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| Strategic Investment Program (SIP) |
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Overview
- Enacted by the 1993 Oregon Legislature
- Allowed the state to compete for large capital investment projects, such as semiconductor fabs.
- Program seeks to improve property tax treatment of capital-intensive industries, stimulating the economies of local communities with direct and associated spending.
- Limits at USD 100 million the amount of property taxed under an agreement.
- Taxed amount each year increases three percent.
- Over 15 years the total amount that can be taxed reaches USD 150 million.
- Law provides for payment by the applicant to the county of an annual community service fee (CSF) equal to 25 percent of the abated taxes, up to USD 2 million.
- Other payments by the applicant may be negotiated with the County.
Agreements in place
- 1994: Two agreements covering a new campus at Ronler Acres and the conversion of D1A in Aloha to Fab 15.
- 1999: An agreement covering upgrades at Ronler Acres and Aloha Campuses of up to USD 12.5 billion over the next 15 years.
- 2005: An agreement covering up tp $24.8 billion of investment in Intel Oregon fabs through 2024. Most terms of SIP 2005 will come into force when the entire $12.5 billion of investments under SIP 2005 are completed. The timing of the bridge from SIP’99 to SIP’05 is uncertain. The industry in which Intel competes is highly changeable. As a result, Intel has little certainty regarding investments beyond a relatively short time-horizon. At current rates of investment, Intel could begin drawing against the SIP’05 $24.8 billion around 2010.
Under SIP'05, Intel will continue to pay full freight on all its buildings, just as small businesses do. The only tax adjustment under SIP’05 relates to equipment inside the buildings. In that regard, SIP was designed to level the playing field with respect to capital intensive industries that spend a lot on equipment but don’t impose any more of a burden on public services than similar-sized companies. And even after the SIP adjustment, Intel will still be paying much more in property tax per employee as the average Washington County business.
SIP '99 payments
Based on the initial set of investment assumptions made at the time SIP '99 was approved, SIP '99 provides for the payment of USD 110.6 million over 15 years, including:
- USD 24 million in property taxes.
- USD 27.4 million in community service fees.
- USD 59.2 million in additional negotiated payments.
- Starting December 1, 2000, Intel is obligated to make guaranteed annual payments. The payments will total USD 28.63 million over the 15 year term of the agreement. The guaranteed annual payment is USD 2.04 million each year from 2001–2005 and USD 1.84 million each year from 2006–2015.
Tax savings if development accelerates
Intel is charged full property tax for new land/buildings. The original SIP '99 model forecasted that the cost of property tax on new land/buildings would be offset by the progress payments (percentage of the USD 12.5B spent), but if Intel speeds up development the progress payment amounts will be too low to offset the total cost of the new buildings/land.
SIP '99 and Intel Oregon hiring
SIP'99 initially provided that if Intel Oregon's manufacturing employment exceeded 5,000, Intel would pay the county USD 1,000 for each additional manufacturing employee over 5,000. Intel Oregon manufacturing employment was approximately 3,400 when SIP '99 was approved. SIP '99 also provided that the county could waive the fee at its sole discretion "...if it determines that, due to economic conditions or other factors, it is in the public interest to do so." In 2003, the Washington County Commission voted unanimously to permanently waive the fee. Intel and Washington County were in agreement that we should work together to hold down costs, encourage efficiencies, and preserve and grow opportunities for good jobs.
Future SIP applications
SIP is an important state statute, which allows capital-intensive companies such as Intel to pay property taxes at an equitable level. Without this state law, further manufacturing investments by Intel Oregon would be unlikely. Even with the property tax abatement provided under SIP, Intel still pays more property taxes in Oregon than the next five highest paying companies combined.
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