Bayer wants $13 million in tax breaks from Berkeley, Calif., or it may abandon its hemophilia products factory there in favor of contract suppliers. The demand is reminiscent of Sepracor and Sanofi-Aventis' recent antics in which they extracted tax benefits from towns simply for staying in business. The San Fransico Business Times:
Bayer could decide as early as this month to expand the Berkeley facility to make a next-generation treatment for hemophilia patients. Or it could opt to use contract manufacturers. The latter option, East Bay officials say they were told by the company, would lead to Berkeley's largest private employer slowly dismantling its East Bay manufacturing operations.
Bayer's Berkeley factory has 1,300 workers; about 200 live in Oakland, Calif. The deadline for the ransom demand decision is Aug. 18. Bayer wants to get the tax break by having Berkeley expand the town's enterprize zone around its land. Enterprise zones are intended to attract businesses to struggling areas they might not normally consider. Bayer's Q2 sales were â‚¬8.5 billion and its profit was â‚¬574 million.
The locals are scared to death that Bayer might make good on its promise:
"We are fearful that any step to move production of Kogenate could mean a move out of Berkeley," said Michael Caplan, the city's economic development manager. "We are doing everything within our power to get them to stay here."
But is Bayer really in a position to move? Kogenate production isn't easy, per the SFBT:
It is a complex process, that Bayer at one point said took more than 1,000 people about 250 days to make one lot -- about a handful -- of Kogenate FS. And Bayer as recently as last year wrapped up a multimillion-dollar investment in a 44,000-square-foot sterile facility at the 95-year-old Berkeley campus by winning FDA and European regulatory approval.
The costs of closing Berkeley in favor of a new supplier could well exceed $13 million -- if they did, then Berkeley would be giving up tax revenues for nothing.