KZ and Thread, Article...Washington County, Ore., Officials to Approve Intel Tax Break...
June 22, 1999
The Oregonian, Portland, OR : Jun. 15--HILLSBORO, Ore.--Washington County commissioners are expected to approve a tax break for Intel Corp. tonight that will redefine the relationship between the county and its largest manufacturing employer.
The vote will determine whether Intel will receive an estimated $200 million in property tax savings on $12.5 billion in future spending on manufacturing projects. In exchange, Intel promised to pay impact fees if it adds too many manufacturing jobs during the 15-year contract and will shell out $110 million in property taxes and fees. Even with the abatement, Intel is by far the largest taxpayer in the Silicon Forest.
The vote on the deal, which was crafted under the state's Strategic Investment Program, appears to be a foregone conclusion.
Three of the five commissioners have said they'll vote for it. A fourth, Delna Jones will recuse herself because she owns Intel stock valued at more than $1,000, making her under state ethics laws an official of the company.
Commissioner Andy Duyck plans on voting against the agreement but only if it's sure to pass. He supports the Intel agreement but wants to cast a protest vote to highlight what he sees as inequities in the state tax system.
Though the contract has received widespread support, such tax abatement agreements remain controversial.
The Strategic Investment Program enables local government to set an initial $100 million cap on the taxable value of a project. In return, the county can charge fees equal to 25 percent of the forgiven taxes, to a maximum of $2 million a year, and can negotiate additional fees beyond that.
The program is criticized because it's inaccessible to the bulk of manufacturers in Oregon, because it requires an investment of about $500 million or more to make sense. Intel already holds two of the abatement contracts.
Tom Brian, chairman of the county board and a lead negotiator on Intel's pending deal, was challenged by a citizen during a community forum last week for accepting $5,000 in campaign contributions from Intel. Brian, however, pointed out that his election was over in May 1998, several months before the chip-maker first approached the county about the new tax break request.
The board is expected to vote on the contract tonight but could delay a vote until its July 6 meeting.
Intel's application for a third tax break was complex because it's not tied to a narrowly defined project. The relief it seeks on $12.5 billion in future spending is pegged for manufacturing equipment upgrades aimed at retaining the 11,000 jobs Intel already has created here. In addition, it was the largest tax savings request by far under the program, surpassing LSI Logic Corp.'s $4 billion contract in Gresham.
Because Intel asked that all of its $12.5 billion in future spending be lumped into one contract with an initial $100 million cap, Washington County officials negotiated $28.9 million in additional fees to offset the savings.
Moreover, Washington County made provisions to ensure that Intel wouldn't continue to grow in ways that would further strain local government services such as police, schools and fire protection as well as resources such as water.
If Intel exceeds the set threshold of 5,000 manufacturing workers at its Washington County campuses -- about 1,000 more than it now employs -- it must pay a fee of $1,000 an employee each year.
Even with such a limit, Intel still has the option to grow.
The job growth impact fees apply only to full-time manufacturing workers on Intel's payroll. Contract and part-time workers, commonplace in the high-tech industry, don't count.
Intel says there is little chance it would bring in outsiders for the bulk of the factory jobs. The company now employs about 2,300 contract workers, about half of them in construction. Fewer than 100 are tied to manufacturing operations, said Bill MacKenzie, an Intel spokesman.
Because the contract applies only to manufacturing projects, Intel also is not held to any job growth penalities if other parts of its business, such chip design, expand. To date, only 4,000 of its 11,000 employees in Washington County are involved in manufacturing.
Further, the agreement provides for no repercussions if the company eliminates jobs.
"We don't have any employee head count as a part of the agreement," said Mike Salsgiver, Intel's public affairs manager in Oregon. "They (the county's negotiators) were more concerned about not getting droves of more new jobs."
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