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Mystery project promises jobs

A multi-billion dollar economic development project being secretly pursued by the state could bring around 1,000 family-wage jobs to Hillsboro.

But the project could also cost Hillsboro, Washington County and other local jurisdictions millions to complete. And it could complicate negotiations during the 2013 Legislature on how much the state should reimburse the local governments for such job-creating investments.

The mystery is code-named Project Azalea. It is being pursued by Business Oregon, the state’s economic development agency. State and local officials who are familiar with the project have signed non-disclosure agreements prohibiting them from discussing it in public.

Despite the pledges of secrecy, the project is rumored to be a 3.2 million square foot semiconductor manufacturing plant. New York economic development officials are reportedly pursuing a project with the same name. Industry trade publications are speculating it would be constructed by the Taiwan Semiconductor Manufacturing Co. to build microprocessors for Apple’s mobile devices, the iPhone and iPad.

Local officials will not comment on the potential project. But Hillsboro has several available vacant industrial sites.

Preparing vacant industrial land for new development projects is not cheap, however. Washington County has helped finance such improvements in the past. It has helped build and expand roads, water lines and sewer systems to encourage companies like Intel to invest billions in new facilities. The county, Hillsboro and other local taxing jurisdictions have also waived millions of dollars in property taxes under the state’s Strategic Investment Program to encourage the investments.

The state has agreed to partly reimburse the local government for their investments by paying them 50 percent of the income taxes generated by the new jobs. But some legislators are now arguing the share is too high, considering the state’s ongoing budget problems. State Sen. Ginny Burdick (D-Portland) has promised to introduce a bill during this year’s session to reduce the share.

County officials say the 50 percent share is fair, arguing the additional income taxes would not have generated without their investments. Some legislators, including state Sen. Mark Hass (D-Raleigh Hills) agree, setting the stage for a showdown next session — perhaps just as the decision on Project Azalea is being announced.

Speculation on plant

Although the Project Azalea negotiations are being conducted in secret, rumors have swirled for months that a new, large high-tech company is considering building a facility in Hillsboro. The rumors picked up steam during the special session of the Oregon Legislature that was held in December to assure that Nike will expand in the state.

Although the session was called at Nike’s request, the legislation it approved applies to any multistate company willing to invest at least $150 million in Oregon to create 500 or more new jobs within five years. As the day-long session progressed, word spread through the capitol that a deal was in the works for Hillsboro that would be much larger than Nike’s proposed expansion.

Once the name Project Azalea leaked, reporters quickly discovered that the Business Review newspaper in New York had reported in November that economic development officials in that state were pursuing a project with the same name. The Business Review obtained documents that detailed needs for water, power and gas to operate 3.2 million square feet of buildings. The documents said college-educated engineers will make up about 40 percent of the initial 1,000-job workforce.

Based on the rumors, industry executives and analysts said the plant appears to be a “fab” for semiconductor production — probably for computer chips that could be used in TVs, cell phones and other electronic devices. The chip industry trade publication EETimes and other sources then reported that the consulting firm Deloitte Touche Tohmatsu had also looked at sites in New York, California and Texas on behalf of Project Azalea. The EETimes also has identified Taiwan Semiconductor Manufacturing Co. as the likely manufacturer, and speculated that it was looking for a location to build chips for Apple.

Gain Share issues

Hillsboro has several suitable locations for such a plant and more on the way. They were identified in an August report prepared by the Value of Jobs Coalition, a public-private partnership that includes Business Oregon. Sites covered in the report include about 71 acres site along East Evergreen Parkway and a 320-acre parcel that is in the process of being added to the urban growth boundary.

Hillsboro also has years of experience working with the state and county to attract large investments by high-tech companies. Successes include assembling the Ronler Acres Campus where Intel is completing a new $3 billion manufacturing plant called D1X that will soon be followed by a $3 billion expansion of the plant.

But preparing industrial land for such developments is not cheap. A Value of Jobs Coalition study estimates the East Evergreen needs $3.285 million in infrastructure improvements to be ready for development. The study also estimates the site being added to the urban growth boundary needs $30 million in infrastructure improvements for full development.

Local jurisdictions have also granted property tax waivers to Intel and other companies to encourage their investments. The waivers only cover the new equipment purchased by the companies, not the land or buildings. They have been granted under the state’s Strategic Investment Program, which has been described as one of Oregon’s best business recruiting tools.

But the program ran into complications last year when the state did not pay Washington County half the property taxes generated by the new jobs encouraged by the SIP-authorized property tax waivers. The payment was authorized under a provision of SIP called Gain Share.

The county estimated the payment should have been about $12 million, which would be split with Hillsboro and other local governments that made the waivers. State officials initially said they could not make the payment because of technical reasons, but in December asked the Emergency Board to authorize a $12.5 payment to Washington County. The board approved the payment shortly before the special session began on Dec. 15.

The controversy called attention to the Gain Share provision and prompted Burdick to say that 50 percent of new income taxes was too high. Burdick said she was concerned the state had committed to give too much money back, especially because the Legislature continuously struggles to balance the budget. County officials disagreed, say the split was fair because the state was still collecting more income taxes than it would other wise. The issue will be resolved by the Legislature, which is scheduled to start its 2013 session in February.




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