Friday, April 14, 2017 by Chad Swiatecki

City approves Merck incentives, waits for decision on IT hub

Austin will provide up to $856,000 in economic incentives to pharmaceutical giant Merck Sharp & Dohme if the company chooses Austin as the site for a proposed information technology hub.

By a 7-3-1 vote, City Council approved a Chapter 380 agreement that will pay the company $85,600 a year through 2026 – based on $200 annually for each job created or retained on the site – if it follows through on its commitments to create 600 jobs in the $28 million project.

Thursday’s hearing and vote also makes the company eligible for an estimated $6 million in economic incentives from the state.

For the second week in a row Council members expressed concerns about portions of the project or incentives package while saying they saw many potential positives in bringing the company to Austin as a potential partner for the new University of Texas Dell Medical School.

Voting against the measure were Council members Delia Garza, Greg Casar and Ellen Troxclair.

Garza seemed to have the strongest objection to the proposal because the expected jobs, which will have a median wage of $79,000 per year, won’t be for lower- and middle-class workers that need employment with opportunities for advancement.

“There’s never a perfect package and while my ‘yes’ votes don’t signal I agree with everything, at the same time my ‘no’ votes don’t signal I disagree with everything,” she said. “My biggest concern is the type of jobs. My priority is to bring as many low- and middle-class jobs as possible, and this doesn’t have that.”

Prior to the vote Troxclair said she expected the measure to pass and that she looked forward to the economic opportunities the company’s presence would create, but she voted against because of the incentive money coming in part from residential property taxes.

Casar said he largely supported the Merck plan, but is opposed to the state potentially awarding the company money while the state legislature is also mulling cuts to schools and other government bodies.

The approval is the first one granted by the city since 2014, and the first for members elected with the change to district representation. Three packages were approved in 2014 for Websense, Dropbox and Athenahealth, with the total investment of $23 million, or just over 75 percent of what Merck would spend on the IT hub if it picks Austin.

A fiscal analysis of the Merck project projects it to generate $1.9 million in net benefits to the city over the course of the 10-year incentive agreement.

Speakers during public comments mostly praised the company and the training potential it would create for Austin Community College and Huston-Tillotson University, though one resident said there is no need to give an incentive to a global company with a valuation of more than $170 billion.

The company turned down a request from Mayor Pro Tem Kathie Tovo that it agree to not contest Travis County’s property valuation on the center during the agreement, with Tovo suggesting Council amend the 380 Agreement language to make such a stipulation mandatory in the future.

The photograph that originally ran with this story has been replaced, as it did not depict the correct company.

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Key Players & Topics In This Article

Austin City Council: The Austin City Council is the body with legislative purview over the City of Austin. It offers policy direction, while the office of the City Manager implements administrative actions based on those policies. Until 2012, the body contained seven members, including the city's Mayor, all elected at-large. In 2012, City of Austin residents voted to change that system and now 10 members of the Council are elected based on geographic districts. The Mayor continues to be elected at-large.

Economic Development Incentives: This is shorthand for a series of programs designed to lure business to a given region. In Austin, the program tends to take some form of tax-based incentives. These can include rebates or grants that are often tied to a set of stipulations. These tend to include local hiring goals, same-sex partner benefits, or, more recently, wage floors for construction workers who build facilities for the incoming organizations.

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