HOUSE COMMITTEE ON TRADE AND ECONOMIC DEVELOPMENT

 

 

February 26, 2002   Hearing Room D

1:00 PM Tapes 18  - 19

 

MEMBERS PRESENT:            Rep. Patti Smith, Chair

Rep. Vicki Berger, Vice-Chair

Rep. Mary Gallegos, Vice-Chair

Rep. Mark Hass

Rep. Dave Hunt

Rep. Steve March

Rep. Dennis Richardson

 

STAFF PRESENT:                  Kimberly A.  Medford, Committee Administrator

Linda K. Gatto, Committee Assistant

 

ISSUES HEARD:                     Informational Meeting

                                                  Sandy Cutler, PhD, Oregon Small Businesses Dev. Center Network

HB 2299 Public Hearing

Work Session

  Introduction of Committee Bills

 

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 18, A

004

Chair Smith

Calls the meeting to order at 1:05 p.m. and opens the informational meeting.

INFORMATIONAL MEETING

009

Sandy Cutler

State Director, Small Business Development Center Network, (SBDC). Recalls that in 1982 – 1983 Lane County unemployment was 16-percent and the prime lending rate for businesses to borrow money was 21-percent. Submits (EXHIBIT A).

033

Cutler

Highlights Oregon small business facts:

  • Over half of the workforce in Oregon is employed by small businesses.
  • Over half of the small businesses in Oregon were founded after 1985.
  • 62 percent of businesses in Oregon survive the first year; 76.5 percent survive 2 to 5 years, and 81.2 percent survive 6 to 10 years.

065

Cutler

Notes that although these are small operations that gross $500,000 or less a year, small businesses are vital to Oregon’s prosperity. Discusses firms by industry and size.

090

Cutler

Reviews the decline in firms between 1998 and 2002. Explains the zero category; sole proprietorships started by laid-off workers. Comments on the resiliency of small businesses.

134

Cutler

Reviews OECDD’s small business assessment evaluation. Provides an overview of the SBDC’s funding, purpose and activities.

194

Chair Smith

Asks if there has been a decline in entrepreneurships due to recent economic conditions.

195

Cutler

Responds that it is because of the economic challenges being faced today that there is an increase in new entrepreneurships.

206

Rep. Gallegos

Asks if there is a  focus on traded sector jobs.

214

Cutler

Responds affirmatively.

227

Rep. Hunt

Asks how will the SBDC’s services change in upcoming years.

230

Cutler

Notes that E-commerce has become an important component of most business operations and they will provide more services electronically. Adds that acquiring a qualified workforce is a challenge for small businesses.

258

Rep. Hunt

Asks what can the Trade and Economic Development Committee focus on that could provide assistance.

265

Cutler

Answers regulatory reform and adequate funding for community colleges and universities.

300

Rep. March

Asks about the source of the survival rate data.

304

Cuter

Responds that this is the David Birch study.

339

Rep. March

Asks if this is the same data source used in the figures for new business startups.

342

Cutler

Responds affirmatively.

371

Rep. Richardson

Refers to the loss of firms in the last year that employed ten or more employees and asks what was the basis for those losses.

383

Cutler

Responds that he will get some examples of what happened from the employment department. Explains that due to confidentially laws the specifics are not available.

399

Rep. Richardson

States that the reason for the question is to identify what happened to lessen losses in the future. Asks does the SBDC assist existing businesses.

411

Cutler

Responds that 70-perent of the SBDC’s clients are existing small businesses.

427

Rep. Richardson

Asks do businesses know to contact SBDC.

432

Cutler

Responds there are a number of ways. Notes the SBDC works closely with local Chambers of Commerce and economic development districts as well as the Small Business Association and may receive referrals from the OECCD.

450

Rep. Richardson

Asks about developing new markets.

458

Cutler

Responds that there are special programs for different industries depending on the expertise and resources available.

TAPE 19, A

028

Chair Smith

Closes the informational meeting and opens the public hearing on     HB 2299.

HB 2299 PUBLIC HEARING

033

Mike Burton

Assistant Director, Oregon Economic and Community Development Department, (OECDD). States that today’s focus will be on the Strategic Investment Program and the Small Cities Business Incentive Program.  Submits (EXHIBIT B).

061

Burton

Submits (EXHIBIT C). Comments on the Strategic Investment Plan and Intel’s relationship to the program.

093

Burton

Begins review of the Small Business Development Program. Reviews proposed amendments clarifying boundaries of a city

120

Burton

Reviews proposed amendments regarding timing. 

136

Rep. March

Clarifies that a community that could not qualify today could look back   two years and now qualify.

150

Burton

Responds affirmatively.

160

Burton

Explains the comment period and precertification on page 4, lines 28 and 29.

176

Rep. Hass

Asks why not allow for a year.

180

Burton

Explains the preference for the language “reasonable period of time” and adds that it can be adjusted under rule, (EXHIBIT D). Explains the intent is to allow a business to respond to the incentive, make their decision to invest, complete the investment and open for business.

