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Oregon says it can’t tell if IBM met job requirements for subsidy

By Mike Rogoway, The Oregonian
Published: February 7, 2016, 4:12pm

PORTLAND — Oregon gave IBM $100,000. IBM promised more than 1,500 jobs.

After a string of layoffs, though, it’s not clear IBM came through on a deal it struck with state and local governments back in 2010, when Oregon unemployment was 10.6 percent. And following more than a year of inquiries, Oregon officials say they still can’t figure out how many people work for the company — or if they can make IBM pay the money back, regardless.

“That’s the process that they’re going through now, is to figure out what the next move is,” said Ryan Frank, spokesman for Business Oregon, the economic development department that oversees the financial incentives.

The amount in question is relatively small, but the protracted uncertainty illustrates issues at play when governments tie financial incentives to employment figures and the complexities around economic development initiatives. IBM and other businesses who receive such tax deals appear to have little incentive to demonstrate they are complying with the job requirements.

IBM’s deal covered a mortgage-servicing subsidiary far from the core of its technology-services business. IBM acquired Wilshire Credit Corp., a mortgage-services business, nearly six years ago and later changed the division’s name to Seterus.

Oregon, mired in the wreckage of the Great Recession, said it beat out North Carolina and Oklahoma for the jobs, lured with $350,000 in incentives to assist IBM with workforce training. That included a $100,000 forgivable loan program, tied to promises IBM would hire 600 people and retain 968 others.

If IBM met the hiring targets, the loan would become an outright grant. It’s a setup Oregon commonly uses.

At least two rounds of layoffs followed, however, beginning in January 2014, amid a broad corporate restructuring. A second round of layoffs followed a year later. IBM’s deal required it to retain at least 1,568 employees for two years, ending no later than June 2014.

It’s not clear IBM met those benchmarks. Frank said Oregon typically verifies employment data through “business identification numbers,” but employment in IBM’s Seterus group is indecipherable among a tangle of subsidiaries. He said inquiries to the company have not been fruitful and said it may soon “begin a more formal process that could include a demand for partial loan repayment.”

An IBM spokesman referred questions about the Oregon operations and its subsidy back to the state, and declined even to say whether his company still owns Seterus. There is no mention of Seterus in IBM’s recent regulatory filings, and the Seterus website makes no reference to IBM.

Oregon grants tax breaks or subsidies to a wide variety of businesses, from semiconductor to film productions. Many deals include no job requirements at all — Intel, for example, made no hiring commitments in 2014 when it won a 30-year package of tax exemptions worth $2 billion or more to the company. Oregon is counting on Intel maintaining a large corporate presence in the state as it continues to bulk up on its Hillsboro chip factories.

Oregon offers similar property tax exemptions to data centers operating in Hillsboro and rural parts of the state, and those deals are tied to hiring figures — though job thresholds are low, typically requiring no more than a few dozen employees.

Even so, it can be hard to discern whether a company is meeting those requirements. The Dalles Chronicle fought for two years to get Google to confirm it had met hiring requirements for its data center there before finally winning a redacted tally of employment, information the city concluded was “a little lacking but perhaps passable.”

In December, Oracle announced plans to build a large new campus in Austin, Texas, and to move unspecified operations there from Oregon. This came after Oregon provided a $1.4 million forgivable loan to Oracle in 2013 in exchange for a promise to add 130 manufacturing jobs in Hillsboro and retain 300 more jobs that had been otherwise headed to Mexico.

Oracle hasn’t said which jobs are leaving Oregon, though the Austin American-Statesman reported they are primarily “ sales-oriented” — which would seem to exclude the production-oriented work in Hillsboro governed by the incentives. But officials at Business Oregon say they have been unable to learn anything about Oracle’s plans from the company.

Asked directly about which jobs are leaving Oregon, and whether Oracle is complying with terms of its forgivable loan, company spokeswoman Deborah Hellinger had a four-word response: “I have no idea.”

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