Merck in Austin?

Pharma firm considers “Innovation” location, Austin city incentives

Friday afternoon, March 31, the city of Austin announced a proposal to provide economic incentives to New Jersey-based pharmaceutical firm Merck & Co., in return for the creation of 600 jobs and a total proposed investment of $28.7 million in a company IT hub, eventually planned for the “Innovation Zone” near the Dell Medical School complex.

City Council will be briefed on the proposal at its April 6 meeting next Thursday (public comment invited), with a full public hearing and a possible vote the following week. According to a statement released by the Economic Development Department, “The City’s proposal includes a performance-based investment of $856,000 over a 10-year period.” Both the Central Health Care District and the Dell Medical School would be expected to collaborate in partnerships with Merck.

Documents posted with the Council briefing materials include a summary of the major aspects of the proposed deal:

• Merck (Merck Sharp & Dohme Corporation) anticipates an investment of $20,532,000 million in construction, as well as an estimated $2 million in annual expenditures for local services and an estimated $500,000 in annual local purchases.

• The Austin project would establish Merck’s fourth IT Hub, to be focused on metadata collection and designing solution-based platforms for personalized, proactive and preventative healthcare.

• Although the company is reportedly considering several other locations, should it choose Austin, it anticipates finding a short-term, lease space, while a future long-term space is constructed within the Innovation Zone. (A potential location would be the mixed-used development planned for the current University Medical Center Brackenridge site. (UMC Brackenridge is to be replaced by the nearly complete Dell Seton Medical Center.)

• The Merck agreement with the city would have a 10-year term, eventually resulting in 600 permanent jobs with an average wage of $84,586, and a median wage of $79,500 by 2026.

The city’s anticipated $856,000 contribution is relatively small (about $200 per job), although it will reportedly function as the local sponsor of and complement to expected state incentives from the Texas Enterprise Fund (not yet announced). The city incentives will be performance-based (paid only in return for annual employment and investment benchmarks). According to a city financial summary, over 10 years the city expects gross benefits of $10,296,672, and gross costs of $8,348,568 – for a calculated net benefit of $1,948,104.

As attractive to city officials as any direct financial return is the opportunity to create a major medical “innovation” partnership with the Dell Medical School within the city’s north Downtown Innovation Zone. In a statement, Medical School Dean Clay Johnston said in part, “While a number of details need to be worked out, a collaborative relationship with this company could create unique opportunities to fulfill our mission in different and far-reaching ways.

“We have discussed projects and initiatives to improve health, reduce inequities, improve patient outcomes and lower community health costs – potentially ranging from an effort to eradicate human papillomavirus (HPV) and cervical cancer in Austin, to pilot projects around better uses of health data, to community-based programs that increase the pipeline from schools into the health professions. These kinds of initiatives would be difficult to achieve without a relationship with this specific kind of collaborator. …

“We look forward to working with the city and the company to ensure that this community can seize every available opportunity to make Austin a model healthy city that’s an example to the world.”

You can review more information about the proposal, and participate in an online survey, on the city's Economic Development Department website. For more on the Merck proposal and this week’s City Council meeting, follow the Daily News and the April 7 print edition.

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City Council 2017, Merck & Co., economic incentives, Dell Medical School, Innovation Zone

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