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Lawmakers to consider state economic development loans

Hillsboro officials spent much of the past few years fighting to add 320 acres to the urban growth boundary for industrial development.by: TRIBUNE PHOTO: CHASE ALLGOOD - Local governments spent many millions of dollars on infrastructure improvements to attract high tech companies like Intel, whose new D1X fabrication plant (above) is nearing completion. But the State of Oregon benefits from the income taxes the new jobs generate.

In 2011, both the Metro Council and the state Land Conservation and Development Commission voted to expand the western edge of the UGB to include property south of the Sunset Highway. Environmental groups and others are expected to challenge the decision legally after it is finalized.

Even if Hillsboro ultimately prevails, much needs to be done before the property can be developed, however. A recent study found it needs more than $30 million in transportation, water, sewer and stormwater services before it can be built out.

Ironically, despite LCDC approving its addition in the boundary, there is no guarantee the state will contribute to the development of the property. This is true, even though the state stands to benefit from its development. The study found it could support 463 jobs, eventually generating over $132 million in additional state income taxes every year.

“The state of Oregon benefits from the investments that local governments make in economic development projects,” says state Rep. Tobias Read, a Beaverton Democrat who is co-vice chairman of the Oregon House Transportation and Economic Development Committee.

As Read sees it, the issue is not so much one of fairness. He believes local governments also benefit from the economic development projects they support.

But with the poor economy cutting into the revenues available all levels of government, Read believes the time has come for the state to start sharing in the cost of preparing industrial land for development. He will introduce a bill at the 2013 Legislature to create a state loan fund to help support infrastructure employment to make targeted lands ready for development. All or part of the loans will be forgiven if the projected number of jobs are created on the properties.

“I don’t think the state should pay more than 50 percent of the upfront costs,” says Read. “I think it’s important that local governments still have some skin in the game.”

Business support

The idea of the loan fund grew out of a series of studies on the availability of industrial land conducted in recent years by a number of business-oriented organizations, including the Port of Portland, the Portland Business Alliance, Metro, the Oregon chapter of the Commercial Real Estate Development Association and Business Oregon, the state’s economic development department.

The most recent study looked at the benefits and costs of developing 12 specific sites in the Portland area. It found they could result in the creation of 12,500 new jobs with average annual wages of $97,000, generating $764 million in additional personal income tax revenue for the state and $217 million in additional property tax for local governments during the next 20 years.

But the report also found it would require more than $91 million to provide basic services to the properties, including transportation, water, sewer and stormwater services. In almost all cases, the study found the costs were more than private developments could be expected to pay for the services, meaning public support would be required to develop the properties and create jobs.

Costs varied from site to site. They ranged from $57,000 for a 93-acre general manufacturing site in Gresham to more than $30 million for the full development of 320 acres recently brought into the urban growth boundary in Hillsboro.

Other sites in Washington County include a 50-acre business park in Sherwood that needs nearly $6 million in new transportation, water, sewer and stormwater services. It could support 125 jobs and eventually generated $3.4 million in additional state income taxes, the study found.

Gain Share argument

The study was released as the state’s commitment to an economic development program that already shares income tax dollars with local governments was being questioned. Read’s committee received a presentation on the study and the loan fund idea on Sept. 12 in Salem. Two days later, a delegation of Hillsboro and Washington County officials appeared before a different legislative committee to the Gain Share program.

Gain Share was created by the 2007 Oregon Legislature. As written, it is supposed to share income taxes from new jobs with local jurisdictions that waive their property taxes to create them. Washington County governments are owned $12 million for waiving more than $80 million in property taxes to encourage Intel and Genentech to create new jobs. The payment has been delayed by a disagreement about the details of the law by the state agencies that are supposed to administer it.

The delegation gave a status report on the program to the state Senate Interim Committee on Finance and Revenue on Sept. 14. At the time, Southwest Portland Democrat state Sen. Ginny Burdick, the committee’s chairwoman, suggested the 50 percent split in the law was too high. Raleigh Hills Democrat state Sen. Mark Hass, a committee member, defended the split, however.

The dispute could be resolved by the next session of the Legislature — which will also consider Read’s bill.




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