PORTLAND — When Oregon’s Washington County and Hillsboro offered Intel three decades of property-tax breaks, they hoped to secure up to $100 billion in investment by the company, as well as the chipmaker’s role at the heart of Oregon’s economy.
The agreement announced Monday was widely anticipated, as Intel’s torrid expansion in Washington County has the company bumping up against the ceiling of its previous package of tax breaks years earlier than expected. Even so, its scale is astonishing.
County officials say they have not estimated how much Intel will save in the deal, but based on the value of prior agreements the total is probably in the neighborhood of $2 billion.
The deal won’t create many jobs, at least not directly: Intel says most of the investment exempted by the deal will be manufacturing equipment.
Instead, city, state and county officials say, the pact will help retain Oregon’s biggest economic engine for many years and to project a business-friendly image to other companies that might be contemplating outposts here.
“This is a big, big deal for the state,” said Sean Robbins, director of Business Oregon. “It also sends, I think, a signal about the type of economy that Oregon is able to facilitate.”
The new breaks are modeled on Intel’s current deal, negotiated in 2005: It requires the company to pay “full freight” property tax on its land and buildings, plus about $5 million a year in other payments. It doesn’t oblige Intel to invest anything, but the company gets tax breaks only on equipment it actually buys.
The deal goes before Washington County commissioners and the Hillsboro City Council at a joint meeting Aug. 26.
The length and scale of the deal are “outrageous,” said Jody Wiser of Tax Fairness Oregon, which scrutinizes corporate tax breaks. The new agreement distorts the original intent of the Strategic Investment Program, Wiser said.
“They could go for 30 years and never have to face a change in property taxes,” she said. “Corporations should pay their fair share.”
Intel’s economic impact in Oregon is unparalleled. The company employs 17,500 in the state and has a monster payroll of $2.8 billion, including the benefits it pays.
Though its headquarters are in Silicon Valley, Intel’s Washington County operations are its largest. The company credits its Oregon footprint to the SIP, property tax breaks the state authorized in 1993 to attract manufacturers like Intel.
The company says it has invested $25 billion in Oregon since coming to the state in 1974. This would be Intel’s fifth deal under the SIP, which saved it $123 million last year alone. For context, Intel reported $9.6 billion in profits in 2013.
Intel’s current SIP had been due to run as long as 15 years, but the company’s spending accelerated in 2010 as it began building a multibillion-dollar research factory called D1X.
The first phase of D1X is entering production; a second phase is due to begin manufacturing microprocessors in two or three years. And Intel has another mammoth investment on the horizon, retooling to work with larger, 450-millimeter silicon wafers.