The Nevada Economic Development Commission today approved more than $350,000 in tax abatements for a new dietary supplement manufacturer locating in Las Vegas despite the company not meeting statutory requirements for tax incentives.
Commissioners unanimously approved tax abatements and deferrals for DrVita Inc., a company expected to provide 41 jobs when it opens in February.
The commission has the latitude to approve incentives in extraordinary circumstances, but commissioners expressed some concern about the precedence that would be set by approving the package. In the end, commissioners agreed that in the current economy, adding 41 jobs was the most important factor.
They also were swayed by the company founder’s track record of success in the industry and the fact that he is financing the startup out of personal funds and not borrowing money.
DrVita is investing $5.5 million in equipment and construction, well above the statutory requirement of $1 million. The company fell short on a requirement for 75 jobs and 7 percent below the required average wage of $19.55 an hour. By statute, an applicant for tax breaks is expected to meet two of the three requirements.
The company will have its sales tax abated to 2 percent for a year, saving it $334,534, and the modified business tax abated at 50 percent for four years for a total savings of $22,940. Sales tax payments also will be deferred for five years.
The state estimates that the company would generate an additional $1.2 million in net new taxes and have an estimated $64.2 million economic impact over 10 years for an anticipated generation of $179.67 per abatement dollar. State analysts said it would take just more than a year for the state to break even on the abatements.
Wayne Gorsek, founder, chairman and CEO of DrVita, said the plant, which will manufacture and distribute dietary supplements, protein powders, herbs and vitamins, would be at the Las Vegas Beltway and Rainbow Boulevard and open in February.
The company’s products and manufacturing process is monitored by the Food and Drug Administration.
Gorsek was the founder of Vitacost.com in 1994 and generated $160 million in revenue until selling it two years ago. The company grew to having 1 million customers and 3 million orders a year, earning Inc magazine 500 Hall of Fame status by being included in the Inc 500 five years in a row.
At Vitacost.com, Gorsek established Las Vegas as the company’s western distribution center, manufacturing products in Charlotte, N.C.
One of Vitacost.com’s most important products is OcuPower, a nutrient designed to prevent blindness from macular degeneration, glaucoma and diabetes.
Gorsek waited out a non-compete clause in his sales contract to launch DrVita, which will manufacture and distribute from Las Vegas. He says he expects to set up an East Coast distribution center once the company is established.
Gorsek says he has “unlimited” expansion opportunities from his 55,000-square-foot plant and he projects hitting the statutory requirement for job creation by 2014.
“The reality is that we’ll be creating shipping jobs outside our company with all the distribution we’ll be doing,” Gorsek said.
He pledged to use American suppliers and vendors and says foreign outsourcing of jobs by other companies is what makes it so hard for him to offer more than the state’s average manufacturing wage.
“It’s hard to compete when you can get manufacturing labor in Mexico for $4.60 a day,” he said.
In other business, the commission formally asked for an attorney general’s opinion on the department’s plans to offer economic incentives with a so-called catalyst fund.
Department officials have begun drafting regulations for the disbursement of funds, but some have expressed concerns that directing public funds to private companies would be a violation of the Nevada Constitution.
Another tax abatement request on today’s commission agenda involving the expansion of Titanium Metals Corp. in Henderson was postponed at the request of the company.