SIX - Heppner Gazette-Times, Heppner, Oregon Wednesday, April 5, 2023
County commissioners gets refresher on SIP, EZ agreements
Continued from PAGE ONE
in the project is over a bil-
lion dollars.
The community service
fee (CSF) is the second
statutory component of an
SIP. The CSF is equal to an
amount that is 25 percent of
the exempt taxes but not to
exceed $2.5 million.
“Once the project is
up and running, they grant
an exemption, I make a
calculation to see what the
exempt taxes are,” Gorman
explained, adding that on a
billion-dollar investment,
the taxes would be roughly
$13 million, and 25 percent
of that would be about $3.2
million. “But we can’t ex-
ceed the two and a half, so
it’s got a ceiling at two and
a half million.”
The CSF is distributed
by the county according to
a schedule that is voted on
by the affected tax districts,
minus the school districts.
“It’s not all of the tax-
ing districts in the county,”
Gorman added. “It’s just
the districts that serve the
property where the SIP is
being proposed.
Seventy-five percent
of the affected tax districts
must be present to vote, and
the decision must be ap-
proved by the Oregon Busi-
ness Development Com-
mission. If for some reason
the districts can’t agree on a
CSF distribution schedule,
then the Oregon Business
Development Commission
will come up with one.
“I know that’s never
happened in Morrow Coun-
ty,” said Gorman. “I don’t
know if that’s happened
elsewhere in the state or
not.”
The third component
of the SIP is the exempt
portion, or whatever new
value is left after the taxable
portion is established. This
is the portion that Morrow
County has historically
used to negotiate any addi-
tional payments. There are
no statutes regarding the
distribution of additional
negotiated payments. Gor-
man said Morrow County
has historically put those
payments in the county’s
general fund or pushed
them to public works for
road improvements.
There is also a percent-
age of income tax that gets
withheld and distributed
back to the county, though
that amount can’t exceed
$16 million in any giv-
en year. That money gets
distributed to the affected
taxing districts in the same
manner as the CSF.
If any of the statutory
or contractual requirements
are not met by the business
firm during the exemption
period, then the property
will be disqualified from
the exemption and be made
taxable until those require-
ments are met, or the ex-
emption period expires. For
instance, if they don’t make
their community service fee
payment, that disqualifies
them from exemption for
the next tax year.
An SIP exemption be-
gins the first tax year after
the end of the calendar
year the facility becomes
operational. Facilities are
generally taxed normally
during construction, but any
large business construction
project can apply for a
construction tax exemption,
except for utility properties
like the Portland General
Electric Carty gas co-gen-
eration plant. Solar, wind
and fiber properties are also
considered utilities, as are
trains and barges.
Let’s make it EZ
Enterprise zones are
much more regulated, with
about 10 times as many
statutes and administrative
rules governing them as
there are for SIP agree-
ments. Enterprise zone
exemptions come in two
types—a standard EZ with
a three- to five-year ex-
emption and a long-term
rural exemption of up to
15 years.
Cities, counties and
ports can all create enter-
prise zones, alone or in
conjunction. An EZ can en-
compass both incorporated
and unincorporated areas,
as long as the governing
entities agree to it—that is,
it can be partly within city
limits and partly without, or
partly within port territory.
Counties may also have
more than one enterprise
zone, and Gorman said
some counties do.
“Right now they’re
capped for the amount of
acreage in the state of Ore-
gon that can be in an enter-
prise zone, is that correct?”
asked Sykes.
Gorman replied that he
knew there was a cap of 15
square miles per zone but
didn’t know if there was a
limit on the acreage within
the county.
“I only deal with after
the zone’s created. That’s
where the assessor role
comes in,” he said.
When they want to cre-
ate an enterprise zone, the
county or city also has to
consult with the affected
taxing districts before mov-
ing forward.
As Gorman noted at
the beginning of his pre-
sentation, enterprise zones
exclude commercial prop-
erty like retailers, with the
exception of hotels, motels
or destination resorts. In
fact, CREZ II expanded its
boundary in 2016 to include
a Choice Hotel (Comfort
Inn & Suites) on Front St.
in Boardman.
