State approves Intel’s “Strategic Investment Program”

Company to invest $25 billion, create jobs in Washington County over 15 years

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http://www.intel.com/community/Oregon/econimpact.htm

Salem, Ore.-The Oregon Economic and Community Development Commission (OECDC) today approved Intel Corporation’s application for property tax relief under the state’s Strategic Investment Program (SIP).

In its application, Intel Corporation (Intel) proposed an extension to their 1999 SIP agreement that will allow additional investments up to $25 billion in new property for high-technology microelectronic manufacturing. The investments will be made within Washington County-largely at the Ronler Acres Campus within the corporate limits of the City of Hillsboro-over a 15 year period, beginning around 2010.

The state application, reviewed by the OECDC’s Finance Committee, is the final step in a process that began with the City of Hillsboro and Washington County, where the company’s project will be located. The City, County and Intel signed a written agreement to proceed with the SIP application after a public hearing on May 17, 2005.

The Oregon Strategic Investment Program is a tax-equity program established by the Oregon legislature in 1993 to encourage investment in Oregon by capital intensive, above-average wage industries. Under the SIP, traded-sector companies making enormous investments in new real and personal property are subject to appropriately less taxes, fostering economic growth and improving employment opportunities in the state.

Intel currently employs 15,600 in Hillsboro and Washington County. The company expects to hire 1,500 new employees at that location over the 15-year investment period, with 750 of the new jobs being created in the first three years. In the state application, Intel estimates hiring will be evenly split between two classifications: 1) technicians with two years’ post-secondary education and work experience, earning an average of $51,722 per year; and, 2) engineers with B.S., M.S. or Ph.D. degrees, earning an average of $92,187 per year.

Because the project almost exclusively entails retooling, retrofitting and improvement of existing facilities, Intel’s new investments are not expected to necessitate public improvements or augmentation of public safety services.

“As with all Oregon manufacturers, Intel is facing increasing cost pressure from domestic and international competitors,” said Governor Ted Kulongoski. “The 2005 SIP agreement is a critical part of ensuring that Intel’s products remain cost competitive-and that their operations remain in Oregon,” he said. “This is exactly why the Strategic Investment Program was created. I thank the City of Hillsboro, Washington County, and the State of Oregon economic development team for making this deal happen.”

About the SIP

Large industrial projects involving $25 million or more of investment are exceptional and, in Oregon, trigger unusually high annual property tax payments. The SIP was designed for companies that, because their capital investment is so large, risk disproportionately huge property tax obligations.

With the Strategic Investment Program, Oregon can reduce the tax burden for these companies, thereby attracting and keeping major capital investments in the state. Under SIP, business investment in excess of $100 million is exempt from property taxes. The exemption threshold increases by three percent per year, over the term of the agreement.

In exchange for reduced property taxes, companies are obligated by state law to pay a number of fees that support the community and the state. In the 2005 SIP agreement, Intel commits to pay $115 million in fees to local governments and non-profits.

Intel Oregon negotiated its first two SIP agreements in 1994; a third SIP agreement was signed in 1999. Together, the three agreements represent a commitment by Intel to invest $15.5 billion in Oregon. The company has fulfilled the investment portions of the 1994 SIP agreements and a substantial portion of the 1999 agreement.

Economic Impacts

A February 2003 ECONorthwest report [which can be found online at http://www.intel.com/community/Oregon/econimpact.htm] concluded that 29 percent of Washington County’s output was attributable to Intel’s ongoing operations. The report noted that much of Intel’s economic impact is generated from spending by Intel employees.

With the 2005 SIP agreement, public schools and municipalities in Washington County will collect directly from Intel an extra $7.7 million per year, or more than $115 million over 15 years.

The project’s effect on statewide employment will generate an average of at least $13 million per year in General Fund revenue from personal income tax receipts, without accounting for inflation. That includes an estimated $3.7 million in annual personal income taxes paid by Intel’s new employees, for a total of $195 million in state revenues over 15 years.

“The 2005 SIP agreement with Intel will stabilize a favorable business and investment climate for Oregon, while continuing to support local schools and non-profit organizations,” said Marty Brantley, Director of the Oregon Economic and Community Development Department. “Without the SIP, Oregon could not effectively compete with other states for large capital investments by Intel or other companies, depriving Oregonians of substantial economic benefits,” he said.

Intel in Oregon

Intel Oregon is the state’s largest private employer with 15,600 employees occupying 7.7 million square feet of floor space. Intel Oregon is Intel Corporation’s largest and most comprehensive site in the world, home to the company’s most advanced manufacturing and research and development facilities.

In 2003, the average Intel Oregon employee earned nearly 130 percent of the average Washington County wage. A large portion of employee incomes is spent locally on such things as housing, groceries, health care, transportation services and entertainment. Expenditures by Intel and its employees thus have a multiplier effect on the local economy, adding jobs and revenues beyond Intel’s contribution.

Since acquiring its first campus here in 1974, Intel has invested approximately $11 billion in Oregon. Of that, more than $7 billion was invested after Intel and Washington County signed their 1999 SIP agreement. According to the company, most of Intel’s employment increases and capital spending in the state occurred after the Oregon legislature created the SIP in 1993.

The Oregon Economic and Community Development Department works to strengthen the state’s economy and put more Oregonians to work in good jobs. By partnering with private sector organizations and working closely with local communities, the Department creates opportunities for business expansion, creation and relocation. The Department is guided by the Oregon Economic and Community Development Commission, which was established in 1993 to guide an integrated approach to economic development and provide continuous policy direction for the Department. For more information about doing business in Oregon, call the OECDD at 1-(866)-4OREGON (1-866-467-3466), or visit http://www.Oregon4biz.com.