JDA TO ISSUE $85 MILLION MORE IN “PHANTOM BONDS” FOR BAXALTA/SHIRE
The JDA met early this morning to agree to $85M more in bonds for a company that makes a profit of $16 Billion a year. JDA has sent a copy of the agreement for us to review, but there hasn’t been time to do so. We are happy that these bonds weren’t hidden from the public like the $1.1 Billion in original bonds.
Here is a copy of the article posted in the Rockdale Citizen about what happened today.
JDA AGREES TO $85 MILLION IN NEW BONDS FOR BAXALTA
November 1, 2016
COVINGTON — The Joint Development Authority of Jasper, Morgan, Newton and Walton counties agreed Tuesday morning to pursue the issuance of $85 million in additional industrial development revenue bonds for Baxalta U.S., which is a wholly owned subsidiary of Shire, the biopharmaceutical giant with a plant in Stanton Springs.
The JDA, which owns Stanton Springs, agreed in 2012 to issue $1.137 billion in bonds for the construction of the Baxalta plant, now known as Shire, and to abate taxes on personal and real property at the plant for 10 years as part of an inducement to locate in Stanton Springs. Since 2012, Baxalta estimates its investment exceeded the original projection by $85 million. The additional investment will result in Baxalta paying $29 million more in property taxes and $60 million total over the 10-year abatement period.
According to Andrea Gray, attorney for the JDA, Baxalta’s increased property value will mean increased tax collections, resulting in the counties receiving tax proceeds sooner than originally expected. Under a revenue sharing agreement between the JDA, the counties and the four school systems, all JDA expenses and debt are paid first out of tax proceeds. Gray estimated that Baxalta would pay $270,000 in property taxes to the four counties and $400,000 in school taxes to the four school systems in year one of the abatement schedule, which could begin as early as 2018. Newton County’s share of that would be $97,228 in county taxes, $149,697 in school taxes, $3,375 in EMS taxes and $6,302 in fire district taxes.
Over the 10-year abatement period Newton County stands to receive more than $20 million in net property taxes. Without the additional $85 million in investment, Newton County’s total collection over 10 years was estimated at $10 million.
“The impact of this $85 million additional investment is that we get more tax revenues and we get them sooner than we were going to under the original abatements,” said Gray. “Part of that is the additional $85 million and part of that is the breakdown of how that is put into real property versus machinery and equipment, the values of those.”
The abatement percentages granted to Baxalta vary by year and by property type, with the abatements decreasing over the 10-year period. JDA officials stressed Tuesday that the additional bonds are not a liability for any of the counties involved nor the JDA.
As a condition of the additional bond issue, Baxalta has agreed to pay $2.5 million to the JDA to go toward a loan with the Georgia Environmental Finance Authority that was used to build a wastewater pretreatment plant at Stanton Springs. Gray said the payment on the GEFA loan would decrease the JDA’s annual payments by $100,000. In addition, Baxalta will pay all bond validation expenses and attorney fees for the bond issuance.
Denny Dobbs, one of Newton County’s representatives on the JDA, said the increased property value at Baxalta and the potential for increased tax revenues are evidence of the importance of taking the long view in economic development.
“You have to have a vision and stay the course,” he said.
Baxalta is expected to begin making tax payments to the four counties and the school systems when production begins, which, with FDA approval, could be as early as 2018. Each of the four counties will receive differing allocations of tax payments based on their initial investment in Stanton Springs. Newton and Walton counties will each receive 37.5 percent of tax payments from Baxalta, while Jasper will receive 10 percent and Morgan 15 percent.
Tax abatements are typically used to induce a project to come to a community and are achieved through the issuance of “phantom bonds.” The process involves a government entity taking title to the project, then issuing bonds and leasing the project back to the developer, in this case Baxalta. The developer then pays rent to the governing entity, and those funds are used to pay debt service and repay the bonds. The title transfer and “phantom bond” process are necessary because taxes cannot be abated on private property.
Tuesday’s approval by the JDA is the first step in the process of issuing the $85 million in bonds. The tax assessors of Walton and Newton counties must agree to the property value assessments, and JDA members plan to brief their boards of commissioners and boards of education. The JDA anticipates holding a bond validation hearing in December in Morgan County Superior Court.
Citizens, be informed and stay informed! Only by being informed, can the citizens understand what is being done and talked about, and then press our officials to make good decisions for everyone in Jasper County. That is our goal with the Taxdogs blog.