Some of Oregon’s leading political figures want to revisit the state’s lucrative tax breaks for data centers, seeking to ensure small communities get the most out of their deals with wealthy tech companies.
None are suggesting doing away with the incentives altogether, and there’s broad agreement that local governments should retain a key role in negotiating the tax deals.
But following a series of reports in The Oregonian/OregonLive this month on Amazon’s dealings in remote Morrow County, lawmakers and candidates for governor say they want to evaluate whether the incentive programs have adequate guardrails, whether the state is providing enough support in negotiations, and whether local officials acted ethically in their dealing with the tech company.
“It is clear from your reporting that enterprise zones could use more oversight and technical support from the state to make sure local communities realize the maximum benefit from these arrangements with large corporations,” said former Speaker of the House Tina Kotek, the Democrats’ nominee for governor.
Independent candidate Betsy Johnson, a longtime state senator, said the issues in Morrow County point to a broader need to make the state an appealing place for employers. She said Oregon needs predictability, clear regulation and efficient oversight to attract and retain business.
“It’s not just the question of whether we’re making the best deal for our tax dollars, it’s whether we’re also securing the investments and job growth we need to move our state forward,” Johnson wrote in an email. “There are going to be failures that come with the general story of success and anybody engaging in this for personal benefit should absolutely be held accountable.”
Former House minority leader Christine Drazan, the Republican gubernatorial nominee, did not respond to a request for comment.
Big technology companies – Amazon, Apple, Facebook and Google – have saved $650 million in property taxes on their Oregon data centers, capitalizing on an incentive program Oregon created in the 1980s to lure manufacturers to rural communities. That’s hundreds of millions of dollars the big corporations would otherwise owe to some of Oregon’s smallest communities.
Data centers now account for roughly three-quarters of all the tax breaks granted through Oregon’s enterprise zone program. Amazon saves nearly $50 million annually in Morrow County and is seeking new tax breaks that could more than double its local footprint.
Carbon emissions from the local electric utility have soared as Amazon has grown. Even as the state moves to require large utilities to shift to renewable energy, Oregon continues to hand out tax breaks to data centers without any requirement the power-hungry facilities use clean electricity.
While data centers aren’t major employers – the computers do all the work – they can have a considerable economic impact in small communities like Morrow County, which has just 12,000 residents. Amazon says it employs 500 at its data centers near Boardman and pays an annual wage of $76,000, 27% above the county average.
In dollar terms, though, the incentives save the companies far more than they pay. Amazon’s tax breaks are worth more than $94,000 per job.
In Morrow County, four key port and county officials helped engineer Amazon’s growth through land sales and tax incentives. The quartet positioned themselves to reap a windfall from Amazon’s continued expansion by purchasing the tech giant’s local fiber-optic provider, a business called Windwave Communications.
Amazon did not respond to questions this past week about when it became aware that county and port officials had acquired the company’s fiber provider in Morrow County. Seattle-based Amazon said previously that it had operated ethically in seeking its tax breaks, adding, “Any suggestions to the contrary would be false.”
The Oregon Department of Justice said that, following the new reporting by The Oregonian/OregonLive, the agency’s nonprofits division is reviewing the sale of Amazon’s fiber-optic provider. The business, called Windwave Communications, had previously been owned by a local nonprofit whose board included two of Windwave’s buyers.
The Oregon Government Ethics Commission has fielded at least one complaint about Windwave’s sale and could decide whether to look into the transaction at a meeting later this month.
Rep. Nancy Nathanson, D-Eugene, chairs the powerful House Revenue Committee that oversees key state incentive programs. She said the state must balance the economic opportunity of big investments with what local governments give up to attract them.
“I recognize the importance of good-paying jobs created in their respective communities and also the cost those incentives can have on providing critical services for those communities and Oregonians across the state,” Nathanson wrote in an email. She said the new reporting raises questions about Oregon’s enterprise zone programs at a key moment.
“Since we’re more than four months from the legislative session and committee assignments, this is the early stage of evaluating issues that could have momentum in 2023,” Nathanson said.
Tax watchdogs are planning to push Oregon lawmakers to reform the enterprise zone program during the upcoming legislative session. Proposals under consideration would cap tax breaks or tie them to the number of jobs create, sharing data center revenue among neighboring counties, and eliminating the ability for officials to bargain away school funding.
Environmental advocates, meanwhile, are contemplating their own push to require data centers use clean energy in return for their tax giveaways.
Danny Moran, spokesperson for House Speaker Dan Rayfield, said the speaker’s priority this session is to adjust state revenues to more directly support workers and low-income families impacted by inflation.
“Speaker Rayfield is interested in a full evaluation of (the enterprise zone) program by the Revenue committee to see where changes can be made to more align with those values,” Moran wrote in an email.
Democratic Sen. Lee Beyer said an upcoming review of tax incentives for the chip industry could provide an opportunity to scrutinize data center tax breaks, too.
“I think there is an interest in revisiting the structure of those programs,” Beyer said.
A former economic development manager and director in Eugene and Lane County, Beyer is retiring from the Senate at the end of this year. He has been chairman of the Senate Finance and Revenue Committee.
Tax incentives have a definite role to play in local business recruitment, according to Beyer, who said he’s often seen them used effectively. But he said Oregon lawmakers should consider whether 15-year tax exemptions are too long, and whether the size of tax breaks should be tied to the number of jobs created.
“Probably it would be helpful if there were some sideboards on it,” Beyer said.
Clarification: This article has been updated based on additional comments from Speaker Rayfield’s office, indicating the speaker wants a “full evaluation” of the enterprise zone program.
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