Hillsboro and Washington County officials are preparing to defend a vital state economic development program before the 2013 Legislature following an inconclusive legislative committee hearing on it.

The program, called Gain Share, sends 50 percent of the income taxes generated by new jobs back to the local and regional governments that waive their property taxes to help create them.

State Sen. Ginny Burdick, a Southwest Portland Democrat, has suggested that 50 percent is too much money and wants the next session of the Legislature to reconsider the formula.

“I’m prepared to have that discussion with the Legislature again. I still think Gain Share is only fair, considering the income tax revenue wouldn’t be there if the property taxes weren’t waived in the first place,” says Washington County Chair Andy Duyck.

Duyck’s comments followed his Sept. 14 testimony in support of the program before the Senate Interim Finance and Revenue Committee, which is chaired by Burdick.

A number of other city and county officials also testified in support of the program, including Hillsboro City Council Chair Aron Carleson and Tualatin Valley Fire & Rescue Chief Mike Duyck.

State Sen. Mark Hass, a Raleigh Hills Democrat who serves on the committee, disagreed with Burdick, saying he supports keeping the current formula. The split sets up a potential battle during the next legislative session. Burdick’s committee has already requested a “placeholder” bill to be introduced on it.

Ironically, Washington County governments have yet to receive any of the money promised them through the Gain Share program. According to state officials, the Oregon Department of Revenue has not processed any payments because of a possible legal glitch in the legislation that created it in 2007. Discussions are currently underway over the law between officials with the Oregon Department of Justice and the Department of Administrative Service, which is supposed to receive the funds from the revenue department and pass them on. Burdick promised the 2013 Legislature would fix the problem if it cannot be remedied administratively before then.

Local investments

The glitch has prevented Washington County from receiving an estimated $12 million from the state. The county is planning on distributing the funds to the other juristictions that waived property taxes to encourage large, job-creating investments by the Intel semiconductor manufacturing company and the Genetech pharmaceutical company. The other governments include Hillsboro, TVF&R, Metro and the Port of Portland.

The Gain Share rebate applies to investments encouraged by property taxes waived through the Strategic Investment Program first approved by the legislature in 1994. Project thresholds start at $100 million in urban areas and $25 million in rural areas. The property tax exemptions last 15 years.

During the hearing, Burdick noted that the estimated $12 million is more than twice what the Legislature predicted when it approved the program in 2007. She pointed to a revenue impact statement that estimated the program would only cost the state $4.5 million for the entire 2011-13 biennium.

“That’s less than half of what we’re looking at,” Burdick said.

But Duyck responded that the increased amount is good news, not bad.

“Part of the reason Gain Share has outperformed expectations from 2007 has been more jobs, jobs that in fact are paying significantly higher wages to employees with the associated SIP projects. This again is a good thing and something that should be celebrated as a successful example of economic development,” Duyck told the committee.

Duyck and the others who testified repeatedly noted that the Gain Share rebates will never come close to completely repaying the property taxes waivers and other investments made to attract the new jobs. Duyck said Washington County governments are giving up between $50 million and $60 million in SIP-authorized property tax waivers. Hillsboro officials presented the committee with documents showing the city has invested millions in infrastructure projects to attract Intel and other SIP-qualified companies, including $25.7 million as the city’s share of a six-foot water supply line for Silicon Forest companies.

“Hillsboro made huge capital investments to attract those companies, and it’s important that Gain Share continue,” said Carleson.

Despite the costs, all of the officials justified the investments as essentially to creating desperately needed, good-paying jobs. A number of recent economic reports portray Washington County and especially Hillsboro as the economic engine of the Oregon, and say the state would have suffered even more during the recent recession without their successful economic development initiatives.

Hass praised the initiatives, singling out Intel as a responsible corporate citizen that encourages its employees to become involved in their communities where they live.

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