Vancouver muffled on Nike talks
City staff can't say whether company was playing games over Oregon taxes
Saturday, January 19, 2013
Five months after Nike Inc. approached Vancouver about expanding in Clark County, city officials still can't tell anyone what they offered the athletic apparel goliath to try to land some tantalizing Nike jobs here.
That's the case, even though Nike took its Swoosh and went back home. Oregon state government gave Nike the special tax treatment it wanted, and now the Fortune 500 company is hunting for expansion sites in its home state.
Only a handful of economic development officials know what was on the table for a hush-hush deal dubbed "Project Impact." Even Vancouver City Council members are largely in the dark on details. The public doesn't know where Nike might have landed, how many jobs it would have created in Vancouver or what incentives the city and Washington state were willing to offer.
The Columbian has filed requests for public documents, under Washington's open records law, that may shed light on those and other details. A big question: Was Nike ever serious about Vancouver, or did it just use the city as a foil to frighten Oregon politicians into handing it a sweetheart tax deal?
The city says it's willing to outline its experience with the recruitment process that was used in dealings with the Nike representatives. But for now, a nondisclosure agreement between the city and a company working on Nike's behalf prevents the public from understanding what was discussed.
That document, which the city released to The Columbian under an initial public records request, shows that a Nike representative came to Vancouver last summer to talk about the possibility of expanding in Clark County. It's unclear when the city of Vancouver will be released from its confidentiality restrictions.
Such nondisclosure agreements aren't unusual.
The importance of understanding the city's playbook for dealing with a top-tier corporate prize like Nike isn't lost on Vancouver City Councilor Jeanne Stewart. Nike is "a great corporation" with good-paying jobs, she said, and its expansion plans represented a big opportunity for Vancouver and Clark County, which for many years has topped the metro region in unemployment.
"At the same time, (companies) always look in more than one location," Stewart said. "They negotiate privately with more than one city. What they're interested in is finding whomever will sweeten the pot the best."
Nike's name is nowhere to be found on the nondisclosure agreement, but other documents obtained by The Columbian confirm that "Project Impact" is all about the company whose products and brand can be seen all over playgrounds and sports arenas.
The city's July 30, 2012, nondisclosure agreement is with EMK LLC, a Delaware company, to discuss "Project Impact." It's signed by Lloyd Tyler, Vancouver's chief financial officer, who is listed on the document as acting city manager.
There's no signature, name, title or date from EMK.
The agreement insists on secrecy. If the city were to release confidential information, including properties the company was examining, it would be held "liable for direct, actual, indirect, consequential, special and all other damages, plus injunctive relief for such (a) breach," according to the nondisclosure agreement.
At the time, Vancouver city councilors had virtually no information about the potential Nike deal.
Councilor Jack Burkman said he "heard some water-cooler talk around a lot of discussions going on with a big company" but that was about it.
Burkman has no objection to the process. "There's a terrain where negotiations can start that doesn't involve the (city) council," Burkman said. "That's (a) staff function, not policy."
Of course, he added, the council weighs in when city funds, a long-term obligation or policy change is at stake. But the Nike issue never reached that level.
Councilor Stewart said at one point there was a briefing during which City Manager Eric Holmes indicated a Fortune 500 company was "looking at a significant property site" and that the city had an agreement to discuss the matter confidentially. But that was all.
By October, Vancouver city officials were gunning "fast and furious" for a piece of Nike, according to the minutes of the City Center Redevelopment Authority, eyeing the potential to secure 5,000 new jobs and a $500 million capital investment.
The city was pursuing Project Impact with help from others, including then-Gov. Chris Gregoire and the Vancouver-based Columbia River Economic Development Council. And the city was working with a site selection company: Newmark Grubb Knight Frank, a global commercial real estate firm that, as its website says, provides "a fully integrated platform of services to prominent multinational corporations and institutional investors."
By December, however, it was suddenly clear the city's efforts wouldn't pay off.
That's when Oregon Gov. John Kitzhaber called the state's Legislature into a rushed special session to give Nike the special tax assurances it said it needed to stay in Oregon.
In a Dec. 10 email obtained by The Columbian, Alisa Pyszka, economic development division manager for the city of Vancouver, indicated Vancouver was behind in the race for a Nike expansion.
Her email went to state and regional officials, including an economic policy advisor to Gregoire. "According to Newmark, the Vancouver site is effectively out of the running as we are behind the Oregon and Texas sites," Pyszka wrote.
