Two of Intel’s top lobbyists sent a pointed letter to legislative leaders and Governor Kate Brown on Wednesday with an explicit warning that “Oregon could completely miss” billions of dollars in new Intel spending if the legislature doesn’t. does not act urgently.
“Our window to compete with other states for these dollars is right now,” Oregon lobbyists Mike Freese and Danelle Romain wrote to the governor and legislative leaders of both parties.
Big chipmakers are moving quickly to expand their network of factories across the country and capitalize on $280 billion in federal aid approved by Congress last summer under the CHIPS Act. Lobbyists wrote that other states were increasing their own incentive programs and suggested Oregon was not keeping pace.
“Oregon has an extraordinary, time-limited, and urgent opportunity to compete nationally for historic investments in semiconductor research, development, and manufacturing, delivering a significant benefit to our entire state. “, wrote Freese and Romain in their letterwhich reads like an undisguised warning from Oregon’s largest corporate employer.
Both Freese and Romain are registered lobbyists for Intel, as well as various other companies and industry groups. They did not write explicitly that they were speaking on behalf of the company but are well known in Salem.
Intel anchors the state’s chip industry, with 22,000 workers assigned to its campuses in Washington County. Semiconductors account for nearly half of Oregon’s exports, $13.3 billion in value last year alone, with most of those chips coming from Intel’s Hillsboro factories.
Intel is already enjoying huge property tax breaks worth more than $750 million over the past five years. The absence of a state sales tax saves Intel hundreds of millions of additional dollars on the expensive equipment it uses to manufacture its microprocessors, and Oregon corporation tax exempts largely chipmakers and other companies that sell most of their products to out-of-state customers.
However, other states offer an order of magnitude more.
Last Wednesday, New York announced that it had secured a huge new factory from Idaho-based memory chipmaker Micron with $5.5 billion in state tax credits. Ohio attracted two huge new Intel factories with $2 billion in public incentives, including a direct taxpayer subsidy of $600 million.
The economies of these states are among the largest in the country. Oregon is unlikely to be able to match those sums, and the public may not be willing to donate huge amounts of taxpayers’ money.
In response to the lobbyists’ letter, House Speaker Dan Rayfield, D-Corvallis, said it was “incredibly important for Oregon to capitalize on federal CHIPS Act investments.”
Rayfield said he was working with Rep. Janelle Bynum, who chairs the House Economic Development Committee, to pursue a legislative package for the chip industry in next year’s session. However, he said Oregon needs a “clear return on any state investment” in the chip industry.
“I want to make sure that any state investment is responsible to ensure that we support working families and create jobs in all sectors of the state,” Rayfield said in a statement Wednesday.
Sen. Tim Knopp, R-Bend, was part of a task force of business and government leaders that developed a plan to revive Oregon’s chip industry in August with a set of changes land use, regulatory reforms and new incentive programs. Knopp, the Republican leader in the Senate, wrote in an email Thursday that it’s important for Oregon to compete nationally for semiconductor manufacturing and research work.
“With this industry, Oregon has a stronger economy and job prospects,” Knopp wrote. “The package I will support would include tax incentives and land use changes that would make us competitive with other states for this type of investment.”
Unlike other chipmakers, Intel already owns enough land in Hillsboro for another multi-billion dollar expansion. And since Oregon is already home to Intel’s most advanced research, the chipmaker has a strong built-in incentive to continue expanding here.
Wednesday’s letter did not suggest a target figure for Oregon’s incentives, but it did suggest the state use Ohio as a model for its approach.
In Ohio, lobbyists said, the state agreed to spend nearly $700 million on transportation and water improvements, offered job-creation tax incentives and exempted proposed state business tax.
Governor Brown said she was preparing a package of proposals for lawmakers to consider on the ‘first day’ of their regular session next year, and she took $1 million from a state strategic reserve fund to prepare existing industrial land for large semiconductor manufacturers.
When Intel announced its plans for Ohio last January, it set off alarm bells among Oregon politicians who wondered why the state hadn’t done more to pursue the project.
Those passions have cooled in the months since, and with Brown’s term as governor ending in January — she is barred by law from running again — her successor will have to decide whether or not to pursue the proposals Brown is preparing.
All three leading candidates to succeed Brown as Oregon governor say they want to attract more investment in the chip industry, but none have committed to a specific set of proposals.
“The question is, what’s the return to Oregon if we give all that money and tax credits to the industry?” asks John Calhoun of Tax Fairness Oregon, an advocacy group that monitors and criticizes state tax incentives.
A former Intel finance executive, Calhoun said he was amazed by the scale of public incentives New York and Ohio are promising. He said the state of Oregon needed to make a lucid assessment of everything it was giving up and what it could expect in return in terms of capital spending, jobs and new tax revenue.
“New York is a wealthy state and can afford it. We’re not that rich,” Calhoun said.
Chipmakers tend to band together to capitalize on a pool of industry suppliers who provide the manufacturing tools, chemicals, and electrical and plumbing contractors they need to operate and maintain factories.
So Calhoun warned that big giveaways might not play well in other parts of Oregon that would only indirectly benefit, if at all, from more semiconductor manufacturing near Portland.
“If you’re going to put all the money into this industry, what are the industries in other parts of the state that aren’t going to get anything?” Calhoun asked. “So far, we’ve only heard what this side (west of the Cascades) needs. Not what anyone else needs.
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