30-year abatement deal keeps chip giant in the state

One day after a proposed investment-and-tax-break deal was announced by Intel Corp., Washington County and the city of Hillsboro, the Washington County Board of Commissioners had an answer for people who questioned the deal.

“To people who say, ‘You’re just giving it away,’ it’s not true,” said Commissioner Bob Terry, referring to tax breaks for large corporations such as Intel during Tuesday morning’s board work session. Though Intel is growing at a rapid pace, without a tax abatement on expensive new technology and equipment as proposed, “It would be a slow death, like Detroit,” added Terry.

On Monday, Intel and representatives of local and state government announced they had reached a proposed agreement for the microchip giant to invest $100 billion in its Aloha and Hillsboro plants and facilities during the next 30 years.

“That’s billion with a ‘B,’ ” said Washington County Commissioner Roy Rogers, who led a public relations swing around the region with nearly a dozen officials and staff members in tow. “It’s a staggering number.”

The agreement is considered a job-retention program and the $100 billion represents new money that Intel expects to invest in research, development and manufacturing on its Washington County campuses.

Rogers said Monday that the proposed agreement meant the county would retain the state’s largest private employer for decades into the future, something that would affect both his children and grandchildren. It’s not a legacy project, he said, but the people who helped reach the agreement are paving the way for the state’s economic future.

“There are 17,500 currently employed at Intel and three jobs created for every Intel job,” said Rogers, referring to a recent study by ECONorthwest, a private economic consulting firm.

The agreement was hammered out under Oregon’s Strategic Investment Program, a public-private partnership that has spurred billions of dollars in investment in Oregon in the past 20 years. In March 2014, Intel notified the county and the city that it wanted to begin formal negotiations to develop a new SIP agreement.

Intel Corp. announced in January that there would be staff cutbacks of approximately 5 percent companywide, with some locations closing and others halting construction.

The state’s SIP program was born in 1993 as an economic development tool approved by the Legislature. Intel’s first SIP agreement was signed with the county and the city in 1994. If enacted, the 2014 agreement would be the fifth agreement in 20 years.

Intel began manufacturing in Oregon in 1974, and it’s now the largest for-profit employer in the state. Oregon’s Intel sites are the largest the company operates.

“We’re very pleased and privileged to be here in Oregon,” said Jill Eiland, corporate affairs director for Intel Corp. in Oregon, Washington and Colorado. "We came for reliable water, electricity and because the local government really wanted us to come here.”

Regardless, because of the ever-changing nature of the worldwide high-tech business, Eiland said “Intel would not have invested to this level in Oregon without these agreements.”

“The 2014 agreement is the same template as previous agreements, primarily for job retention,” said Rob Massar, assistant county administrator. “The primary difference is this is looking at a 30-year horizon, with mini-SIPs within that.”

Gov. John Kitzhaber praised the agreement, saying it is “proof positive that Oregon is fertile soil for business to grow and families to prosper.”

A global leader

The proposed agreement is focused on investments in the company’s equipment replacement and on retaining employees. The multimillion-dollar machinery and equipment used in the company’s manufacturing process can become obsolete within a few years as technology evolves.

Estimated cumulative Intel taxes and fees during the 30-year duration of the 2014 SIP proposal:

n $64 million required by state law for property taxes, $58 million for community service fees, adding up to $122 million.

n $228 million in fees negotiated by Washington County and the city of Hillsboro, including $57.4 million guaranteed annual payments of $2.7 million for 20 years, adding up to $57.4 million; in-lieu-of fees, $170 million; and charitable payments of $600,000.

All together, Intel’s taxes and fees add up to an estimated $350 million.

The 17,500 current employees do not include contract employees. Intel contractors are added into the “multiplier effect” outlined in a recent report by ECONorthwest. The report said Intel actually helps create 69,000 jobs in the state.

There was plenty of praise for the deal from state and local officials.

“Intel’s decision to increase its investment in Hillsboro strengthens our position as a global center for high-tech manufacturing jobs,” said Hillsboro Mayor Jerry Willey.

But there were detractors as well. “There are three specific problems with SIP,” said Bill Conerly, an economic consultant in Lake Oswego and chairman of the board of Cascade Policy Institute. “It applies only to large corporations. There are some small businesses with expensive equipment that should have tax relief. It only applies to some industries; another case of the government trying to pick winners and losers.

“It’s discretionary, so a company not only has to meet the size and industry criteria, but also has to curry favor with government officials. This is an invitation to cronyism and corruption.”

Jody Wiser, chairwoman of Tax Fairness Oregon, said, “The Hillsboro City Council and the Washington County Commission should slow down and give more than 15 days of consideration to this deal before tying their own and the state’s hands for the next 30 years.

“The impression in the press about this deal is that Intel is committed to investing $100 billion in Oregon over the next 30 years,” she added. “That is not so. The truth is that the proposed deal commits Oregon to giving Intel a property tax abatement on up to $100 billion for 30 years.”

The board and the Hillsboro City Council plan to gather public comments at a joint meeting and hearing at 7 p.m. Tuesday, Aug. 26, in the Cameron Public Services Building, 155 N. First Ave.

After an agreement is adopted by the county and Hillsboro, Intel will submit an application to Business Oregon, the state agency and commission that must approve the pact, something that could happen in early September.

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