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I Got It Wrong

The $7 million giveaway, part II

Sooner or later it happens. You write or say something and then you have to come clean and admit that you just got it wrong. In “The $7 million giveaway” (EW, 9/1) I argued that our local officials got little or nothing in return for extending the enterprise zone benefits for Broadcom, the company that purchased the former Hynix site, an additional two years. I concluded that without any new requirements, the additional $7 million in property tax waivers was not an investment at all, it was a just a “giveaway” of much-needed tax revenue. 

With the county and city constantly in need of money to fill budget shortfalls, it’s easy to look at that additional $7 million as funds needed to fill budget gaps. And, while it is true that both the City Council and the County Commission voted approval of the two-year extension, without adding any additional requirements for the money, a deeper look at the issue caused me to reach a different conclusion.

No one actually gives Broadcom money. It would be forgiven property taxes for the five years of the enterprise zone, based on the level of investment in the property. It would continue to pay the current property taxes. After five years Broadcom would pay the full property tax load on the dramatically increased value of the site. We forgive taxes we would not be getting anyway, while creating significantly increased property taxes after the waiver ends. 

Until Broadcom bought the site, it sat idle for years, possibly awaiting demolition and continuing reductions in property tax revenue. Broadcom came calling even before the online auction for the site was to take place and no one knew who it was. To maintain confidentiality, Broadcom was represented by a site selection consultant.

Broadcom, like many large corporate clients seeking an expansion or relocation, maintained confidentiality by using a site selection consultant to determine, among other factors, community support before making a commitment involving many millions of dollars.  For our local economic development team, whoever that was, it would be reasonable to assume the involvement of such a consultant indicated this was the “real deal” to be taken seriously and the first credible client looking at the former Hynix site in a very long time.

This points to one of the issues that often plagues economic development projects, secrecy. Projects come with code names and site selection consultants to maintain confidentiality and secrecy. No one wants to talk on the record. Many clients insist on total confidentiality for siting a project. And secrecy is also part of the culture of economic development, even though it often creates mistrust and suspicion on the part of the public. 

I believe that finding a credible client to renovate and invest in the Hynix site for a manufacturing facility is in our community’s best interest. If we were to lose this opportunity, another might be far in the future, if ever. The two-year extension of West Eugene Enterprise Zone is one of the few discretionary incentives we have to show community support and encourage a company like Broadcom to locate here. 

And remember, no one writes a check to Broadcom. That’s one of the beauties of the enterprise zone as an incentive. The benefits only come from, and are based on, the increased value of the facility. The first three years  are automatic, based on location. If you are in the zone and meet the qualifications, you get the first three years of property tax abatement on the increased assessment while continuing to pay the current rate. This is available to any company expanding into an enterprise zone. 

The additional two years needs to be approved by the local governments. In this case, they could have nickel-and-dimed Broadcom by demanding some additional token requirements to placate some constituents. But they didn’t play that game and I believe now that it was the correct decision. In order for Broadcom to get the full $21 million in benefits over the five-year period, they will likely spend hundreds of millions on improvements to the site. Improvements that translate immediately to hundreds of living wage construction jobs even before the site is operating, and hundreds more when it is.

Were the votes by the Eugene City Council and Lane County Commission to grant the additional two years a “giveaway” or an “investment?”  I understand there are a lot of folks who just don’t agree with public incentives at all. I get that for them, it will always be a giveaway. I just do not agree. In my opinion this was an opportunity that we could not afford to miss. 

As much as I dislike admitting I was wrong, I was. If Broadcom does what is required to get the tax breaks, if it creates hundreds of living wage jobs, if it rehabilitates an aging manufacturing facility and significantly increases property taxes when the waiver ends, then the votes were not a giveaway. They truly were an investment in our future, and the right thing to do.