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Covance deal not that simple

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GREENFIELD — While city officials are supportive of drawing roughly 360 acres of the Covance campus into city limits, it’s still unclear how tax breaks on the deal would work.

Covance, a drug development company, bought the property – which is mostly outside city limits – from Eli Lilly and Co. five years ago. Now, Covance officials say they’d like the campus to be annexed into the city so the company can use the city’s wastewater treatment system.

While Covance would pay for the utility lines and connection fees, the city council must weigh whether to approve a tax break plan that would phase in property taxes over 10 years.

The company already has nearly $10 million in tax abatements from county government, and just how those tax breaks would work after an annexation is uncertain. The attorney for Covance says tax abatements from the county would remain in place after an annexation; the attorney for the county says they wouldn’t; and the attorney for the city hasn’t looked into the matter enough to give an opinion.

On the table is a 10-year phase-in of city property taxes. With current property tax rates and property values, the company would be paying roughly $160,000 to the city in annual taxes. The plan calls for new taxes to be slowly phased in over a decade.

Greenfield Utility Director Mike Fruth said it makes sense to give the company a break, especially because Covance wouldn’t use city services much. Most of the roads in the annexation area would remain private, Fruth said, and the company would maintain its safety systems so the use of police and fire protection would be minimal.

“Since they have limited need of services, we propose their taxes be rolled in on a 10-year period,” Fruth said.

Covance has been receiving tax abatements from county officials for years. A total of 11 have been approved for several of the company’s buildings and equipment. With this year’s tax rates, that totaled $9.9 million in breaks to the company in 2014, according to records from the county auditor’s office.  

Hancock County attorney Ray Richardson said in order for those abatements to stay in place, the city council would have to decide whether to honor the abatements. But Chris Janak, attorney for Covance, said there’s no need.

“Whatever deals on abatements of county taxes, those would remain in place,” Janak said.

The city council’s consideration of a 10-year phase in of property taxes would run parallel to what the county has already given the company, Janak said. That’s because by being annexed into the city, Covance will have to pay another layer of taxation.

And then there’s the question of fire protection. Clerk-Treasurer Larry Breese said he’s trying to figure out whether a tax abatement to the company would affect funding to the city’s fire territory. He hasn’t been able to get an answer yet from the Indiana Department of Local Government Finance.

“I have no idea what effect this may or may not have,” Breese said. “And it may not have any (effect) at all.”

City attorney Tom Billings said he’s looking into the matter and hasn’t figured out yet how tax abatement would work with the annexation plan.

The answers should come soon, however. The city council will likely vote on the plan as early as next month; the city’s board of works is scheduled to consider a sewage agreement with Covance in two weeks.

Regardless, council members so far seem to be in support of the idea of bringing Covance into city limits because it will boost revenue to the city’s coffers.

The city council heard about the plan publicly for the first time at a meeting Wednesday. Council member Judy Swift said she likes the idea of the city and Covance working together on a mutual deal.

Covance will pay the city $96,000 in connection fees, and monthly storm water charges to the company will be $450. The proposal also calls for Covance to foot the entire cost of construction of sewer lines to the property.

“This is something I’ve wanted to get done for a while,” said councilman Jason Horning.

Horning said while he wants to know how abatements will work, ultimately the city is getting a good deal from the annexation.

“We started talking about this probably eight or nine years ago, back when it was still Lilly,” he said. “They didn’t need us in the past, so it really wasn’t beneficial for them to come into the city limits. Now they need us because they want to utilize the sanitary sewer.”

Covance has been maintaining its own sewer system since it purchased the property from Lilly five years ago. A company spokesman said in a statement this week that Covance wants to hook into Greenfield’s system so it can focus more on drug development and less on infrastructure.

The Greenfield campus of Covance employs roughly 700 people; the New Jersey-based company has 12,500 employees in 60 countries worldwide.

“It’s going to be good for the city in the long run to have them in city limits,” Horning said. “And they’re one of the major employers, so I think it’s a good deal to get them into the city. That’s going to eventually help offset residential property taxes by having them in the city, even though we’re giving them a tax break.”

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