Where will Nike expand?
What more does Nike want to expand in Portland or Washington County?
Property tax breaks are still on the table after the Dec. 14 special session of the Oregon Legislature that Nike sought before agreeing to expand in Oregon. The Legislature briefly considered but quickly rejected an outright ban on Nike receiving financial incentives from local governments.
At the special session, Nike promised to invest at least $150 million in Oregon to create 500 or more jobs in the next five years. In exchange, the Legislature authorized Gov. John Kitzhaber to sign a contract guaranteeing the companys state income tax situation will not change for up to 30 years.
Nike is reportedly looking at expanding in South Waterfront in Portland or near its World Headquarters campus on the edge of Beaverton in Washington County. Both locations are within or near enterprise zones where property taxes for new developments are waived for three to five years.
Portlands City Council approved the enterprise zone in South Waterfront on Dec. 13, the same day the Legislatures Special Joint Committee on Economic Development took up Nike-related legislation. The first draft would have prohibited Nike from entering into the contract if it also received property tax breaks worth $5 million or more from the states strategic investment program. The committee briefly discussed expanding the prohibition to include all other financial incentives. It quickly resolved to ban none of them, however.
Beaverton has two enterprise zones. One stretches south and east from Nikes campus near Southwest Jenkins Road and Murray Boulevard. The other is further to the east. Both were approved by the Beaverton City Council in July 2012.
Nike has also held discussions with Washington County officials about strategic investment program property tax breaks. The county has granted such breaks to Intel and other companies to encourage new developments. Granting Nike a similar break is still possible under the final bill approved at the special session.
A pile of subsidies
Although activists protested Nikes tax break proposal, House Bill 4200, in Portland and Salem before and during the special session, they had no impact on the outcome. It passed the House by a margin of 50 to 5, with five members absent. The state Senate vote was 22 to 6, with two absences.
Nike has not said where it plans to expand, and no potential locations were mentioned during the deliberations on the bill. People familiar with the companys plans had been sworn to secrecy. But legislators, lobbyists and other interested parties weighed the pros and cons in quiet conversations between committee meetings and floor sessions.
The consensus is that Nike can expand practically anywhere. It needs office and design space, not a manufacturing facility that requires industrial land. Portland is considered attractive to corporate executives and the creative types who design the companys footwear, apparel and increasingly sophisticated tech gear.
On the other hand, expanding in Washington County allows all operations to be more centralized.
According to state Sen. Ginny Burdick, D-Portland, the prohibition against strategic investment program breaks in the original bill was not intended to favor Portland. It was designed to prevent companies from receiving too many financial incentives and tax breaks to locate or expand in Oregon. Burdick said state and local governments are still struggling financially from the effects of the Great Recession. She also worried that companies could play cities against each other for the biggest breaks.
I dont want to pile subsidy upon subsidy upon subsidy, Burdick said during the Dec. 14 hearing.
But Duncan Wyse, president of the Oregon Business Council, testified that some companies could create so many jobs that multiple subsidies would be justified to attract them.
There could be tremendous benefits that we wouldnt want to miss out on, said Wyse, whose organization advocates for business growth.
In the end, the committee voted that the governor should merely take all of the subsidies received by qualifying companies into consideration when negotiating contracts.
Kitzhaber can negotiate a contract that ensures Nikes corporate taxes will be based on the states single-sales factor for 30 years. Enacted in 2005, it taxes multistate companies like Nike only on their sales in Oregon, not outside the state as well.
The single-sales factor was enacted to encourage more large companies to locate or expand in Oregon. State economists predict it will cost a total of $165 million during the next two-year budget cycle for all corporate beneficiaries. But the economists also predict the minimum 500 jobs Nike is promising to create will generate $30 million a year in new income tax revenue.
Estimates of the benefits of Nikes expansion seemed to shrink as the session neared. When Kitzhaber originally called the Legislature to Salem on Dec. 10, he said Nikes expansion would create 12,000 direct or indirect jobs during the next seven years and boost the states economy by $2 billion a year. The minimums set in the version of HB 4200 a $150 million investment and 500 direct jobs are much lower.
The difference became apparent when Intel executives showed up at the Capitol to follow deliberations. Although they did not testify, their presence reminded everyone of how much more money the semiconductor manufacturer is investing in Oregon more than $6 billion to build and expand a new fabrication facility at its Ronler Acres Campus in Hillsboro.
Outside the hearing room, one lobbyist said the difference reminded him of Dr. Evil in the 1997 movie, Austin Powers: International Man of Mystery. In the spy spoof, Dr. Evil awakes after being frozen for 30 years and plots to hold the world for ransom with a stolen nuclear bomb. But he doesnt realize how much prices have increased and disappoints his co-conspirators by demanding a ransom of only $1 million.
Imitating Dr. Evils high-pitched voice, the lobbyist said, Nike is prepared to invest millions in Oregon, millions.