The Oregon Legislature's Dec. 14 action gives Nike greater tax security as the company plans a multimillion-dollar expansion in the state. The legislature allowed Kitzhaber to enter into a contract with Nike to protect it from changes in the way the state calculates the global sportswear-maker's state income taxes for 30 years.
'Take it at face value'
In the aftermath of the competition for Nike's expansion, The Columbian sought to interview city and other officials about their experience, including what they offered the company and what they learned.
Initially, the city agreed to the post-mortem discussion, and scheduled it for Jan. 11 at City Hall.
On Jan. 9, the city canceled it. "Per update from the site selector, we are still technically under the (nondisclosure agreement)," Pyszka wrote in a Jan. 10 email to The Columbian, and other city and economic development officials.
A Columbian request for additional public records connected to the city's dealings with Nike is pending. The city says it will take until Feb. 1 to find and assemble the records, and to decide whether any of the information is exempt from Washington's open records law. The Columbian submitted a similar public records request to Washington government.
Nike isn't the first Oregon corporation to approach Vancouver for a potential site to expand or relocate.
There are two examples from 2010 alone: Portland-based Vestas Americas -- a subsidiary of a global wind-turbine manufacturer -- and Portland's Rentrak Corp., which creates data-tracking software for the entertainment industry.
Vestas Americas considered two Vancouver sites before accepting $2.25 million in government incentives to stay in Oregon.
Although it never spoke to Vancouver city or regional economic development officials, Rentrak said it conducted lease negotiations over a Columbia Tech Center site. What's more, the company made it publicly clear that it would have moved to Vancouver if it hadn't received political support and tax breaks worth more than $5 million from the Oregon governor and the Portland City Council.
Economic development officials cautioned against reading those or other similar cases as evidence that Vancouver gets played as a bargaining chip by Oregon companies.
Lisa Nisenfeld, president of the Vancouver-based Columbia River Economic Development Council, said companies from all over the U.S. make inquiries about sites in Oregon and Washington. And Oregon companies have relocated or expanded in Vancouver, Nisenfeld said, citing Eugene, Ore.-based Farwest Steel's expansion at the Port of Vancouver as just one example.
"Generally, any time a company from outside the area comes and makes an inquiry about a possible expansion or relocation project, we have to take it seriously and those projects sometimes come to fruition," she said. "We take it at face value, knowing that sometimes it's going to work and sometimes it's not."
'Game that gets played'
Even with city officials unable to talk about Nike, it's not difficult to imagine the strategy it may have deployed in lobbying the company.
In the case of Vestas Americas, for example, Vancouver Mayor Tim Leavitt and former City Manager Pat McDonnell sent letters to the company extolling the city's and Washington's attractions for the company's North American headquarters. Those attractions, they said, included Vancouver's absence of a business and occupation tax, and the city's affordable land, housing and business costs.
Washington's lack of personal or corporate income taxes, those letters said, "has proven supportive to a spectrum of companies."
But it's also important to understand that economic development is played differently in Washington and Oregon.
Bart Phillips, a former president of the Columbia River Economic Development Council, said the two states interpret their respective constitutions differently, with Washington effectively barring direct financial support for corporations and Oregon willing to open that door.
In Washington, it's possible for lawmakers to write an industry-specific bill that reduces, say, the sales tax on manufacturing equipment to support not just one company but potentially others, said Phillps, now vice president of economic development at Innovate Washington. However, he added, "we couldn't play the game of writing checks like Oregon."
Corporations consider a number of factors in choosing a site, experts say, including a state's tax structure and incentives, and development and infrastructure costs.
Paul Dennis, president and CEO of the Camas-Washougal Economic Development Association, said communities have to be careful about what they're willing to give away for what they'll get in return.
What's the point, Dennis said, in providing incentives to companies if those incentives "outstrip the return that the public agencies will get"?
In working with companies, Dennis said, he evaluates what the business is capable of doing immediately in the way of investment and jobs. If they say they'll be growing in five years, Dennis said, "that's more speculative."
In the case of Nike's flirtation with Vancouver, it's hard to tell how serious the company was about expanding here. Yet, experts say it's also difficult to ignore a company when it comes knocking on your door.
"In economic development, you just have to understand that that's probably part of the quote, unquote game that gets played," said Dennis, a former Camas mayor. "Any company is footloose."