LET'S MAKE A DEAL
BY BOB WA RREN
Baloney
ECONOMIC DEVELOPMENT SMOKE AND MIRRORS
A
recent audit of Business Oregon, the
state’s economic development depart-
ment, will likely generate more local
debate about economic development
incentives. I spent about 15 years
working for the state economic development depart-
ment and, after learning about the state audit, my
first reaction was: It’s about time.
While I know from experience that incentives are
an important business recruitment tool, in my time
at Business Oregon I saw a lot of abuse of incentives
and very little accountability. The audit was right
on the mark. Let’s hope that it does some good. Ac-
countability for incentives has been way overdue at
Business Oregon.
A Saturday morning at Eugene’s Full City Cof-
fee is a bustling scene with multiple coffee groups
engaged in conversation around current happenings
in our town. On this particular Saturday, a lot of the
buzz was about the decision by Broadcom to sell the
former Hynix site in west Eugene, and about the $21
million economic development incentive package
Broadcom had received.
I heard mixed feelings about the Broadcom deal.
Some were disappointed the deal fell through and
that jobs won’t be created. Some were opposed to
offering up the $21 million in property tax abate-
ments and incentives in general. Others expressed
confusion about the $21 million, wondering if it
would stay with the site for another buyer.
I was amazed to learn the tax incentive question
had come up at a recent City Club of Eugene meet-
ing and at least one city councilor was unable to an-
swer it. A councilor who recently voted on the pro-
posal to expand the enterprise zone tax abatements
from three years to five, worth an additional $7 mil-
lion, was apparently clueless about how the program
actually works. I was not surprised.
The short answer is, of course, no, it won't stay
with the site. The $21 million number is purely hypo-
thetical, based on a guesstimate of how much the val-
ue of the property would increase assuming a Broad-
com investment in the $300-$400 million range.
With the announcement Broadcom was putting
the property on the market, the enterprise zone ben-
efits would be zero. Broadcom will continue to pay
the half million dollars in property taxes each year
until it finds another buyer. But that will not be easy.
A Register-Guard editorial on the subject said
that “finding a buyer will be onerous, perhaps frus-
6
January 5, 2017 • eugeneweekly.com
trating, but local officials are gearing up for the job.”
That of course begs the question, how do these
local economic development officials “gear up for
the job?”
The short answer is they don’t. Saying they do is
just economic development smoke and mirrors.
There is really nothing the local players can do to
find another buyer. Saying they can furthers the myth
that a community can actively recruit companies to
relocate here. The idea that through some magical
process a community like ours can go out and find a
company that may be considering moving or expand-
ing and then convince them to come here is nonsense.
Business recruitment for large projects like Broad-
com is done by the state, not the local community.
The state actively promotes Oregon as a location for
business expansion.
Locally, the term “business recruitment” is just a
name for any new business that moves into our com-
munity. No one actually went out, found the prospect
and recruited them to come here. It’s just not econom-
ically feasible for a community to do that. It’s barely
feasible at the state level.
Business recruitment is about being ready for
that time when a company comes looking. After a
business is recruited by the state, the state sends out
a list of criteria the firm needs for their facility. The
firm itself is often anonymous at this stage. If it’s
good, then the local economic development team re-
sponds quickly and accurately to the state request.
This is the first opportunity to “sell” the community.
There is usually more than one community in-
volved in the search for an expansion location, so
our local economic development team has its second
opportunity to “sell” our community. Every commu-
nity puts on its best face and touts livability, good
schools, affordable housing, skilled workforce, reli-
able infrastructure, etc.
Often, these recruitment opportunities are man-
aged by site selection consulting firms. Their primary
job is to reduce the number of site options to a man-
ageable number, maybe two or three. So the initial
challenge for a community is to just stay on the list.
This is where incentives come into play. Hardly
ever will a community stay on the list without some
significant local incentives, and enterprise zones are
often a requirement. Other incentives like workforce
training assistance and local cash also help to stay
on the list.
While it is true that companies do not locate just
for the incentives, they often will not come without
them. And, when it comes down to two or three sites
in the running, incentives can be the deciding factor.
All things being equal, a company will likely
choose the community that offers the best incentives
package, or at least a very good one. One reason is,
of course, the money. But another reason is that it is
a way for the community to say we really do want
the company to locate here.
That’s how “business recruitment” usually
works. When local promoters talk about the need to
go out there and “recruit” businesses to move to our
community, it’s just a bunch of baloney.
It’s totally unrealistic to think that our communi-
ty is going to market itself in any meaningful way to
find firms looking to move, and then convince them
to locate here. That kind of an effort would require
a marketing budget that would far exceed any com-
munity’s ability to fund it, or justify it with results.
What does make sense is for our community to pre-
pare for when opportunity knocks.
The best recruitment strategy is to be a commu-
nity that is truly a great place to live. But you still
need incentives. That is, if we actually do want busi-
nesses to come.
So, are we open for business to anything, to any-
one? Are there companies or even industries we do
not want in our community, or others that we would
favor? The existing economic development recruit-
ment system does not offer that kind of discretion.
Bob Warren retired in 2012 as the regional business development of-
ficer for Business Oregon for Lane, Lincoln, Linn and Benton Counties.
Prior to that, he was senior policy advisor on forest policy for Gov.
Barbara Roberts and director of the governor’s Forest Planning Team
and district aid and natural resource advisor for Congressman Peter
DeFazio.