Chemours to stay in Wilmington; 1,000 jobs kept in Del.

Chemours will keep its global headquarters in downtown Wilmington, preventing nearly 1,000 jobs from leaving Delaware.

The company had scouted multiple locations in New Jersey and Pennsylvania, Mark Vergnano, its chief executive officer confirmed. Vergnano said there was a very real chance the $6 billion company could have left the state it has called home since it was spun off from DuPont in July 2015.

"When we started, it could have been any one of those places," he said about the competing states. "The odds were even all around."

About 800 employees work at Chemours' current headquarters at the iconic DuPont Building, which sits along Rodney Square. An additional 200 workers are based at research sites the company leases throughout Delaware from its former parent. Those locations include the Stine-Haskell Research Center in Newark, along with DuPont's Experimental Station and Chestnut Run headquarters. Both the Experimental Station and Chestnut Run are located just outside Wilmington.

By keeping those employees in and around Wilmington, Chemours prevented what could have been a devastating blow to the city's economy. In May, Bernice Whaley, director of economic development for the state, said the loss of Chemours could cost the state 3,409 direct and indirect jobs along with $554 million of revenue.

"When you look at the number of employees, what Chemours generates in personal income tax and what it could have meant if all those people put their homes on the market, there could have been trouble developing," Gov. Jack Markell told The News Journal.

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Chemours' downtown workers generate more than $70 million in annual payroll, according to data from the Wilmington Office of Economic Development. In addition, those workers generate more than $850,000 in annual wage taxes for the city.

Jeff Flynn, the city's economic director, said Chemours' decision provides indirect economic benefits for the city outside its workers spending money at downtown shops and restaurants. For example, Chemours will likely contract with local businesses such as maintenance and janitorial services to work at its headquarters.

"Chemours may not hire someone in Wilmington to clean the carpets, but that person might do their shopping in the city," he said. "These are things people don't always think of that are impactful."

The benefits go beyond the city's economic gain. Symbolically, Chemours' selection of Wilmington helps fill the void created when DuPont vacated downtown in early 2015 for the nearby suburbs. Some say the city has been reeling since DuPont moved and then agreed to merge with the Dow Chemical Co. and split into three separate businesses. Delaware will retain two of the businesses created through the Dow merger.

"This solidifies that DuPont is not here anymore, but at least one of the legacy companies is staying in downtown Wilmington," said Rich Heffron, president of the Delaware State Chamber of Commerce. "It sends a signal to other companies that downtown is a good place to be."

Wilmington Mayor Dennis P. Williams said in a statement he was "honored" Chemours selected the city as its permanent headquarters.

"Our city provides a cost-competitive urban location with attractive amenities, an accessible location and a talented workforce," Williams said. "As Chemours embarks on this exciting new journey as an independent company, Wilmington will continue to strongly support their corporate and community objectives."

Still looking in Wilmington 

Although Chemours will remain in Wilmington, it has not decided if it wants to stay in the DuPont Building. Chemours owns the 108-year-old building, which has served as the company's only headquarters since it split from DuPont.

Vergnano said his preference is to remain in the DuPont Building, but it must be modernized to be considered a viable option. Chemours will spend the next six to eight months reviewing other possibilities within Wilmington's downtown business corridor, he said.

Chemours currently occupies all of the office space in the 13-story DuPont Building.

"We want our headquarters to reflect the company," he said. "We are more of an entrepreneurial company. We have a startup kind of vibe, and that is something we want connected to the way we think of our headquarters."

He said the building also needs more open space to encourage teamwork among employees, he said.

Last month, the state approved $1 million to a group affiliated with Wilmington developer Buccini/Pollin to acquire and upgrade the building adjacent to the Hotel du Pont. Buccini/Pollin has proposed completely gutting the office building in a $92 million renovation and then lease back 252,000 square feet on floors 4 through 13 to Chemours for 15 years, according to its application for the grant money.

State guidelines require applicants to own or provide intent of ownership in order to be eligible for funds.

Any discussions between Buccini/Pollin and Chemours about a sale and leaseback are premature, Vergnano said.

"We've spoken to multiple people about ways to make this [building] viable from our standpoint, but we are just not ready to conclude that kind of conversation with anyone right now."

Vergnano is not the only one whose first choice is the DuPont Building. U.S. Sen. Tom Carper, a Democrat, and Flynn both said they would prefer if Chemours stayed at 1007 N. Market St.

"I think the last thing we need in Wilmington is to have that building that has been a landmark for a business giant to just sit vacant," Carper said. "That sends a terrible signal."

Flynn agreed but conceded the final choice rests with Chemours.

"I love the idea that it is Chemours' historical home, and I love the potential that it could be renovated," he said. "But they need to stay where they are going to work best."

If Chemours leaves the DuPont Building, it is not clear where it could find 252,000 square feet of available space in the city. Downtown office buildings in the city posted a vacancy rate of about 18 percent last year, according to real estate firm Jones Lang LaSalle, but few buildings have the size to accommodate Chemours' space needs.

