The governor calls a legislative session to consider preserving current tax rules for five years if the company expands
Gov. John Kitzhaber announced Monday that he is calling the Legislature into special session on Friday to take up a bill that would clear the path for Nike to do a major expansion in Oregon.
The bill would guarantee Nike that the way its corporate income taxes are figured would not be changed over the next five years — if Nike creates at least 500 jobs and invests at least $150 million in facilities in Oregon during that time.
“With legislative action this week, Oregon can secure high-wage jobs and hundreds of millions of dollars of new private investment in the next five years,” Kitzhaber said in a statement . “In fact, Nike is ready to commit to a significant expansion of its Oregon operations if the state can provide certainty we won’t change tax rules after they make a new investment.”
Kitzhaber said a recent analysis by AECOM, a global professional services firm, estimates that the economic impact of Nike’s potential expansion would be more than $2 billion a year by 2020 and more than 12,000 jobs — including people directly employed by the company and its suppliers, as well as jobs created when those people’s incomes are spent and respent in the community.
Construction work alone would account for about $440 million and more than 2,900 jobs, Kitzhaber said.
No details were made public Monday about the proposed expansion.
“I have no specifics to share,” Nike spokeswoman Mary Remuzzi said when asked for a rough timeline of the expansion and the number of people who would be added to the company payroll. She said she had no comment when asked what the expansion would allow Nike to do, and said no decision has been made on where the expansion would occur.
Nike Chief Financial Officer Don Blair said in a written statement only this: “Nike is a global company with a long history in Oregon. We support this proposed legislation as a way to help us continue to grow in Oregon.”
The full text of the bill to be considered by the Legislature, the Economic Impact Investment Act, is not yet available. But Kitzhaber said the bill would allow him to enter into qualifying investment contracts with any company committing to a minimum of 500 jobs and $150 million in capital investment over five years.
The urgency behind the special session is coming from outside the state, Kitzhaber spokesman Tim Raphael said.
“Nike is being actively recruited by a number of states,” Raphael said, and Kitzhaber did not want to see the prize of a major business expansion slip through the state’s fingers.
The Legislature will convene in January but that is not soon enough, Raphael said. “(Kitzhaber) is not willing to risk it,” Raphael said. “He has no interest in getting into a bidding war with other states.”
“The company is willing to sign an agreement right now,” Raphael said, if the state guarantees that it won’t change the way the company’s corporate income taxes are figured for the duration of the agreement.
Raphael said the proposed bill would give the governor a tool for attracting new companies to the state as well as encouraging existing ones to expand here. At its heart is the state’s single-sale factor used in figuring taxes, which is very attractive to large companies that typically have a lot of employees and large operations here but have most of their sales outside the state, Raphael said. Those sales are not factored in when determining the corporate income taxes that those companies pay to Oregon.
The tax policy has been instrumental in attracting companies such as Intel and Genentech to Oregon, Raphael said.
Kitzhaber wants to use it to attract more companies with high-paying jobs to Oregon, Raphael said, allowing it to compete more effectively with states that have more resources to throw at attracting those type of businesses.
“The governor is interested in boosting per capita income,” Raphael said. “He is much less interested in a lot of minimum wage jobs.”
Nike’s employment in Oregon has grown 60 percent since 2007 to more than 8,000 jobs in Washington County where its Beaverton headquarters are located, according to Nike. The average annual salary is more than $100,000, Remuzzi said. This is about double the state and regional average, Kitzhaber said.
The bill he wants the Legislature to approve in Friday’s one-day session would not affect the tax rates that companies pay, only give them the certainty that the way their taxes are computed would not change during the time the agreement is in place, Raphael said. Even if the Legislature were to change the way corporate taxes are figured, the contract between the governor and a company would preserve the existing system, he said.
The proposed legislation drew applause Monday from some business groups and elected officials, including the Oregon Business Plan, the Oregon Business Association and House Majority Leader Val Hoyle.
“This is an opportunity that we could not let pass us by,” said Hoyle, a Democrat who represents Eugene. “I’m excited that we’ll be putting so many people to work with high-paying jobs. It is critical that in the next few years we do everything possible to speed up Oregon’s steady economic recovery. House Democrats are dedicated to keeping our business climate strong to grow Oregon jobs.”
Less enthusiastic were some longtime critics of the single-sales factor, such as Chuck Sheketoff, director of the liberal Oregon Center for Public Policy. Sheketoff told The Associated Press that the proposed legislation is similar to the no-tax pledge created by anti-tax activist Grover Norquist.
“The governor’s asking the Legislature to take a Norquist-like pledge for one company,” Sheketoff said.
