Zoetis gets state aid toward $75.3 million expansion project at Charles City facility

By Bob Steenson, bsteenson@charlescitypress.com

Zoetis in Charles City received approval from the Iowa Economic Development Authority on Friday for more than $4 million in state tax benefits to support a $75.3 million expansion project.

The project would enlarge the existing facility located in the southwest part of Charles City by 95,000 square feet to create additional temperature-controlled spaces, manufacturing storage and processing equipment, and would result in 70 new jobs, including 17 of which are incentivized by the state program.

The state award calls for $3.012 million in investment tax credits and $1.372 million in sales, service and use tax refunds, for a total state incentive of $4.383 million.

To qualify for the tax benefits through the High Quality Jobs Program, the 17 jobs must offer an hourly wage of at least $20.58.

There are currently almost 500 persons employed at the Charles City facility, according to the Zoetis application with the Iowa Economic Development Authority (IEDA).

According to the summary presented at the IEDA meeting Friday, the project will be completed in three phases, with the first two to begin yet this year:

• The Manufacturing East Expansion will add more manufacturing space to the east side of the existing manufacturing facility to create additional temperature-controlled spaces, new filling equipment and manufacturing storage. Project is expected to begin in November this year and be completed in 2023.
• The Downstream Processing Expansion will include new temperature-controlled storage and processing areas that support several new pieces of biological processing equipment. Project is expected to begin in November this year and be completed in 2023.
• The Manufacturing North Expansion will add more manufacturing space to the north side of the existing manufacturing facility to allow for additional temperature-controlled space, biological filling and process equipment. Project is expected to begin in August 2023 and be completed in 2025.

In addition, equipment purchases are expected to also start in November and be completed next year, and required infrastructure expansion is expected to start in August 2023 and be completed in 2026.

The projects lists $43.2 million in building construction, $2.5 million in building remodeling and $29.6 million in manufacturing machinery and equipment, for the total $75.3 million project.

The state award is contingent on a $4.86 million property tax rebate from the city of Charles City, anticipated to be a 90% tax rebate on the added value, over an 8-year period, according to the agenda packet from Friday’s IEDA meeting.

Charles City Administrator Steve Diers said that property tax rebate is likely an estimate based on the expected value of the project. The actual amount will be determined once the projected value of the project is assessed, then the tax rebate would have to go through the Southwest Bypass TIF District Board and through the City Council and the county Board of Supervisors. It could get to the Charles City Council by the last meeting in December to set a hearing date if everything goes smoothly, he said.

This new Zoetis expansion project comes on the heels of a 20,000-square-foot, three-year “Poultry Center of Excellence” expansion project that was finished last year and became fully operational this year, at a capital investment of about $55 million.

Poultry vaccines are the largest volume of product manufactured at the Charles City site, although it produces vaccines for multiple species, such as hogs, dogs and horses, the company said.

Zoetis Inc. is a global leader in the animal health industry, focused on the discovery, development, manufacture and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests and precision animal health technology, according to information from the company.

The previous Zoetis expansion created state-of-the-art processing suites with custom automation and proprietary processing systems, the company said. The new spaces can be utilized in different ways to produce a variety of animal health vaccines.

Adjacent to the previous expansion, the company renovated and transitioned approximately 11,000 square feet of manufacturing space from a labeling and packaging area to a suite for highly automated filling and lyophilization, also known as freeze drying.

The previous expansion added 10% additional square footage under one roof to the 600,000-square-foot facility, and includes automated egg receipt and incubation, semi-automated egg processing and expanded vial filling and freeze-drying capacity.

The company had received a $2.5 million state tax credit for that project, along with $1.85 million in local property tax rebates and forgivable loans.

The IEDA board on Friday approved awards for five Iowa companies, which will assist in the creation of 266 jobs and result in $202 million in new capital investment for the state.

In addition to the Zoetis project, the other four businesses receiving state incentives through the IEDA are:

• AML Riverside LLC,  Fort Dodge, animal health, $410,000 in state aid; 16 total new jobs in an $11.1 million project.
• Benson Hill Inc. and subsidiaries, Creston, soy processing, $1.416 million in state aid; 11 new jobs in a $28 million project.
• Confergen Energy, Cedar Rapids, renewable energy pallets, $587,000 in state aid; 23 new jobs in an $18.4 million project.
• IceCap Cold Storage, Council Bluffs, cold storage, $776,650 in state aid; 146 jobs in a $69.4 million project.