The Strategic Investment Program run by the Oregon Business Development Department offers a 15-year property tax exemption on a portion of large capital investments. The program was created in the 1990s to induce large, capital-intensive facilities to locate and grow anywhere in Oregon.

To qualify, projects must serve a "traded sector" industry. Oregon law defines "traded sector" as one in which "member firms sell their goods or services into markets for which national or international competition exists."

The project's cost must be at least $25 million in a rural area or $100 million otherwise. But as a practical matter to benefit from the program, the overall investment will need to be considerably bigger. The actual exemption is on property value in excess of a taxable portion, which starts at $100 million for all urban projects, while in rural areas:

Total Investment Costs	Initial Taxable Portion Amount
Not more than $500 million	$25,000,000
Between $0.5 and $1.0 billion	$50,000,000
Greater than $1.0 billion	$100,000,000

A rural area must be located entirely outside urban growth boundary of a city with a population of 40,000 or more at the time of state SIP application or in a Rural Strategic Investment Zone designated before October 5, 2015. Taxable portion is based on property's real market value and grows 3% per year.

There are two options for an SIP project to be approved:

• Ad hoc approval. The county holds a public hearing and negotiates an agreement between the business and county and city (if applicable).
• Strategic Investment Zone. The zones are designed to provide a more streamlined local process. At any time, a county (and city) may submit a request through Business Oregon for the Business Oregon Commission to designate a Strategic Investment Zone. Community Service Fee

Companies must also pay the respective county a community service fee as set by law. The fee is contained in the agreement with the business, which may include additional requirements on the business. The county must also sign a separate agreement with other local governments for distributing the fee.

A D V E R T I S E M E N T

A D V E R T I S E M E N T

For any SIP project that is exempt in the prior tax year, the business must submit a report to Business Oregon detailing its employment and payroll. The report is used to evaluate the program's performance and provide estimates of state personal income tax revenue that may be shared with local governments.

Supporters of the program point out that other states have similar programs and will poach the cream-of-the-crop companies without it. They also point to the jobs and positive secondary economic effects of the program. Critics say that it uses taxpayer funds -- any tax abatement is essentially a general fund loss -- that targets only large and successful companies. Additionally, it may not make sense to have a large monopoly utility company -- Portland General Electric, for instance -- using taxpayer backed money for economic development.


--Staff Reports

Post Date: 2020-12-28 20:08:02

Last Update: 2020-12-29 08:31:23