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Council votes to expand enterprise zone into LO

Proposed partnership with Tigard would provide tax incentives that encourage businesses to hire, grow

Lake Oswego and Tigard have struck up another partnership, this time to boost economic development.

The Lake Oswego City Council voted unanimously last week to sponsor an expansion of the Tigard Enterprise Zone to include Lake Oswego’s Southwest Employment Area.

The expansion, which must be approved by the state, would effectively extend to Lake Oswego a program that allows eligible businesses to receive property tax exemptions on new capital investments — which can include acquiring new property or machinery — for up to five years.

Tigard opted into the program just over a year ago, creating a zone that includes 1,598 acres of industrial and commercial land that extends from Metzger to the Washington Square mall, through the town’s commercial section between Highway 217, Interstate 5 and Pacific Highway, and down Southwest 72nd Avenue.

Tigard’s zone stands to add just 93 acres through its partnership with Lake Oswego, encompassing an additional 15 businesses that are likely to be eligible for participation. But Tigard Economic Development Manager Lloyd Purdy said many of the benefits to the expansion are “intangible.”

“Like operating at a more regional scale, and building and continuing good relationships with a good neighbor,” Purdy told The Review. “Remember, 90 percent of our residents in the workforce commute to a neighboring city every day. Lake Oswego firms employ Tigard residents. I want our residents to be gainfully employed, no matter where they work in the region.”

The Oregon Legislature enacted the enterprise zone program in 1986 with the aim of encouraging business growth in areas experiencing economic hardship. There are currently about 70 such zones around the state.

Sarah Selden, senior planner for Lake Oswego’s Planning and Building Services department, told the City Council last week that Clackamas County has seen upwards of $100 million invested in its zones, and more than 500 new jobs created.

In order to create such a zone, a jurisdiction must meet certain economic hardship requirements: At least 50 percent of household incomes in the area must fall below 80 percent of the state median income, or the unemployment rate of the area must be at least two percentage points higher than the state average.

Once eligible, an enterprise zone lasts for 10 years, unless the sponsor, jurisdiction and state renew it. “That has happened in the past,” Selden said.

The zone can be no more than 12 square miles total, and the furthest distance across it cannot exceed 12 miles. The zone does not need to be contiguous, although non-attached portions of the zone must be no more than five miles apart.

Eligible businesses also face strict requirements to participate: Not only must they be located within the zone, but they also must be noncommercial and provide goods and services to other businesses. Manufacturers, processers, shippers and other traded-sector businesses, as well as call centers and headquarter facilities, are all eligible; retail, construction, financial and other defined commercial businesses are not.

Businesses must demonstrate that they plan to increase employment by one employee or by 10 percent of their staff — whichever is higher. They must also agree to carry out hiring with a workforce organization within the county, and must agree to pay any new employees a compensation package that is at least 150 percent more than the average wage in the county. In the case of the expanded enterprise zone, two counties are involved, so this amount comes to a minimum of $89,000 — higher than Washington County’s average.

“The compensation and benefits requirements are intended to support good, quality jobs,” Selden said, “living-wage jobs that would provide employment for the community.”

Businesses must also be planning on a minimum investment of $500,000.

“That’s based upon the threshold where the amount of your abated taxes would be worth participating in the program and making those additional hires,” Selden explained.

While the enterprise zone program offers businesses a 100 percent tax abatement on the value of new facilities and equipment, land and existing buildings and equipment are not exempt. That means the zone does not result in losses to current property taxes levied by local taxing jurisdictions, Selden said.

Through a proposed intergovernmental agreement yet to be approved by the two cities, Purdy — who works as Tigard’s Enterprise Zone manager — would also act as zone manager in Lake Oswego. Purdy would be compensated for his work in Lake Oswego through application fees collected from interested businesses.

“(The agreement) would allow each city to make changes or decisions regarding the local incentives without the approval of the other jurisdiction,” Selden explained, “but when it comes to changes like boundary amendments, that is something that’s jointly decided on by both cities.”

While the Lake Oswego City Council agreed to go forward with the partnership, councilors still must work out the specific details of the intergovernmental agreement. Once that happens, both cities will work together to prepare application materials to be submitted for authorization by Business Oregon, the state’s economic development agency.

Selden explained that partnering with Tigard made more sense than establishing a separate enterprise zone.

“We did explore different options, including just establishing a zone with Lake Oswego, or partnering with another jurisdiction,” Selden said. “The city of Tigard has a much larger enterprise zone.”

Analysis showed that partnering with Tigard allowed the City of Lake Oswego to meet economic hardship requirements, although Selden told The Review that census tract data for the Southwest Employment Area showed that the city would likely be eligible to establish its own zone, based on unemployment rates.

“But the city of Lake Oswego already has a partnership with the city of Tigard, and it’s a great opportunity to build upon that,” Seldan said.

Reporter Geoff Pursinger contributed to this story. Contact Saundra Sorenson at 503-636-1281 ext. 107 or ssorenson@lakeoswegoreview