Business

Controversy continues over Brisbane company's move

Wednesday, May 11, 2011
VWR International Jackie Speier

The controversy is heating up over the move of lab equipment distributor VWR International from Brisbane to Visalia in the San Joaquin Valley. One side claims they're letting more than 100 long-term workers go in Brisbane in order to take lucrative tax credits being offered in Tulare County. The other says potential tax incentives were never part of its decision to relocate. Regardless which claim is true, the loser is Brisbane, which will lose $2.1 million in tax revenue or 18.5 percent of its annual budget, along with the displaced workers.

VWR International is in the process of building a 500,000-square foot warehouse in Visalia. Vice President of Operations Ed Borger talked to ABC7 News Wednesday morning via Skype. Borger says that the company doesn't even know if it's qualified to file for the tax credits that come with relocating to Visalia.

"We have not filed for any of the tax credits and we have not yet found out if we qualify for those tax credits," said Borger.

Visalia is located inside what's called a Targeted Tax Area. Companies setting up there can apply for a hiring tax credit of nearly $38,000 for each employee hired, a break on state sales and use taxes, and accelerated depreciation for equipment purchased. Certified public accountant David Neighbors, a corporate tax expert with the Singer Lewak tax and consulting practice in San Jose, says such tax breaks can save a company millions of dollars.

VWR's Borger said that it was Visalia's strategic location in the center of the state that was the reason it's moving its Brisbane operation to the Central Valley. He said the potential tax benefits were not even considered.

"Our decision to build in Visalia was based purely upon our capacity constraints in our current facilities as well as our ability to reach all of our customers," said Borger.

"I would say that that would be disingenuous because hopefully they have proper business and tax advisers that are quantifying the savings of moving to a particular locale," said Neighbors. He adds that the amount of tax savings is so great that any company would factor that in and crunch the numbers since the savings would help defray the cost of building a new facility and enhance its bottom line.

VWR came under attack at a public hearing Monday in Brisbane, called by Rep. Jackie Speier, D-San Mateo. She and State Treasurer Bill Lockyer were critical of a company taking advantage of tax breaks by moving to another city in California. Lockyer says the state tax break is being used to lay off more than 100 union workers in Brisbane and to hire lower paid workers elsewhere.

"Everyone has kids and families to support, and all that, and they're going to have everyone with no jobs," said Brisbane resident Sal Pavone. Paul Saldana, president of the Tulare County economic development agency, told ABC7 that it's not a common occurrence when a company relocates intrastate to take advantage of tax credits. He also said that his organization did not use the tax credits as a carrot to attract VWR, nor could he promise the company it would receive the credits. That decision rests with the state Franchise Tax Board when the company files its tax return.

Visalia's Targeted Tax Area is similar to but not an enterprise zone, which Gov. Jerry Brown earlier this year targeted for elimination to help close the state's budget gap. A Targeted Tax Area (TTA) can only extend tax credits to a specific list of companies. Paul Saldana, the economic development executive, said that VWR in his opinion would qualify as a warehouse business, which is on the list for TTA tax breaks.

Regardless of who's right or wrong in this controversy, there is one clear loser -- the city of Brisbane, which will lose one major employer and a huge chunk of its annual revenue.

(Copyright ©2014 KGO-TV. All Rights Reserved.)

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Tags:
brisbane, jobs, taxes, jackie speier, business, david louie
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