A growing biotechnology firm is asking the city for a tax break to help fund a $3 million expansion of its Portland facility.

The 12-year deal would provide $375,000 in local financing for ImmuCell, an animal health company focused on the dairy and beef industries, to expand its Riverside-area campus, adding an estimated 14 well-paying jobs. The proposal was forwarded to the City Council last week with a unanimous recommendation from the council’s Economic Development Committee.

City Councilor David Brenerman, who chairs the committee, said the city has been trying to grow its biotech industry.

“They’re a good business to have in the city and we wanted to encourage them to expand here,” Brenerman said. “Hopefully, the council will agree with the committee and support it.”

Economic Development Director Greg Mitchell did not respond to a request for information about when the proposal would go to the council. But City Hall spokeswoman Jessica Grondin said a first reading would be held sometime in August, with a vote occurring in September.

ImmuCell estimates that its expansion will cost $17.5 million. Only $3 million of that is for a new 12,625-square-foot, two-story building, while $14.5 million is equipment and furnishings.

The company purchased land next to its facility at 56 Evergreen Drive for the new facility, which is needed before a new product can receive approval from the U.S. Food and Drug Administration, according to CEO Michael Brigham. The company has spent $12 million in developing the new product, Mast Out, a natural treatment for mastitis in lactating dairy cows, but cannot begin selling it without FDA approval, he said.

The company already has over $16 million in financing for the project, Brigham said. Earlier this year, the company sold 1.1 million shares through a public offering, generating $5.3 million in capital for the business, which now employs 47 people. It plans to use that funding, along with $6.5 million in cash reserves and a $4.3 million bank loan, to finance the project.

“We have been talking to the city about a TIF for several months,” before the public offering in February, said Brigham, referring to the acronym for the tax break, tax increment financing. “The debt and the equity came first. We have bought the land, so we’re committed.”

“Technically, I think we’d move forward” even without the TIF, he added, “but it was always our expectation and our hope that it would be a three-legged stool: the debt, the equity and the TIF.”

In 2013, the council changed its guidelines for granting Tax Increment Financing for an individual business. While the new policy does not prohibit tax breaks to individual businesses, it does prioritize areawide and affordable housing TIF districts.

TIFs capture the increased property taxes from a specific development, diverting revenue from the city’s general fund, which pays for a variety of city services, including police, fire and public works. The city receives some benefit, since the added property value does not count against the city when it comes to state revenue sharing and education spending, which decreases as the overall valuation of a city increases.

In this case, the city would get $12,600 a year, or $150,000 in total, in so-called “sheltering” benefits, for the $375,000 it’s giving away in taxes, according to city documents. After the 12-year term, the entire value is added back onto the tax rolls.

TIFs generally fall into two categories: those that benefit an individual business and those that benefit the city in general by investing in infrastructure, such as roads and sidewalks.

In a Credit Enhancement Agreement such as this, a portion of those new property taxes, in this case nearly 62 percent, are returned to the property owner as a way of financing the project and the rest goes into the city’s general fund.

In an areawide TIF, the additional property taxes go into a special fund that is used to make public infrastructure improvements within a specific neighborhood. For example, Bayside and the city’s waterfront have areawide TIFs.

TIFs can be controversial. Critics argue that they amount to corporate welfare, while city officials often say TIFs are one of the few tools a municipality can use to attract and retain businesses.

In fiscal year 2015, the city returned $3.2 million in local tax dollars to seven private businesses and nonprofits, while $1.2 million in TIF revenue was used for public infrastructure and arts, according to the most recent annual report.

 

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