Panel advances Oregon plan to aid semiconductor grants

By PETER WONG
Oregon Capital Bureau

Oregon lawmakers have put forth a plan to aid businesses and others seeking shares of billions available in federal money to encourage the domestic manufacturing of semiconductors.

The plan leaves unresolved specific industrial sites that can accommodate fabrication plants and related businesses – and where the money will come from to develop those sites.

The amended version of Senate Bill 4 now heads for a review by the Legislature’s joint budget committee of the $210 million it proposes to spend. Then the bill will go to up-or-down votes by the Senate and then the House, likely in the last week of March.

It is among the top priorities of Democratic Gov. Tina Kotek, who proposed $200 million in her recommended state budget for the two-year cycle starting July 1. She already has made $1 million available from the governor’s strategic reserve to aid smaller businesses seeking federal money from the Department of Commerce.

Senate Republican Leader Tim Knopp of Bend was one of two legislators on a task force last summer that came up with recommendations for what emerged as the framework for this legislation. He supports such advanced manufacturing for its potential economic return to Oregon.

Knopp, who also is the top Senate Republican on the joint committee that crafted the bill, said it is incomplete “but I will support the measure” that emerged on Wednesday, March 15.

The task force was formed before congressional approval of the legislation known as the CHIPS Act, but after Intel — Oregon’s largest private employer — announced a multibillion-dollar investment in chipmaking in Ohio.

Most of the state money ($190 million) is earmarked for the Oregon Business Development Department to help businesses and others to apply for federal grants. Of a total of $52 billion available for incentives for domestic semiconductor manufacturing, the Department of Commerce has $19 billion available this year and $5 billion in each of the next four years.

Businesses receiving state money would have to show that their projects will generate a minimum amount of state and local revenue — $1 million for each million granted by the state if the agreement is for less than five years, and $1.5 million for each million granted if more than five years. At least 65% of the jobs created would have to be at the area median income, which for Portland in 2021 would have been about $78,000 per household.

Another $10 million is earmarked for higher education programs.

The legislation empowers Gov. Kotek to designate up to eight industrial sites – two sites of at least 500 acres each, and six smaller sites – through a process that lets her redraw urban growth boundaries of cities by the end of 2024. Her executive orders can be appealed directly to the Oregon Supreme Court, but only within 60 days of her actions. It does not explicitly allow proposals made by Hillsboro, which seeks to include land that the Legislature put off-limits to development in a 2014 law affecting Washington County.

Members of the joint legislative committee also conceded there is more work to be done on how to pay for development of such sites with services such as power, water and sewer lines, and streets. The bill would create a fund of $10 million, which lawmakers say is not enough.

“But it is an acceptable balance that achieves those goals and gives us a pathway forward,” said Rep. David Gomberg, D-Otis, who also is House co-chair of the budget subcommittee that is scheduled to review the bill this coming week.

Gomberg and House Speaker Dan Rayfield, D-Corvallis, said in separate interviews that lawmakers would not go much higher than Kotek’s budget request.

‘Foundation already built’

Sen. Janeen Sollman, a Democrat from Hillsboro, is the Senate co-chair of the joint committee. Her district is already home to Intel, which has four plants in Hillsboro and Aloha – and an advanced research and development facility opened last year –and is Oregon’s largest private employer with 22,000 people.

Despite unresolved issues, Sollman said, Oregon starts the quest for federal money in a strong position as the third largest state employing people in semiconductor manufacturing at a total of 40,300. Only California and Texas employ more workers.

Sollman also said that existing programs at community colleges and universities –coupled with the Future Ready program that then-Gov. Kate Brown proposed and lawmakers approved in 2022 – give Oregon a strong base for training. (Advanced manufacturing is one of three key industries in that program.)

“We knew that Oregon was poised for success. We knew we had this foundation already built,” said Sollman, who was on the Hillsboro School Board.

“This (CHIPS Act) gave us the opportunity for growth in an industry that was going to give us an 8-to-1 return on our investment.

“I think about the potential we have for building and supporting this industry in Orgon and what that means for future generations… I am thinking about the opportunities we have to build that ecosystem we are talking about.”

She quoted Gresham Mayor Travis Stovall, whose city is home to an expanding Microchip Technology plant: “It is taking families from poverty to prosperity.”

The legislation generally follows recommendations last summer by a task force led by Brown, U.S. Sen. Ron Wyden and Maria Pope, chief executive of Portland General Electric. Their report proposed authority for two sites, each greater than 500 acres; four other sites, each between 50 and 100 acres, and eight smaller sites of between 15 and 35 acres.

“We need to have a better handle on that,” Senate Majority Leader Kate Lieber, a Democrat from Beaverton and a committee member, said. “I think everybody on this committee wants the same thing, which is continued economic prosperity for Oregon.

The legislation trims that number to a total of eight. Initial versions of the bill would have barred appeals, but the Oregon Constitution guarantees that courts are empowered to offer legal remedies. The new version would allow expedited appeals to the Supreme Court, a procedure that lawmakers have approved in the past.

But giving the governor the authority to expand urban growth boundaries is new. This version drops a reference to 16 specific communities where available industrial lands must be reviewed as part of the process.

Certainty needed

Sen. Bill Hansell, a Republican from Athena, said he is familiar with how uncertainty over land use can derail a development project. He was a Umatilla County commissioner for 32 years until he was elected to the Senate in 2012.

“If we are serious about moving forward in a timely fashion, we absolutely have to get that done, and done correctly – or everything else is superfluous, because we can’t site a fabrication plant as we hope to do,” he said. “That is the foundation for all the other stuff we are trying to build.”

Sen. Mark Meek, D-Gladstone, said he believed the relatively small amount of farmland acreage that might be lost to development would be worth it. “We are going to be bringing in high-wage jobs,” he said.

Rep. Jeff Helfrich, R-Hood River, said passage of the bill would go far to dispel an anti-business image for Oregon. “This opens up the door for other businesses,” he said.

The House co-chair of the joint committee is Rep. Janelle Bynum, a Democrat from Clackamas who said there is more work to be done to supply state money for development of the industrial sites once they are chosen. She also said money should be put into training programs.

“We need to shore up our funding or look where we have already provided funding,” Bynum said. “It’s pretty empty, and I am committed to continuing to work on that. “I do not want to throw money at this. But I want to make sure that we are using everything we have to improve business in Oregon.”

Among the proposals: Enterprise zones, which allow cities and counties to grant property tax breaks, and which are up for renewal; a revival of a tax credit, which businesses can subtract from income taxes owed, for research and development. Advocates say other states have it, but critics say it is not needed – and that federal guidelines for the semiconductor grants place less weight on state tax breaks.

Two other existing programs have largely benefited Washington County because of multimillion-dollar investments by Intel and Genentech. Most of the other beneficiaries are counties with wind-generation facilities.

The Strategic Investment Program, first approved in 1993, allows property tax breaks for investments of at least $100 million in urban counties and $50 million in rural counties. Gain Share, first approved in 2007, uses a part of state income taxes from the jobs generated or retained by such investments to partially offset county losses from property taxes.