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District, county officials push back on report, arguing schools benefit from presence of Intel, other tech companies.

The Hillsboro School District lost nearly $97 million in the fiscal year 2017 to corporate tax breaks, according to a recent study by Good Jobs First, a left-leaning Washington, D.C., think tank.STAFF PHOTO: OLIVIA SINGER - An Intel volunteer visits an elementary school classroom in Hillsboro for a literacy program earlier this school year. Local school districts like Hillsboro and Forest Grove frequently partner with employees of Intel, Washington County's largest employer.

Of 5,600 school districts examined across the country, Hillsboro ranked number one for individual school districts with the largest disclosed abatement-revenue losses for that year.

Between the 86 school districts examined across Oregon, a total of $117.9 million was disclosed in subsidy losses, according to the study. Hillsboro accounts for the majority of that.

But the Hillsboro School District and Washington County officials are disputing much of the report from Good Jobs First, stating that there were fundamental details left out.

"School funding in Oregon is largely determined at the state level — not by local tax collections," district spokeswoman Beth Graser said.

Philip Bransford, Washington County's communications officer, reiterated Graser's point.

"Property tax abatement has an impact on all local property taxing districts, including school districts, that serve the area where a Strategic Investment Program (SIP) agreement is in effect," Bransford said. "Unfortunately, the Good Jobs First report fails to note that, in Oregon, most of the revenue for our K-12 school system is derived from income taxes, not property taxes, and the state school funding formula addresses how these revenues are distributed throughout Oregon."

He added, "Creating and retaining high-quality jobs is therefore critical to the livelihood of our schools and our local economy over all.

In a city that has been nicknamed the "Silicon Forest," the great number of tech giants headquartered in Hillsboro, such as Intel and Genentech, have proved strong for its local economy, driving jobs to the area at a faster rate than ever before. Between 1990 and 2000, the city's population grew by nearly 90 percent, exploding from a town of not quite 38,000 people to more than 70,000. Over the next decade, city planners expect Hillsboro to see yet another population boom. South Hillsboro, the state's largest housing development underway south of Tualatin Valley Highway, will add 8,000 homes and more than 20,000 new residents to the city over the next decade. But the city's gain may serve as the school district's loss, the report claims.

According to the Hillsboro School District's comprehensive financial report for the fiscal 2017 year, one of the tax abatement programs impacting the district's levied property taxes is the county's Strategic Investment Program, which was adopted by the Oregon Legislature in 1993.

According to the county, the program allows businesses and local governments to negotiate the amount they will pay in property taxes if they "are willing to invest at least $100 million at an urban site or at least $25 million at a rural location in Oregon."

The purpose is to attract and keep companies that provide good jobs in Oregon, particularly capital-intensive, high-technology employers, the county stated.

The most recent agreement with Intel, reached in 2014, provides a framework for potential investment in Oregon of up to $100 billion over a 30-year period.

In 2006, the city and county reached a similar agreement with Genentech, Inc. for a maximum investment of $250 million beginning in 2010 and extending for 15 years.

Those initial amounts are taxed in full, Bransford said, and then Washington County negotiates fees on top of those required under the SIP law in order to generate what the full property taxes would have been on just the land and buildings involved.

"This means the abatement was really meant to focus on the expensive equipment inside those buildings, often billions of dollars of equipment that depreciate rapidly within just a handful of years," Bransford said.

Businesses that have entered into SIP agreements in Washington County have informed the county that without such property tax abatement, they would not otherwise invest the billions of dollars they do into the area, Bransford said.

"This policy goal of attracting and retaining capital-intensive employers who produce high-wage jobs is exactly what the Oregon Legislature had in mind when it authorized the Strategic Investment Program in 1993," he added. "Without such property tax abatement, these employers would have simply gone elsewhere resulting in likely lower property values along with fewer jobs and less income tax generation."

Because they have entered the SIP agreements, the companies have chosen to invest in the local economy and have generated payments at rates proportionate to those made by every other business in Washington County, Bransford said.

"Intel and Genentech have both entered into Strategic Investment Program agreements with the City of Hillsboro in which they have agreed to invest and expand their operations in exchange for tax incentives and deferrals," Graser added. "Those investments have allowed them to bring hundreds of additional well-paid employees to our area who pay income and property taxes, which are the main sources of funds in Oregon (we don't have a sales tax). So the health and growth of those companies does benefit schools."

Scott Klinger with Good Jobs First said regardless of how other taxes were collected, the report still accurately reflects money that would otherwise go to the school district without such tax abatement.

"These numbers reflect how much tax would have been collected and forwarded to the district had the abatements to Intel and others not been made," Klinger said. "That other taxes were collected by other bodies of government, doesn't change the fact that the school district has had to forego almost $97 million to which it otherwise was entitled. ... We believe these disclosures by the school district are important for parents and citizens to know about and discuss in the community and with their elected officials."

The tax abatement numbers have only been made public recently — according to the report by Good Jobs First — after a new element was added to the Governmental Accounting Standards Board in 2015, the organization that works to improve standards for accounting and financial reporting for state and local government across the country, requiring state and local government bodies, including school districts, to disclose the costs of corporate tax abatements annually.

While not every every district, nor state, disclosed its abatement-revenue losses last year, of those who did, Hillsboro, and Oregon, found themselves pretty high on the list.

Schools in 28 states across the country lost at least $1.8 billion over the last fiscal year as a result of corporate tax subsidies, the report claims.

"If abatements were curtailed and the resulting tax revenues were reinvested to hire additional teachers (at each state's average teacher salary rate), the ten most-affected states could hire a total of 27,798 more teachers," Good Jobs First stated. "South Carolina alone could hire more than 6,300 teachers."

In Oregon, 1,905 more teachers could be hired using the known subsidy dollars, the report stated.

Even with the tax abatement programs, companies like Intel and Genentech are some of the highest property tax players in the county, Bransford said.

"Intel is the highest property tax payer in Washington County and Genentech is the eighth highest in the current tax year," he said. "In addition, the jobs and wages associated with their investment, along with the many support companies that rely on their presence in Oregon, produce a significant share of income tax revenue flowing to the state government for distribution to K-12 education and other state-funded services."

By Olivia Singer
Reporter, Forest Grove News-Times and Hillsboro Tribune
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Follow Olivia at @oliviasingerr
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