Oregon lawmakers appear close to bipartisan agreement on another package of incentives for the state’s semiconductor industry.
But with the Senate unable to function amid a prolonged Republican walkout, it’s not clear if the Legislature will ever take up the proposals.
“We are at a crossroads of opportunity here. And if we do not have a successful session … all of this will be for naught,” Sen. Mark Meek, D-Gladstone, said at a committee hearing Friday. “We will miss a golden opportunity to feed our families for generations.”
Chip industry incentives were among lawmakers’ top priorities coming into the session, aiming to secure a share of $52 billion in federal incentives Congress approved last year. Semiconductors are among Oregon’s largest industries and the state’s top export.
The Legislature moved quickly at the beginning of the session on a bill that to approve $210 million for the chip industry, most of that in direct subsidies. The legislation also gave Gov. Tina Kotek extraordinary authority to circumvent Oregon’s land-use laws and designate new land for industrial development for chipmakers.
Kotek signed that bill in April and lawmakers went to work on additional incentives recommended last year by a task force of business and political leaders. Lawmakers focused especially on restoring a research tax credit and extending, and reforming, two programs for local property tax incentives.
Testimony at Friday’s committee hearing suggested Republicans and Democrats are supportive of compromise legislation due to be detailed in amendments filed next week. But it’s not clear when, or if, the full Legislature would ever consider a finished bill.
The Senate hasn’t had a quorum to consider legislation since May 3, when most Republicans walked out to block legislation from the Democratic majority over abortion rights and gender-affirming health care.
Democratic U.S. Sen. Ron Wyden, who helped lead the Oregon task force and promote the CHIPS Act in Congress, said Friday that Republicans should return to Salem “so the Legislature can finish its job by passing the tax and workforce incentives needed to create jobs in Oregon.”
There doesn’t appear to be much prospect the GOP will give in. Republicans have worked closely with Democrats in crafting the semiconductor legislation but say they won’t allow the legislative majority to press ahead with bills their own constituents ardently oppose.
The boycott has stymied hundreds of bills and left the fate of the session in doubt. Republicans have indicated they probably won’t return except to pass a two-year budget at the very end of the session, and there’s some doubt the Legislature will be able to agree on the conditions that would bring Republicans back to vote on the budget.
That raises the prospect that the budget might not be addressed until a special session sometime this summer – or maybe later.
That might not leave any time to take up the latest semiconductor legislation. Industry backers say a lack of additional funding could seriously impede Oregon’s ability to capture a share of the federal money and lure more chipmakers to the state.
“The task force put out a road map, a strategy, not a menu of options. And the Legislature, at this point, has accomplished less than half of that,” said Andrew Desmond of the Oregon Business Council, which shepherded the semiconductor task force.
Without the tax credits, and additional funding for workforce development, Desmond said Oregon will be fair less appealing to chipmakers.
The task force hasn’t taken a position on how the Legislature should resolve its impasse. But Desmond cautioned that legislative dysfunction might itself be a turnoff to companies considering where to build.
“Things that inject uncertainty and things that inject risk I think just makes it more difficult for companies to put billions and billions of dollars, if not their entire company fortunes, here,” Desmond said.
Lawmakers appear to have a consensus on the importance of restoring Oregon’s research tax credit, which expired in 2017, as central to attracting more semiconductor investment. And both Republicans and Democrats want to see property tax programs extended to lure manufacturing jobs.
Influential business groups and tax watchdogs are diametrically opposed, though, on the scale and breadth of those incentives. And the powerful Oregon Education Association wants to new limits on the amount drawn from the statewide schools fund to compensate individual districts when local governments give way education dollars in tax incentives.
At Friday’s meeting of the Joint Committee on Tax Expenditures, committee members heard testimony on parallel bills from the House and Senate that would reform and extend property tax incentives and while restoring the research tax credit.
The Senate bill, generally speaking, is more generous to industry. The House version puts more limits on the research tax credit and would require companies to pay more property taxes for local schools.
Each bill also seeks to reform the state’s enterprise zone program, an incentive created in the 1980s for small manufacturers. It’s now used primarily by data centers, which save big tech companies $180 million in Oregon taxes annually. The enterprise zone program sunsets in 2025 unless lawmakers extend it.
The bills would preserve data center eligibility for the program, but the House version of the legislation would encourage local governments to consult with the state’s economic development agency when negotiating tax incentives and would require 30 days’ notice before deals become effective.
Local governments sometimes negotiate humongous enterprise zone incentives with little public notice and no public debate.
In Morrow County, with fewer than 13,000 residents, local governments approved $1 billion in data center tax breaks for Amazon last month. The city of Boardman took just 90 seconds to consider the matter while the Port of Morrow didn’t announce they would be taking up the incentives until less than 24 hours before commissioners voted on the deal.
The Senate bill would exclude retail warehouses used by Amazon and other e-commerce companies from incentives. Oregon gives away millions of dollars in incentives each year to those facilities, even though they cannot locate elsewhere because they need to be close to customers.
Warehouses for manufacturing and food processing would still be eligible for the incentives. But tax watchdogs and economic development officials agreed Friday that it makes sense to cut off e-commerce warehouses.
“Retail fulfillment centers may not match the original intent of enterprise zones,” testified Lindsay Tenes, lobbyist for the League of Oregon Cities.
Rep. Nancy Nathanson, co-chair of the tax committee, said she and Sen. Meek will introduce amendments next week to offset local property tax breaks with a fee companies would pay in exchange for their incentives.
And Nathanson, D-Eugene, said the amendments will contain a “strong” research tax credit for chipmakers.
“That’s at the top of the list,” Nathanson said.
While she didn’t specify how big the tax break will be, or how broad the eligibility standards will be, Democrats and Republicans alike said Friday they are encouraged by Nathanson’s approach.
None of it will matter if the Legislature doesn’t have a quorum to take up a finished bill.
Erin Doyle, government relations manager for Washington County, said she believes there’s still a chance bipartisan semiconductor incentives could be approved whenever lawmakers take up the budget – either at the end of this session or during a special session.
“I am optimistic that we can still get something accomplished this year,” Doyle said.
The goal now, she said, should be for lawmakers to negotiate a prewritten set of bills that they can quickly take up whenever they meet to consider the budget. And she said she’s hopeful that lawmakers are moving in that direction.
“The session has turned out the way it has,” Doyle said, “but that doesn’t mean we stop working.”
— Mike Rogoway | [email protected] | 503-294-7699
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