By the end of 2026, Catalent might spend $350 million, in order to expand its Bloomington operation at South Patterson Drive in the southwestern part of town.
The project would add 1,000 new jobs, growing its local workforce by about one-third.
The pharmaceutical company is looking to spend about $10 million on development of real property, possibly by buying more land. The other $340 would be invested in personal property, which includes all the non-permanent fixtures inside a building, like manufacturing equipment.
The investment by the pharmaceutical company would be contingent on a tax abatement on the additional value for both real and personal property. Real property would be abated at a rate of 50 percent a year for 10 years, making a total of $826,760 in additional paid property taxes and $826,760 in abatement.
The bigger break comes for the personal property, which is 90 percent for 20 years, and totals an estimated $43,450,785 in abated taxes, with $4,827,865 in additional taxes to be paid.
It’s not a done deal, even if Bloomington’s city council grants the abatement, in a series of steps that will start at its meeting next Wednesday, Feb. 16.
That’s because Bloomington is just one of a number of other places in the country that are in the running for Catalent’s potential expansion in production capacity.
At the city council’s Feb. 4 work session, Bloomington director of economic development Alex Crowley put it like this: “[Catalent has] not made a decision—we are competing for this investment with other areas in the nation. They have biologics plants—as you’ll hear as part of their presentation, around different parts of the country.”
Crowley added, “Bloomington, I think, stacks up pretty well, from a talent perspective, from a quality of life perspective, the site, and the adjacent land availability.”
The nearby land that is available includes a 90-acre parcel just to the south of the current Catalent facility, which is owned by the Monroe County government.
The county-owned real estate is part of the “economic revitalization area” that Bloomington’s city council will be asked to designate next Wednesday. On the Wednesday agenda is a resolution that would do two things: designate the economic revitalization area; and authorize the period of abatement.
After that, there’s a pause for public review and then a final, confirmatory resolution, which is currently set for the council’s March 2 meeting.
Catalent’s application for the tax abatement says the company is “considering building improvements to support increased manufacturing capacity as well as potential future new construction.” The application continues, “If tax abatement is approved, real property improvements would occur in phases on property currently owned and may also include additional property acquisitions.”
Catalent says its planned expansion is “critical to company’s ability to remain competitive and pursue additional growth opportunities.”
One of the challenges for adding 1,000 new jobs is finding places for the new employees to live. At last week’s city council work session, Crowley pointed out the close proximity to Catalent of the former IU Health hospital site at 2nd and Rogers, which the city of Bloomington has an agreement to purchase. The master plan report on the site concludes that it could support between 660 and 1,000 units of new housing.
Crowley said at last week’s work session, “I think the couple of areas of interest and concern that we might have is number one, housing for the workforce and attracting the workforce.” He continued, “If you remember, the hospital site is right up the street, that is going to provide significant housing availability as that gets built out.” He added, “The adjacency to that site is actually really interesting for us.”
Housing the new workers in Bloomington, or at least somewhere in Monroe County, is crucial to the tradeoff between forgoing property taxes through the abatement and collecting more local income tax from the additional workers.
In Indiana, local income tax is collected in the county where the worker lives, not where the job is. If the new workers were all to commute in from outside Monroe County, the income taxes on the extra $66.5 million a year in payroll, which Catalent expects to pay the new workers, would not flow into Bloomington or Monroe County government coffers. Crowley told councilmembers at their work session last week that half of Catalent’s current workforce lives outside of Monroe County.
Catalent’s application for the tax abatement pegs the lowest-paying new jobs at $19 an hour and the average full-time hourly wage for new positions at $30 an hour.
Catalent has surpassed by a factor of four the job numbers it promised in connection with previous tax abatements . A tax abatement granted in 2019 was supposed to create 200 new jobs, but generated 839 new positions.
All of the tax abatements that have been granted by Bloomington to various companies have been on the west side of town.
Crowley told councilmembers who attended last week’s work session that the biggest “curveball” with the proposed tax abatement is the 20-year time period. It’s the first time Bloomington has gone past a 10-year abatement period, since the state law was changed in 2014 to allow for abatements longer than a decade, Crowley said.
According to Crowley, Catalent wants to protect their tax liability well into the future given the nature of their equipment, and the tenure of their commitments, and the character of the pharmaceutical industry.
Crowley said the abatement on Catalent’s personal property might turn out to be about the same reduction in revenue as a potential reduction of the “floor” on depreciation value, which current state law sets at 30 percent of the initial value. There’s some talk in the state legislature about lowering the “floor,” Crowley said. If the value of an personal property asset can depreciate to near zero, instead of being artificially maintained at 30 percent, then the tax on that asset would approach zero, too.
Under consideration this year is HB 1002, which would exempt from the 30-percent floor any new depreciable personal property purchased after Jan. 1, 2022. It has been passed by the house of representatives and is now in front of the senate.
Reduced tax payments from abatements presumably raise a firm’s EBITDA and eventually taxable income. (?) In any case, it would be interesting for Congress to consider requiring firms to report estimated state and local tax savings from abatements like these and adding a special income tax rate on that amount, with the revenue returned to state and local governments.