Intel, IDT get county tax breaks for Oregon sites

Electronic News, Sept 19, 1994 by Roy C. Webster

HILLSBORO, ORE. - Amid expressions of doubt and concern about "doing the right thing," Oregon's Washington County commissioners twice in the same number of weeks have voted 5-0 to forgive $10.5 million in property taxes over 11 years to Intel Corp. ($6.5 million) and Integrated Device Technology Inc. ($4 million). The exemptions were granted beginning 1996 through 2007 as incentive for a combined investment of over $1.5 billion in new plants and equipment within Washington County.

Washington County granted a tax exemption to each corporation under provisions of Oregon's Strategic Investment Program (SIP, HB3686) enacted by the 1993 legislature. The SIP provides state industrial revenue bond financing for new facilities combined with special property tax treatment and exempts property taxation on the facility value over $100 million.

Intel, Oregon's leading high-tech manufacturer, employs about 6,600 at three "campus" locations, all within Washington County. Intel's initial SIP application, the first received by the county and first processed in the state, declared development of the "D1E" (Aloha) facility as critical to its ability to compete globally.

Keith L. Thomson, Intel senior VP and GM of Oregon operations, said: "If we don't have the incentive for Oregon then Oregon is not competitive." He emphasized that without tax breaks, intel would build its next big plant in another state and could modify its expansion plans for Aloha. In a work-session before the meeting where the vote was taken, commissioners expressed concern that they could be granting a tax break for a project that would be built regardless.

Intel planned the $705 million Aloha campus expansion a year before passage of the county ordinance in July, 1994. At the same time the commission voted unanimously to forgive the Aloha project taxes, a major percentage of construction already was underway.

In an attempt to influence the commission and gain leverage for a $2 billion application filed one day before the commission meeting, the application stated that "even if the County determines it is likely the facility would be located here without the tax exemption, the County might consider supporting an exemption if it determines that doing so would clearly and directly result in the creation/retention of jobs in the future that otherwise (would) not be create/retained."

Expansion of the Aloha facility, where Intel's 860 and 486, microprocessors began, will add 355 new jobs - five in administration, median salary, $29,957; 250 technicians, median salary, $30,282; and 100 engineers, median salary, $69,189. The goal is that a minimum of 50 percent of the jobs created pay a wage at or above $27,000 which was the county average annual covered wage in 1992. The tax break for Intel over eight years, 1996-2003, reduces $20.54 million to $11.8 million. However, the company will pay a community service fee of $2.2 million over the same period to promote job training and benefit education.

Like Intel, IDT established a precedent when it became the first company outside of Oregon to apply for tax exemption under SIP provisions and, upon approval, became the first major tenant in the 10-year-old, 301-acre Dawson Creek Park, an investment of the Tektronix Master Retirement Trust in Hillsboro.

IDT currently manufactures microprocessors, memories and logic at two California sites and another in Malaysia. Washington County commissioners expressed apprehension on the ability of IDT to deliver all the application claims. Discrepancies in the IDT application to construct an $801.5 million, 8-inch silicon wafer fabrication facility (Fab IV) for CMOS devices resulted in questions of wonder from commissioners, but without negative impact.

"I don't feel as though I have a good handle on what we would be buying," said Commissioner Linda Peters, in whose district the plant will be built, before voting. She wondered why the application stated that "approximately 500 people" would be employed in Phase I and "475 in the second phase" for a total of 1975 jobs versus the negotiated agreement where IDT only guarantees a minimum 200 full-time positions for Phase I and an additional 200 full-time positions for Phase II.

"It would be easier to build in California," Phillip Pare, IDT's VP and project manager, said, but we do not believe that is the right thing to do. Oregon is the logical place to build Fab IV."

He identified IDT as "a market driven company" not driven by incentive. He also emphasized IDT failed to achieve growth expectations in Salinas, Calif., where maximum capacity will peak at $475 million annual revenues upon completion of conversion from 5-inch to 6-inch wafers. Simultaneous with Mr. Pare lobbying before the commission for the $4 million tax exemption, earth-moving equipment was leveling acreage at the Dawson Creek Park site for Phase I construction.

Without a tax exemption, IDT would pay $26.9 million over 15 years. The tax bill now will be $21.6 million if the entire project is built. The 5.3 million difference win be reduced by $1.3 million community service fees to be shared by Washington County and the City of Hillsboro.