When communities offer large cash incentives to entice a company to relocate, a lot of buzz starts up in the news. New York and Texas may come to mind. We’re a little different in Oregon. The State of Oregon does not offer cash incentives, rather, our primary incentive is property tax abatement. Only traded sector companies and regional headquarters are eligible for this incentive in Oregon. In our region, this is also open to hotel developments. These tax abatements are also limited to specially designated regions of the state called Enterprise Zones. What does that mean for us?
Southern Oregon currently has four Enterprise Zones –Medford Urban, Jackson County Rural, Grants Pass Urban, and Rogue (Josephine County). SOREDI has been managing these Enterprise Zones since the Legislature created the opportunity for sponsoring communities in the late 1990s. In that time, we have processed over 166 applications with a total estimated investment at the time of application of nearly $403 million, the creation of at least 3,060 jobs and the retention of nearly 10,000 additional jobs.
Currently, the Medford Urban Enterprise Zone is up for renewal. If approved by the city council, it will be recognized for another ten years beginning on July 1, 2019. Last year, the Rogue Enterprise Zone which encompassed all of Josephine County, split in into two zones, creating a new Grants Pass Urban Enterprise Zone when the City of Grants Pass grew too big to qualify as a rural community. With its growing population, now over 35,000, Grants Pass is now considered a metropolitan statistical area (MSA). Jackson County’s Rural Enterprise Zone covers just about all other commercially and industrially zoned properties. Unfortunately, there are still some pockets of the county that do not qualify for the incentive.
The incentive does not apply to land and it is not retroactive. This means that we are proactive, making outreach calls to manufacturers and larger companies to ask if they have any expansion and growth plans. This allows us to have a pre-certification application in hand before the company begins to break ground, add new equipment or machinery, or make significant tenant improvements. Each of those improvements represents an investment in our collective tax base, investments that add value. Translation? More tax revenue for our communities!
There are claw back provisions, of course. New and expanding companies are required to create new jobs equal to at least 10% of their existing workforce – which could be just one job if it is a qualifying new venture. Miss the mark with job creation, and you miss the incentive. Fail to retain those jobs for the required time, or miss the April 1 annual filing period for property schedules, and well, rats… you also miss out. That said, we are also proactive in sending reminder notices at the beginning of each year and following up with these companies each March to be sure all is on track. Besides this being our job as the enterprise zone manager, we think it’s just good customer service.
So, what was this enterprise zone activity worth during the 2017-2018 fiscal year? We are glad you asked. SOREDI processed 8 applications – worth $61 million in promised investments, 141 new jobs and 422 retained jobs. And if we conservatively use the median average wage (2017) for the region, those 563 jobs were worth about $22.4 million in state wages. Let that resonate for just a minute. As we are often keenly aware – good or bad – Oregon does not have a sales tax which makes us particularly reliant on income taxes to fund education and essential state services. Those created and/or retained wages will result in about $1.6 million in annual Oregon income tax revenue. So, do the math. Those 8 companies alone will increase their contribution to the income tax base (via their new hires), by 23%.
So what do we give up in exchange for this investment? We temporarily give up the collection of property tax for 3-5 years. After the 3-5 years period, the company begins to pay property tax on those investments. Companies only qualify for five years of abatement if the jobs created provide wages that are at least 150% of the county’s average compensation – (salary plus non-mandatory benefits). Right now, that comes out to a total compensation of at least $62,123 in Jackson County and $53,861 in Josephine County.
Are you a manufacturer or traded sector firm with more than 50% of your business generated from outside our region? Are you considering a new regional headquarters or perhaps a new hotel development? Then we urge you to call our offices before you break ground, because going back to paragraph 4 – the incentive is not retroactive. Sorry.
Here is one big way that Southern Oregon continues to be business friendly. There is no fee to apply for enterprise zone benefits. In many other communities, the Enterprise Zone manager charges a percentage of the total investment as an administrative fee. But, not at SOREDI. We do not collect a penny from the companies who apply. Nada. Zilch. SOREDI is a membership-supported agency and our services are complimentary. Every job created due to Enterprise Zone application processing was supported by every one of our SOREDI members. Thanks!
Expanding companies are already taking a risk with their investment, expectant that market forces will hold in their favor, and that they will find the qualified, skilled workforce they need for their sustained prosperity. The lack of an application fee is one small thing perhaps in the grand scheme of being business friendly but last time we checked, the big successes were simply the cumulative effect of many smaller measures. Didn’t I read that in a fortune cookie once?
Thank you SOREDI members for your financial support – you are helping companies in our region create and retain jobs every day. Hats off to you!