B O ON DO GG L E
HOW CAN WE MOVE OREGON’S JOBS STRATEGY BEYOND CORPORATE WELFARE? by Alan Pittman
B
esides Sony, the local economic devel-
opment landscape is littered with fail-
ures:
• Hynix received more than $60 million in
subsidies and tax breaks but recently laid off its
chip plant workers for six months and continues
to teeter on bankruptcy.
• HMT laid off 400 workers at its Eugene
hard drive plant after receiving $2 million in tax
breaks.
• Eugene lured Symantec downtown with
$1 million in subsidies and built the corporation
a $13 million parking garage. But Symantec
left Eugene for more tax breaks in Springfield.
• Local officials launched the Riverfront
Research Park in 1994 with promises of 3,000
high paying jobs. But today, taxpayers have few
if any jobs to show for at least $13 million in
subsidies.
• Over the past three decades, Eugene has
spent tens of millions of dollars on subsidized
parking garages and infrastructure for down-
town businesses in failed efforts to revitalize the
city core.
Calls for jobs, jobs, jobs have intensified
with the current economic slump. Given past
failures, what should state and local govern-
ment do? New Gov. Ted Kulongoski and indus-
try and business recruiters have called for even
more of the same old tax break and deregula-
tion strategies. But there’s a growing chorus of
critics that say we should learn from our past
mistakes and employ a new economic develop-
ment strategy focused more on the public good
than corporate profits.
BROKEN RECORD
DETAIL OF A MURAL BY CARL MORRIS.
MORRIS PAINTED THESE MURALS IN 1943 IN THE
EUGENE POST OFFICE ON WILLAMETTE STREET AS
PART OF A DEPRESSION-ERA PROJECT TO EMPLOY
ARTISTS TO ADORN NEW BUILDINGS BUILT BY THE
NEW DEAL JOBS PROGRAM.
hen Sony came to Springfield in 1994, state and local
governments lavished more than $12 million of tax
breaks and subsidies on the corporation.
“Oregon couldn’t be more proud or be more excited than to
welcome Sony,” then Gov. Barbara Roberts gushed.
But nine years later, Oregon isn’t so proud. The high tech
industry the state paid untold hundreds of millions of dollars
to recruit is in the dumps. Sony and many other companies
have shut down, scaled back or moved away for cheaper
labor. With thousands of high tech jobs lost, Oregon now leads
the nation in unemployment and government red ink.
“We became the cartoon poster child for a failed state,” Tim
Nesbitt, director of the Oregon AFL-CIO, told the Portland City
Club last month.
W
14 MAY 8, 2003
Kulongoski has declared aggressively
recruiting new industry with tax breaks is his
“highest priority.” Even before he took office,
he left for Silicon Valley to schmooze corporate
CEOs. Last month the governor was at Intel
wearing a clean room “bunny suit.”
Kulongoski’s newly appointed point man on
economic development, Marty Brantley, says
the state hasn’t given away money fast enough
to lure corporations. “Part of the reason our
unemployment rate is so high is we have not had
the tools,” says the director of the Oregon
Economic and Community Development
Department. “We are in a very competitive envi-
ronment and without some of these incentives
for people to come, they won’t come.”
Brantley’s agency is backing legislation to
expand the state’s strategic investment and
enterprise zone programs to give more proper-
ty tax breaks to corporations. The two programs
have already cost state and local government
hundreds of millions of dollars over the past
decade in forgone taxes with the tab increasing
by about $80 million a year.
Kulongoski has signed an executive order to
create an “Office of Regulatory Streamlining”
to cut state regulations that stand in the way of
business. Another executive order aims to
expand city urban growth boundaries (UGBs)
to create more “shovel ready” industrial sites.
The sprawl prospect has local land specula-
tors drooling and strong backing from Jack
Roberts, the new head of business recruiting
for the Eugene/Springfield Metropolitan
Partnership.
“The biggest problem we have right now is
a shortage of good industrial lands,” says
Roberts. “We have to talk about expanding the
urban growth boundary.”
Roberts also sees no mistakes in past give-
aways to Sony, Hynix and others and wants to
continue the hand-outs to corporations. The
incentives to lure the companies were “worth-
while,” he says. “We need to get in the game.”
The Eugene City Council recently voted to
give Hynix $2 million more in tax breaks, even
though the corporation was cutting and not
adding jobs. The council also has moved to
triple the size of the city’s urban renewal district
downtown and keep the Riverfront Research
Park district going another 20 years. Several
councilors recently used an unscientific survey
of some local businesses’ anti-government atti-
tudes to call for more deregulation and subsi-
dies.
BROKEN BREAKS
“Jack Roberts doesn’t have a clue,” says Ed
Whitelaw, a UO professor and one of the
Northwest’s leading economists. Study after
study has shown that corporate incentives do
little to improve local economies, he says. “I
can give you chapter and verse.”
Sony was a “classic mistake,” Whitelaw
says. “We’ve know [that incentives don’t work]
for decades, yet people keep getting suckered
into it,” he says. “It’s a chronic persistent dis-
ease that we’ve contracted here. It’s just mind-
less.”
A long list of studies has shown corporate
incentives don’t create jobs, but rather pay
companies for decisions they would have made
anyway. Here’s a sampling:
• In 1998, two-time Pulitzer-Prize winning
reporters Donald Barlett and James Steele
reported on tax incentive “corporate welfare” in
a four-part Time magazine series. “It has turned
politicians into bribery specialists, and smart
business people into con artists. And most sur-
prisingly of all, it has rarely created any new
jobs.”
• A 2000 study commissioned by Oregon’s
largest business lobby, Associated Oregon
Industries, shows tax breaks don’t work. Tax
breaks aren’t a big factor in location decisions
by corporate headquarters, the study found. The
corporations tend to choose states with large
populations and big economies. California and
New York have high taxes but do the best at lur-
ing corporate headquarters.
• Each new job recruited to the state adds to
the population by about 2.3 people and is there-
fore unlikely to result in reduced unemploy-
ment, according to studies by Oregon
Employment Department economist Art Ayre.
• The Oregon economic development
department itself conducted a study in 1993 that
concluded “analysis of tax incentive programs
finds little evidence that they are effective in
promoting economic development.” The
research indicated that labor costs, transporta-
tion, materials, quality of city services and other
considerations outweigh tax incentives in
deciding where a corporation locates.
With so many studies questioning tax
breaks, Eugene City Councilor Bonny Bettman
says any new breaks should closely weigh costs