Austin OKs Merck incentives to build big pharma IT hub in Austin

Michael Theis Staff WriterAustin Business Journal

Austin City Council has approved its first economic incentive agreement in years, designed to lure pharmaceutical giant Merck & Co. Here's a breakdown of how the public money will flow to the drug-making giant — which has lofty hiring goals.

Per the incentive agreement, Austin would pay the drug maker $856,000 over 10 years, split into annual $85,600 payments — so long as Merck meets certain requirements, including investing $28.7 million to build the hub and employing 600 full-time workers at an average wage of $84,586 per year plus benefits.

The city's approval of the incentives agreement opens the door for a state package worth up to $6 million in tax abatements.

City staff with the Economic Development Department, which helped craft the deal, said the incentives package also comes with commitments — though not requirements — by Merck to develop a diverse hiring pipeline with local educational institutions. Backers from the Dell Medical School also hailed the arrangement for its potential to apply Merck's expertise to the forming Innovation District, which is dedicated to improving community health care.

The measure passed 7-3, with District 2 Councilwoman Delia Garza, District 4 Councilman Greg Casar and District 8 Councilwoman Ellen Troxclair voting against. Casar and Garza said they opposed the measure because it wouldn't bring enough low- and middle-income jobs to the city.

"There are wonderful things in this package, but I cannot support it because a priority for me is bringing jobs to this city that help middle- and low-income families," Garza said during the meeting.

Troxclair, City Council's lone Republican, opposed the deal, saying that it was inappropriate to use public funds to benefit a private company.

This is the first incentive agreement approved by Council since 2014. That year, Council approved three agreements — with Websense Inc., Dropbox Inc. and Athenahealth Inc. However all of those agreements are now inactive for various reasons. Between 2003-2014, Austin approved a total of 14 economic incentive agreements under the state's Chapter 380 incentive program. Today, seven remain active (not including the new Merck agreement) and one has been completed. The rest are inactive.

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