Flynn said the Brandywine Building has about 240,000 square feet of open office space, while the Hercules Building has roughly 200,000 square feet. Both would be tight fits for the company.

It is unlikely Chemours would build a new headquarters from scratch in downtown Wilmington, according to Vergnano. He said the company wouldn't spend its own money on that kind of project, but it would be open to developers who want to foot the bill for construction costs and lease to Chemours.

"We own this building so that puts it as the lead dog," Vergnano said. "But there are other opportunities around the city, and we are open to that."

Only one site in the city, a field along the Riverfront that could support 300,000 square feet of office space, would meet Chemours' size requirements, according to Flynn.

New Jersey and Pennsylvania in play 

Chemours had entered discussions with New Jersey and Pennsylvania officials about the possibility of a new headquarters. New Jersey offered the locations just over the Delaware Memorial Bridge in Salem County, but the company dismissed those spots as too rural and "too far away for our workforce," according to Vergnano. He said a lot of employees live in Philadelphia and take the train to work each morning.

"When we look at where we want to be and the talent we want to attract into Chemours, we are finding millennials really like having a connection to the city," he said. "Whether that is going out to lunch or live in the area or use mass transit, we are finding the city to be a very attractive location."

Chemours owns a 1,455-acre manufacturing facility, dubbed Chambers Works, at the base of the Delaware Memorial Bridge in Deepwater, New Jersey. The property, along with the DuPont Building, was transferred to Chemours as part of the DuPont spinoff. Although one Salem County executive tried to entice Chemours to relocate its headquarters to Chambers Works, Vergnano said the property was never seriously considered because he didn't want Chemours' headquarters to be on an industrial property.

In Pennsylvania, Chemours scouted a potential spot in Chadds Ford but rejected it because of executives' desire to be in a city. The company also considered moving into the Philadelphia Navy Yard or an office building in Center City Philadelphia.

Vergnano said the expense of renting space in Philadelphia along with its high wage tax and difficult commute for Delaware residents eliminated the area from contention.

Vergnano said the company received inquiries from states such as Louisiana and Texas, where many other chemical companies are based. However, the inquiries were never formal, and the company didn't want to lose its employee base by moving across the country.

Corporate tax overhaul helped

The major key to keeping Chemours in Delaware, according to Vergnano, was the passage of the Delaware Competes Act, which transformed how the state calculates income taxes for companies headquartered here. Signed into law by Gov. Jack Markell in January, the act taxes a company based on its Delaware sales only, but not for adding payroll or property. Other states typically calculate corporate taxes based on sales within a state.

Some had nicknamed it the Chemours Act because it is believed the legislation was pushed with the company in mind.

"It was really the change of the tax law," Vergnano said about why the company chose to stay. "Delaware was at a distinct disadvantage from a tax law standpoint. Once they made the change it put them on equal footing with everyone else, and then we could really make a decision based on what's best for our employees."

Markell said the speed in which the General Assembly passed the act sends a strong message to the business community beyond Chemours.

"I said we were going to get it done and get it done quickly," he said. "We are constantly looking at how we can be competitive with other states, and this sent a pretty positive signal."

The state also agreed in May to provide $7.9 million in taxpayer grants to Chemours. About $695,000 of the package will be set aside to upgrade Chemours' headquarters, wherever it decides that will be. In exchange for the incentive package, Chemours would be required to retain 900 jobs in Delaware through 2020.

Flynn said the city approved up $2 million from its strategic fund for Chemours. Under the agreement, which still needs to be signed by both parties, Chemours must keep a minimum of 550 jobs in the city for 10 years.

"This is one of the largest incentive packages we've ever approved," Flynn said. "We really felt strongly about doing everything we can to help this company stay in the city."

Other incentives offered by Wilmington includes a five-year abatement on the city's $180 per employee annual head tax and a property tax abatement that will hold the company's property taxes at its current levels for five years if the value of its headquarters increases through renovations.

"We really wanted that company in the city," Flynn said. "It's not just a chemical company. It's a company that knows where it is heading."

Chemours has struggled since separating from DuPont. It has reported only one profitable quarter as a standalone company, posting an $11 million gain in the first quarter of this year. The company will report its second-quarter earnings next week. As part of the spinoff, DuPont assigned $4 billion in debt to Chemours and required the fledgling company to indemnify it for legal damages stemming from the release the toxic chemical C8, at DuPont's Washington Works plant, near Parkersburg, West Virginia. The Washington Works plant was assigned to Chemours as part of the spinoff.

Vergnano is confident in Chemours' five-point transformation plan. The plan, which included a major overhaul of its chemical solutions business and cost reductions that resulted in layoffs, is on track to make it a prosperous company that will grow in Delaware, he said. Officials around the state agreed, forecasting a bright future for the chemical company.

"This is a great story in the making," Carper said. "DuPont loaded them down with debt and liabilities, but I think they've performed above expectations. I hope and expect they will continue to exceed expectations."

​Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.