good Jobs First of the state's One North Carolina Fund found that large companies, such as GE, Smithfield, and Bayer, received the overwhelming bulk—95 percent—of the program's resources between 2008 and 2013. These are billion-dollar operations that hardly need taxpayers' help.

No, Durham isn't going to go broke on this deal. But it's a bad precedent to keep setting. Seventy-seven thousand dollars isn't a lot of money to Durham. But it's even less to the Almacs of the world.

This article appeared in print with the headline "Small Bills"

  • The city’s theory is that Almac would have taken its expansion elsewhere

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