The 15 square miles of
the enterprise zone don’t
have to be contiguous, but
separate sections do have to
be within a certain distance
of each other; separate parts
of a rural enterprise zone
need to be within 15-25
miles of each other, depend-
ing on the population of the
county.
Zone sponsors appoint
local zone managers. In
Morrow County, Greg
Sweek is the CREZ manag-
er. Sponsors also have other
duties, such as approving or
denying applications and
marketing the enterprise
zone. Current zone spon-
sors in the county include
Morrow County, the Port
of Morrow and the City of
Boardman, depending on
the area. CREZ I sponsors
were the county and the
City of Boardman. All three
entities are sponsors of
CREZ II. CREZ III spon-
sors were the county and the
Port, though Boardman was
involved through what are
called “areas of influence.”
“I think the Port of
Morrow takes a big por-
tion of these requirements
because they’re the ones
that have the available land,
the infrastructure to be able
to supply utilities,” said
Gorman.
Also in the county’s
enterprise zone inventory
at one time was the South
Morrow County Industrial
Park, the former site of the
Kinzua Mill outside Hep-
pner. It was created at the
same time as CREZ I. That
zone’s duration expired
without any applications,
and the county chose not to
renew it at the time.
“There’s the ability to
stretch boundaries almost
anywhere we need to stretch
them in Morrow County,”
put in Sweek, “The thought
process was that, if some-
thing were to happen at the
mill site, we could expand
the zone boundary from up
in the Boardman area to
down here and make things
happen.”
The county assessor
is also heavily involved in
enterprise zones—more so
than with SIP agreements,
Gorman said. The asses-
sor has to assist sponsors
in determining whether a
property qualifies for an
exemption and in reviewing
applications from business
firms, as well as compiling
detailed annual reports for
the Department of Revenue
and the Oregon Business
Development Department
and, of course, assessing
tax values.
To build or expand in
an enterprise zone, a com-
pany submits an application
detailing the proposed busi-
ness investment, property
and investment amount
and an estimate of new
employees.
One interesting re-
quirement is that the busi-
ness has to provide a certain
number of new jobs in the
zone; a new business with
a standard exemption must
add at least one new em-
ployee, while an expanding
business need to add at least
10 percent of its existing
employee base. That is, if a
company seeking to expand
already has 500 employees
within an enterprise zone,
it needs to add at least 50
new jobs.
A business with a long-
term rural exemption must
have at least 35 new em-
ployees within first three
years of the exemption.
It also has to pay 30 per-
cent more than the average
county wage at the time.
The company then has to
stay at those levels or higher
for the rest of the exemp-
tion.
Sweek noted that he
thought the required num-
ber of employees could
vary, though he added that
the requirements for the
number of employees were
very “convoluted,” with a
lot of variables involved.
As with SIP agree-
ments, a business in a three-
year standard enterprise
zone is taxed during con-
struction but may also apply
for a construction tax ex-
emption. The EZ exemption
begins the tax year after the
business is operational. In
long-term rural enterprise
zones, which have seven- to
15-year exemptions, new
property is automatically
exempt during construc-
tion. Payments in lieu of
taxes may be negotiated
between the business and
the zone sponsors.
As with SIP agree-
ments, enterprise zone
businesses that don’t make
payments on time or oth-
erwise fail to meet zone
requirements will lose their
exemptions for that year.
Gorman ended by sum-
marizing that the biggest
differences are that an SIP
has a taxable amount and a
community service fee and
does not have to be within
a particular zone, while an
enterprise zone does have
to be in a particular area
but does not have a taxable
amount or community ser-
vice fee.
The county also has a
third kind of property ex-
emption, payment in lieu
of taxes (PILOT), which
Gorman did not cover in his
presentation. A fourth kind
of exemption program, also
a zone, has never been used
by Morrow County.
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