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Enterprise zones bring jobs to cities

Milwaukie sees a gain in living-wage jobs, but fire district says abatement a problem

Eleven Milwaukie companies have increased their collective number of employees by 25 percent since 2000, thanks in part to a joint incentives program through Clackamas County and city, according to figures released by the county.

The companies have also invested a total of over $32 million dollars through an economic incentive package known as an enterprise zone.

'[The enterprise zone] really helps in attracting new business and, not just new jobs, but better-paying jobs because of the 150 percent minimum wage requirement,' said Renate Mengelberg, of the county business and economic development department.

The zone offers tax abatements on new industrial investments by companies if they follow certain guidelines, such as increasing employment by 10 percent and paying their staff at least 150 percent of the minimum wage.

There is some dissention, however, about the zones. Clackamas County Fire District #1 said the enterprise zones place a burden on the fire district, because while a company might expand, there's no means of funding an increase in fire service because of the tax abatements.

The zone, instituted in 2000, covers four distinct industrial areas of Milwaukie, and the county is asking Milwaukie to extend the zone for another 10 years.

'If you were in the industrial sector in 2000, it was half vacant,' said Milwaukie Mayor Jim Bernard. 'We're bringing them in from Portland, most of the business came from Portland.'

Alex Campbell, the city's resource and economic development specialist, said the zones entice companies to the city.

'Something like an enterprise zone is an important signal to their business that the local government is friendly to small business,' he said. 'If they'd put that [business] in Tennessee, we'd see no tax increase at all. With the enterprise zone we abate that for five years and then we do get tax revenue.'

Fire district concerns

CCFD#1 Executive Officer Kyle Gorman said that five years without taxes can have an impact on the fire district.

He said that many of the investments being made by the businesses that participate are in industrial equipment and technology, which can depreciate so quickly and to such an extent that by the time the investment is back on the tax rolls three or five years after the initial abatement, there may not actually be a significant amount of added tax value. He said, for example, if a company buys a machine to process silicon chips, it may be obsolete in five years when it's back on the tax rolls, adding no tax value in the short- or long-term.

'What we're concerned with is when a majority of the investment is in machines and nobody knows what the value of that will be when it comes back on to the tax rolls,' Gorman said.

They also argue that there's no way of knowing whether the zones actually attract the businesses, and that companies are more likely to decide where to locate based on other market factors, like cost of housing and available industrial space.

Fire District Chief Ed Kirchoffer said other jurisdictions shouldn't be making absolute decisions that affect the fire district's revenue without fire district approval.

'Another group of elected officials decides to abate taxes and our board of directors has no say in that matter, no vote,' he said. 'Most of the other agencies have other funding sources - we don't. So it has a direct impact on the fire district.'

The fire district is funded almost entirely through property taxes. So when those taxes are abated but growth occurs, the district doesn't have the funding to match the increased service needed.

'Anything that influences property taxes is of great concern to us because that's where we get our revenue,' Gorman said.

It wasn't always that way. The fire district used to decide on its budget and then the county assessor would distribute that cost throughout the service area, so rates could fluctuate year by year. But with the taxing changes implemented in 1996, it went almost solely to property taxes.

And it's not just the possibility of a fire the district has to prepare for that leads to inequities. It also has to spend time doing inspections and certifying whatever projects the investments are spent on, without receiving any revenue from that investment.

Gorman and Kirchoffer said it doesn't have to be a total loss for their district, and said that they support enterprise zones and urban renewal districts, but there should be balance.

According to the Portland Development Commission, the city recoups the cost of services such as public safety through business or property taxes or through license fees.

'Some other jurisdictions - Portland, for example - use enterprise zones,' Gorman said. 'They have a structure in place whereby the city recovers 30 percent of the tax abatement for the direct cost of serving that site.'