South Waterfront site may be ready for company's expansion

by: TRIBUNE PHOTO: CHRISTOPHER ONSTOTT - Nike could expand onto land near the Ross Island bridge near where Zidell has its barge-building business.A section of South Waterfront where Nike might expand in Portland is moving closer to being ready for such a development.

Business Oregon, the state’s economic development department, is expected to soon approve the expansion of the East Portland Enterprise Zone in South Waterfront. The City Council voted to expand the E-Zone, as they are commonly called, by 29.2 acres on Dec. 13. State approval is required for companies to qualify for property tax waivers intended to encourage development in new and expanded e-zones.

According to Portland Development Commission spokesman Shawn Uhlman, the city has already sent most of the required documentation to Business Oregon.

“We expect to receive the formal approval by the third week of January,” Uhlman says.

Nike has not yet said where it plans to expand in Oregon. Some sources say the decision could be announced in April. Nike has declined to provide details of its plans or announcement schedule, however.

“We don’t have a specific timeline to share,” says Nike spokeswoman Mary Remuzzi.

The company has committed to expand in Oregon, however. It signed such an agreement with Gov. John Kitzhaber after a special legislative session authorized it. The bill adopted by the Dec. 15 session allows the agreement to freeze Nike’s existing state tax structure for 30 years if the company invests at least $150 million to create 500 more jobs in Oregon within five years. Kitzhaber signed the agreement on Dec. 19.

Effective mechanism

Although Nike has not revealed its expansion plans, rumors were rife during the special session that the company was considering two sites. One is in the E-Zone expansion that spreads under the Ross Island Bridge. The other is on property adjacent or near to its World Headquarters in Washington County that is covered by an existing E-Zone in Beaverton.

Nike is thought to be considering constructing one or more office buildings to help accommodate its growing workforce. During the special session, company officials testified that the Oregon expansion could generate more than $2 billion in additional economic activity in the state by 2020.

The East County Enterprise Zone was originally created by the council and approved by the state to encourage development in a large area east of Cesar Chavez Boulevard. The council approved expanding it into South Waterfront the day Kitzhaber and Nike officials testified to a special joint legislative session that helped draft the bill. According to a Dec. 5 memo about the expansion to Mayor Sam Adams from PDC Deputy Director Keith Witcosky, E-Zones are “one of the state’s most effective mechanisms for business growth, expansion, retention and recruitment.” They provide property tax abatements for five years to firms making new capital investments that expand operations and increase employment, according to the PDC memo.

The expansion land includes the Zidell Marine barge building operation and open space. It is being marketed by ZRZ Realty.

According to Witcosky’s memo, “ZRZ Realty is currently master planning the future development of this property with a focus on attracting high-growth, quality-job creating companies. This E-Zone designation will provide an important resource for leveraging employment opportunities on this site and assisting ZRZ and the city in reaching goals for 10,000 jobs and 5,000 housing units for South Waterfront at full build out.”

Beaverton’s four E-Zones were approved by Business Oregon in July. One stretches south and east from Nike’s campus near Southwest Jenkins Road and Murray Boulevard. It wraps around some land owned by Nike and reaches toward areas where the company has already expanded into additional office space.

Nike could expand in both Portland and near Beaverton.

Investment costs

The agreement between Kitzhaber and Nike says the company’s expansion project began in January 2012. That does not mean Nike decided to expand in Oregon more than 11 months before the special session, however. Both Nike officials and Kitzhaber’s office indicated it means that’s when the company seriously began studying where to expand both inside and outside of the state. The January date was included so that any pre-development costs incurred before the decision is made can count towards the minimum $150 million investment.

“With the significant growth in our employment base, we are reaching the capacity of our existing facilities. In early 2012, this ongoing employment growth drove a need for expansion efforts. Ongoing infrastructure planning and investments are being and will be made to accommodate employment growth,” Remuzzi says.

The agreement also prohibits Nike from receiving more than $5 million in property tax breaks through the state’s Strategic Investment Program to help finance the expansion. Such a prohibition was included in the original bill but taken out at the request of Kitzhaber and a number of legislators, including state Sen. Mark Hass, a Raleigh Hills Democrat. Washington County has successfully used SIP-authorized property tax breaks to attract investments from such businesses as Intel and Genetech.

Washington County is also entitled to receive 50 percent of the state income taxes generated by the new jobs created with the help of the SIP-authorized property tax breaks. The Legislative Emergency Board authorized a $12.5 million payment from the state to the county shortly before the special session began.

State Sen. Ginny Burdick, D-Portland, believes the 50 percent share is too high, given the state’s budget shortfalls. She has promised legislation to reduce the amount during the 2013 legislative session. County officials believe the 50 percent share is fair, considering it does not repay the cost of infrastructure improvements made to help attract the large private investments.

The agreement authorized by the special session ensures that Nike will continue to be taxed under the single sales factor method for 30 years if it fulfills its obligation. That is a method of taxing multistate corporations such as Nike only on the income they generate in Oregon, not everywhere they do business. Nike officials say certainty on the tax structure was required before they would commit to expanding in Oregon.

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