Records reveal Vancouver, state's efforts to court Nike
Gregoire, CREDC, port were part of campaign to entice sportswear giant
Thursday, February 14, 2013
The city of Vancouver aggressively sought an expansion of Nike Inc. in Clark County, offering at least $8.1 million for the project and pitching the company on expanding at the former Hewlett-Packard site now owned by SEH America, public records obtained by The Columbian show.
In addition to numerous local government, business and economic development leaders, then-Washington Gov. Chris Gregoire was personally involved in the effort, authorizing hundreds of thousands of dollars from her strategic reserve fund and extolling the SEH property in east Vancouver as a "fully functional corporate campus ready for immediate occupancy and further future development."
The city's all-out effort to win a piece of the global athletic apparel goliath, based near Beaverton, Ore., involved Gregoire, SEH, Clark County government, the Columbia River Economic Development Council, Greater Portland Inc. and other local business, utility and workforce development officials.
At stake was the potential to rope in thousands of new jobs and hundreds of millions of dollars in private capital investment.
In the end, Nike took its Swoosh and went back home to settle on a still-undisclosed expansion site after Oregon Gov. John Kitzhaber, in an extraordinary move in late December, rushed the Oregon Legislature into a special session to grant Nike a sweetheart tax deal.
In a phone interview Thursday, Vancouver City Manager Eric Holmes said the city's failed effort — which he estimated consumed more than 100 hours of city staff time — should not be considered fruitless.
"I'm proud of what this community has to offer as far as being a great place for investment," he said. "I'm very pleased we were a serious contender. When we look at the potential investment that could have happened here, not only do we have a stronger business case, but we're even more prepared the next time an opportunity comes up."
Despite limitations on what Washington state may offer compared to other states — including the inability to extend public credit to corporations — the city was "able to make a compelling business case for investment here," Holmes said.
Holmes makes case in letter
The city, which had remained mum about the project after losing out to Oregon, on Thursday released hundreds of pages of new documents to The Columbian regarding "Project Impact," the code name for the planned Nike expansion. The newspaper had requested the records under the state's public disclosure law.
The city's months-long push to grab a piece of Nike intensified on Oct. 24, when Holmes wrote a letter to Robert Hess, executive managing director of consulting for Newmark Grubb Knight Frank. The Rosemont, Ill.-based global commercial real estate firm represented Nike in the company's pursuit of an expansion site.
Holmes' letter responds to numerous concerns raised by Newmark on behalf of Nike (which is referred in the letter only as "the Client").
One of them was Nike's hesitation about leasing from SEH and "making a major investment in their buildings" or purchasing the site "without a clear exit strategy." The site has 735,000 gross square feet of building space and 114 acres of open land.
In response, Holmes wrote that the city and its team have explored all options but have "not identified a viable alternative to direct acquisition" from SEH. Holmes went on: "As you are aware, (then-Gov. Gregoire) has made this project a top priority and is willing to meet with the Client and help facilitate the property transaction if there is a way she can assist."
Nike also was concerned about "employee perception and (human resource) challenges with locating in Vancouver."
Holmes replied: "We understand the Client's concern regarding perceptions of Vancouver in contrast to the current company headquarter site. However, the City of Vancouver, and specifically the SEH site, is an unparalleled opportunity to provide for immediate expansion needs in a region with existing exceptional athletic & outdoor workforce talent and the ability to continue to attract similarly skilled talent."
Holmes also outlined several ways in which the city, through various programs and partners, would financially assist Nike. They included:
• If the company would work to acquire the SEH site, the city of Vancouver and Clark County government — with approval from their respective elected officials — would seek a $6.1 million loan from the U.S. Department of Housing and Urban Development. That loan would go directly to private capital investment.
• The city of Vancouver would submit an application for a state infrastructure grant, a minimum of $1 million, to boost the existing bicycle transportation system at the SEH site.
• Then-Gov. Gregoire would allocate $500,000 of her strategic reserve fund to Nike, for relocation and workforce development costs, if the company would work to acquire the SEH site.
From Holmes' letter, it's clear Newmark, on behalf of Nike, was pressing for concessions and for changes to what the city and its partners were offering.
For example, Nike wanted a full exemption from the city's business licensing fees. Holmes wrote that the city would grant the exemption by proposing the City Council change the municipal code to exempt Nike from $200,000 in licensing and surcharge fees.
Nike, through Newmark, also asked the city whether it would be willing to develop a multiyear program involving the relocation of up to "1,000 high skilled employees." Holmes responded the city would work to tailor such a program.
Nike also wanted to know under what circumstances the city would consider "special legislation to incentivize the project?"
Holmes responded that the "City helped successfully secure for SEH, as part of a consortium of users, a (business and occupation) tax exemption at the State, as well as promoted a free trade provision at the federal level."
Early efforts get under way
But even before Holmes sent his October letter, a full-court press was on starting when a Nike representative approached the city in July. Before long, public officials had signed a nondisclosure agreement for ongoing discussions.
On Aug. 8, Gregoire sent a letter to Hess, the Newmark representative, saying the state is a leader in producing Fortune 500 companies and that Nike would "benefit from our investment in the state's economy and overall business climate."
Gregoire wrote that the state's "Office of Regulatory Assistance is also available to assist with permitting as needed."
The Columbia River Economic Development Council — Clark County's longtime, veteran nonprofit jobs promoter and business recruiter — also made the case for a Nike expansion in Clark County. Documents show the CREDC offered a litany of reasons to locate in the county, and spelled out additional available financing and cost-reduction measures. They included:
• No corporate or individual income tax.
• No local business and occupation tax.
• A streamlined permitting process.
• Site improvement incentives through Clark Public Utilities.
• Grants and tax-exempt, low-interest loans.
Indeed, the CREDC even suggested that 34th Avenue, the main access to the SEH site, could be given a new name "to support company brand and image."
Indeed, the CREDC documents indicate nearly every major local government agency was involved in the hunt for a piece of Nike.
At one point in making its case, the CREDC wrote that the "Port of Vancouver can offer up to $10 million in tax-exempt, low-interest financing for tenant improvements and infrastructure updates on the property, as long as some form of manufacturing is performed on-site, such as prototypes."
And the CREDC outlined numerous planned infrastructure improvements, and potential financial assistance in making road and utility upgrades.
Among numerous items it listed to entice Nike to expand in Clark County, the CREDC also noted that, as part of the Columbia River Crossing Interstate 5 Bridge project, "Portland's 52-mile MAX light rail network will be extended to downtown Vancouver. The extension will link Vancouver with the Portland International Airport, downtown Portland, Clackamas, Gresham, Hillsboro, and Milwaukie."
Ultimately, however, Nike got what it wanted from Oregon.
Kitzhaber and Nike President Mark Parker signed a 30-year agreement, which guarantees the company will continue to pay corporate taxes based on its sales within Oregon. The agreement also commits Nike to completing a $150 million expansion in Oregon by the end of 2016 and hiring 500 new workers.
Before Thursday's release of records to The Columbian, the city of Vancouver and other area leaders had stayed mum about the details of their pursuit of a Nike expansion.
Holmes said he has to remain cautious in his comments about the project, given the fact that he's still under a nondisclosure agreement.
The city takes economic development and the recruitment of companies seriously, Holmes said, including its contractual obligations. Businesses have to have confidence "in us that we can have an open conversation under the terms, and they can rely on it," Holmes said.
Asked when he would be freed from the nondisclosure agreement, Holmes said: "I don't know."
The city used exemptions under state open records law to censor portions of the documents it released to The Columbian. The censored portions include financial and commercial information provided to the city by Newmark.