Kitzhaber Wants Retention Contract with Nike

Willamette Week
December 10, 2012

Deal will extend existing tax rules, create "thousands" of jobs

Gov. John Kitzhaber announced this morning he will convene a special session of the Legislature on Friday, Dec. 14 (not Dec. 17 as he first announced) in order to cut a deal with Nike.

Kitzhaber said today that Nike is planning a major expansion and sought assurances Oregon would not materially change its tax structure in a way that would disadvantage Nike in the future.

"They are looking for certainty," Kitzhaber said.

Kitzhaber told reporters that Nike approached him "a month or a month and a-half ago." Coincidentally or not, that is when Democrats regained control of the Oregon House.

Nike told Kitzhaber the company wants to expand and is being courted by other states. Before investing hundreds of millions, the sports-wear giant wants Kitzhaber's assurance that any legislative tax changes over the next five years will not change the math of their investment. Kitzhaber says such a promise would not cost taxpayers anything.

The governor is proposing an "Economic Impact Investment Act" which would enable the governor to make a "no changes" promise to companies that commit to certain investment levels, including but not limited to the creation of 500 new jobs and the investment of $150 million over a five-year period.

Here's how Kitzhaber's office characterized what the governor wants lawmakers to agree to on Friday:

The Economic Impact Investment Act would allow the Governor 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 Act creates a new economic development tool and has no fiscal impact on the state.

Nike would expand to accommodate current and future job growth. Nike's employment in Oregon has grown 60 percent since 2007 with an average annual compensation of over $100,000, about double state and regional averages. A recent analysis by AECOM, a global professional services firm, estimates the economic impact of a potential expansion to be more than $2 billion a year and more than 12,000 jobs by 2020 (direct, indirect and induced). Construction alone accounts for about $440 million and more than 2,900 jobs.

Currently Nike benefits from the way Oregon taxes big companies—on what is called the "single sales factor." That approach taxes Nike on the basis of its sales here, rather than on its capital investment or employment. Nike wants that approach to continue.

The Oregon Center for Public Policy, a left-leaning think-tank has previously argued against the single-sales factor approach. OCPP director Chuck Sheketoff today noted that method of taxing corporations is the subject of current litigation here and in California.

"To promise Nike 'no changes' seems bizarre," Sheketoff told WW.

But there's unlikely to be a lot of time for debate. Kitzhaber said he moved the special session up from next Monday to this Friday to meet lawmakers' schedules.

Kitzhaber said "it's my fervent hope" the gathering will be a one-day session.

The session will call back a Senate in which Democrats hold a 16-to-14 advantage but Democrats and Republicans share control of the House with 30 members each.

Republican co-House Speaker Bruce Hanna (R-Roseburg) eliminated doubt about where his caucus will be by sending out a statement about the proposed deal even before Kitzhaber did.

Here's Hanna's statement:

"Not enough has been done to create an environment for robust economic growth and job creation in Oregon. The legislation we will move during the special session is a simple way to create enormous long-term benefit for our state, its people and its economy. While special sessions are never ideal, this opportunity for Oregon demands immediate action. Providing greater certainty in tax policy for a company interested in investing $150 million or more is a step in the right direction for creating a better climate for industry within our state. I am pleased to be a part of this discussion and support the idea of a session to move this legislation forward."

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