Gottfried and Threaders, Found the Intel article I was speaking about in my previous post, oregonlive.com
Intel, county strike deal on
tax
A proposal would give the chip-maker a tax break and
promise millions for Washington County
Thursday, May 27, 1999
By Don Hamilton and Elisa Williams of The Oregonian
staff
HILLSBORO -- Washington County and Intel Corp.
exchanged multimillion-dollar promises Wednesday in a
tentative deal that would guarantee the county $28.9 million in
fees even if the world's largest chip-maker never spends
another dime in Hillsboro.
In exchange, Intel could shave as much as $200 million off its
property tax bill on $12.5 billion worth of equipment and plant
upgrades planned during the next 15 years.
Even with such a tax break, Intel's annual payments to
Washington County would increase from $12 million in 1998
to an average of $19.3 million a year -- the largest of any
taxpayer in the Silicon Forest.
Without the program, Intel said its
investments in Oregon would
dwindle because the company's
property taxes would be too high.
The agreement comes after 12
weeks of haggling as Intel sought
its third contract under the state's
Strategic Investment Program.
The program enables local
governments to set an initial $100
million cap on the taxable value of
a new project and charge a fee
equal to 25 percent of the tax
savings, as much as $2 million a
year.
If the Board of County
Commissioners approves the
agreement, which could come up
for a vote as early as June 15, the
county expects to receive an
additional $110 million during the
next 15 years in taxes and fees.
No decisions have been made
about how the county would
spend the fees from Intel.
If approved, Intel's tax savings
wouldn't raise taxes for other
property owners.
"The goal is to retain 11,000 jobs
by Intel in Washington County.
That really is the overarching
achievement. That's how we will
be judged 15 years from now,"
said Charles D. Cameron,
Washington County administrator
and a member of the negotiating
team.
Intel already has two of the four
existing contracts under the state's
Strategic Investment Program.
The new agreement would set a
number of precedents for the
investment program, which was
designed to ease the property tax burden on companies that
make huge capital investments.
The county secured financial guarantees that are twice what
the program requires.
The Strategic Investment Program originally was designed to
create jobs. But in this application, Intel has agreed to pay
additional fees if employment grows too quickly. The
company, which is the state's largest manufacturer, employs
about 11,000 people in Washington County. With the future
spending, Intel expects to create fewer than 1,000 new jobs
during the next 15 years. If it exceeds that figure, it must pay
an impact fee of $1,000 per additional employee per year.
"Frankly, had this been a proposal to add 5,000 jobs, I doubt
we could consider it because of the impact and the concerns of
the community," said Tom Brian, chairman of the county
board and head of the county's negotiating team.
Intel expects to spend $1.1 billion in the first two years under
the agreement. In the following three to five years, it expects
to spend about $1.7 billion. The balance of about $9.7 billion
probably would be spent during the final years of the
agreement.
The deal is designed to ease Intel's tax burden on
manufacturing equipment that costs millions of dollars but lasts
only a couple of years. The agreement would not cover any
new buildings, which would be taxed like any other building in
Washington County. In Oregon, property taxes are levied on
machines and equipment along with buildings and land.
"I was very positive on the outcome and the process," said
Steve Grant, an Intel plant manager who helped negotiate the
deal. "It gives us a long-term horizon. We know how the taxes
will be treated."
Intel, based in Santa Clara, Calif., makes the chips that run 85
percent of the world's personal computers. Predicting spending
several years into the future is difficult, Grant said.
The $12.5 billion Intel plans to spend in Oregon during the
next 15 years represents about a quarter of the company's
capital spending, industry analysts say. Intel is the chip
industry's largest spender by far.
Intel faces a complex but favorable political climate in its bid
for three votes from the five county commissioners. Brian
favors the plan, as does Commissioner Roy Rogers, also a
member of the county team that negotiated the deal. Kim
Katsion has not made up her mind.
Commissioner Delna Jones plans to abstain because she owns
stock in Intel valued at more than $1,000, meaning state ethics
laws consider her to be associated with the company.
But that could change. Under an exception in state law, Jones
could vote to break a tie if her vote "is necessary to meet a
requirement of a minimum number of votes to take official
action."
Commissioner Andy Duyck, who opposed Intel's application in
1994 and planned to oppose the company request this year,
has had a change of heart. Duyck, owner of a Forest Grove
machine shop, said he has changed his mind several times
during county negotiations with Intel. But Wednesday, he said
he planned to vote for the Intel request, although only if his
were the deciding vote.
"I believe it's in the best interest of Washington County," he
said.
If it would pass without his support, however, he would vote
against it as a protest against the tax system. The Intel
application, he said, illustrates an unfair system in which a big
industry gets tax breaks unavailable to the little guy.
"If you wrote a bill giving special treatment to each business
with an end result where everyone was treated fairly, I
wouldn't have a problem," Duyck said. "But we're choosing
certain industries and neglecting others. There's no relief for
the average small business that's still capital-intensive."
Some of Intel's peers question the program.
"They've got an immense economic club that they're
wielding," said William Perrill, chief financial officer and
treasurer for Komatsu Silicon America Inc., another Hillsboro
high-tech company. "Will they really pull out? Who knows, but
they do have options."
Still undecided is how the money would be allocated. Intel's
two 1994 applications under the Strategic Investment Program
call for payments of $22.6 million over 15 years in community
service fees. But the county also is receiving $4.2 million in
fees negotiated above what's required by state law.
If the request is approved, Washington County would receive
$7.3 million a year. But it may not all wind up in county
coffers. Local schools could receive some, as could the city of
Hillsboro.
No decisions are needed for a while, though. The county
probably won't receive its first payment from Intel until
December 2000.
You can reach Don Hamilton at 503-294-5959 or by e-mail
at donhamilton@news.oregonian.com and Elisa Williams at
503-221-8505 or by e-mail at
elisawilliams@news.oregonian.com. |
