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State shells out county Gain Share payday

Portland Tribune
May 29, 2014By Peter Wong

Washington County will gain $37.8 million from the state to offset part of the property tax breaks it granted to Intel and Genentech for investment in Hillsboro plants.

Lawmakers approved the payment, plus $300,000 to be shared by six other counties, when the Legislative Emergency Board met Friday. The 20-member board makes budget decisions when the full Legislature is not in session.

But House Speaker Tina Kotek, D-Portland, said she wants to raise questions about the entire program when the Legislature meets for its 2015 session.

"While this follows the statute we passed in 2007, I think this program, the way we go about running it, and the implications for our budget and what happens to the counties receiving it needs serious review and assessment," said Kotek, who is co-chairwoman of the E-Board.

But Sen. Richard Devlin, D-Tualatin, said the investment made by Intel and Genentech in their Hillsboro plants "has generated significant funds for state and other programs."

Washington County received its first payment of $11.8 million 18 months ago from the Strategic Investment Program, which enables counties to approve property tax breaks for 15 years to attract new businesses or encourage their expansion.

Although the program was created in 1993, lawmakers decided in 2007 to allow the state general fund to help counties offset part of their property tax losses. The payments are based on half the estimated income taxes generated by new employees, as calculated by the Oregon Business Development Department from information supplied by the businesses.

The payment amounts are determined by the Oregon Office of Economic Analysis, which prepares the state's quarterly economic and revenue forecasts.

Payments are scheduled to end by 2019, but lawmakers can revisit the law at any time.

Washington County says it has benefited from $4.4 billion in investments by Intel and $250 million by Genentech under current agreements. Intel has had four agreements, dating back to 1994; Genentech’s dates back to 2006.

The county applies the tax break to new equipment, not land or buildings. The law requires property taxes on the first $100 million of investment in most areas, and $25 million in designated “rural” areas.

Other eligible projects are in Clatsop, Gilliam, Morrow, Sherman, Umatilla and Union counties.

“Local governments with SIP agreements elsewhere in Oregon have forgone property taxes — at a smaller scale — to successfully recruit employers in industries such as paper product manufacturing and wind power generation,” said Andy Duyck, Washington County board chairman, in a 2013 statement.

The latest request was recommended by the executive and legislative budget staffs. But the program, particularly the state payments to counties known as Gain Share, has its critics.

“As the local government gives away the property tax break, the state loses money because it has to make it up in funding for education,” said Chuck Sheketoff, executive director of the Oregon Center for Public Policy, a Silverton think tank. “It wrongly assumes that but for the program, this (investment) activity would not occur in the counties. You have to look at all the other subsidies these companies get.”

Some lawmakers have suggested paring the payments, which will end in 2019.

Based on documents that the Oregon Business Development Department released in 2013 after an order by then-Deputy Attorney General Mary Williams, Intel saved an estimated $50 million in property taxes in 2011, and $63 million in 2012, based on 6,629 and 7,701 employees in those years.

Genentech saved $3.8 million in property taxes in 2012, the only year it was required to report, based on 324 employees.

The documents were released after a public-records request by the Oregon State Public Interest Research Group, which said more than $1 billion has been spent on corporate tax subsidies since 2009 and another $665 million in the current two-year period.

“Regardless of whether that information may qualify as ‘trade secrets,’ we conclude that there is a strong public interest in its disclosure here,” according to the Department of Justice order. “The incentives represent a sizable public investment in that outcome, and the public has a correspondingly sizable incentive in ascertaining the extent to which its investment is paying off.”

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