197

Rep. March

Requests an example of what “reasonable” entails.

203

Burton

Discusses page 3, lines 29 – 31 regarding location of operations.

218

Rep. Hunt

Asks where “substantially” is defined.

219

Burton

Responds it is defined in rule, (EXHIBIT D). Notes that normal standards are 10-percent.

260

Burton

Begins a review of exemptions under the Strategic Investment Program. Notes that these projects are negotiated and includes the impact on public services such as fire departments and schools.

326

Burton

Comments on the characteristics of the exemptions in place.

342

Rep. March

Asks if there is information on the total value of the exemptions to the firm relative to the firm’s investment.

352

Burton

Responds that the investments are over $100 million and run into the cap on annual service fees. States he will get the figures.

360

Burton

Begins review of the proposed changes; allowing electrical generating facilities.

409

Burton

Explains the second change is to create a scaled down version in rural communities.

430

Burton

Discusses the option for special districts to opt-out. Explains this is limited if an exemption is already in place.

485

Burton

Reviews change #5 page 4, (EXHIBIT B).

TAPE 18, B

043

Rep. Gallegos

Asks what criteria defines the term “eligible project”.

057

Art Fish

Enterprise Zone Coordinator, OECCD. Responds that the current definition of an eligible project is on line 22. Notes that all large investments are  eligible except electrical generation facilities. 

096

Kimberly Medford

Committee Administrator. Refers to lines 34 - 37 stating that this is the current statute and explains that the department has the ability to determine the eligibility of a project.

103

Burton

Notes that the change being proposed is to allow electrical generation facilities. Comments on the threshold of size as criteria for qualification.

113

Rep. Hunt

Asks how industries other than semi-conductor facilities are being addressed.

140

Burton

Responds that the $100 million threshold is semiconductor fabs. Notes that at the $25 million threshold there would be a broader range of investments that could qualify.

163

Rep. Hunt

Asks if consideration has been given to counties that have significant unemployment levels but have been unable to meet the threshold.

171

Burton

Responds that OCEDD is responding to this request and notes that reducing the threshold statewide would encourage a number of projects.

185

Rep. Hunt

Comments on large population centers that are not defined as rural and asks if there are tools available to them.

201

Burton

Responds that the tax rolls could be surveyed for large investments and reported back to the committee.

209

Medford

Reads the definition of rural area contained in ORS 285A0107. 

224

Rep. Hass

Asks what prompted the change for rural areas.

228

Burton

Responds that the $25 million level arises periodically and may provide a fit for smaller communities.

240

Rep. Hass

Asks what are the mechanics to this program, how does it look in 15-years.

243

Burton

Responds that the potential is for a 15-year property tax exemption and a 15-year exemption on income taxes subject to minimum thresholds and annual service fees.

255

Fish

Clarifies that in this program they do get the income.

268

Rep. Gallegos

Comments that the investment is huge but the life cycle is short. Asks if  companies that are currently in down cycles benefiting from exemptions if in order to receive the tax credits certain goals need to be met

279

Burton

Responds affirmatively.

300

Rep. March

Notes that the contracts are reviewed each year and the designation can be withdrawn if the goals are not being met.

312

Rep. Richardson

Asks would county representatives claim there is a negative impact on the municipalities.

321

Burton

Responds that so far this program has applied to Multnomah and Washington counties and both have been willing participantes. Notes  there is a tax impact but it is limited, representative of the huge investment.

340

Duke Shepard

Representing Multnomah County Chair Diane Linn. States that he managed the Strategic Investment Program agreements with LSI Logic, Intel and IDT in Washington County and Microchip in Gresham. Comments that the program is working as intended. 

370

Shepard

Notes concerns with HB 2299:

  • Ability over time for special districts to opt out potentially complicating the tax structure.
  • Notification requirements to shareholders and a 30-day notice can be problematic.

435

Rep. March

Asks what parties have to agree in negotiations.

455

Shepard

Explains the process and provisions.

TAPE 19, B

027

Rep. Hunt

Asks how many special districts are there.

032

Shepard

Responds he does not know.

035

Rep. Hass

Comments on the net tax gain.

038

Shepard

Notes that the tax abatement for LSI Logic has been between $4  - $6  million in a given year and Microchip is expected to be $1.6 million next year. 

050

Hacina Squires

Special Districts of Oregon. Notes that most of the special districts in Multnomah do not have permanent rate authority, however, it is an issue in Clackamas and Washington counties.

066

Chair Smith

Closes the public hearing on HB 2299 and opens the work session for the purpose of introducing committee bills.

WORK SESSION – Introduction of Committee Bills

072

Medford

Recaps that LC 3185 is the bill that was discussed during the SUMCO meeting on February 5. Explains LC 3185, (EXHIBIT E). Explains the process of introducing committee bills noting that the vote is for the purpose of moving the LC draft on to the next process.

092

Rep. Gallegos

MOTION:  Moves LC 3185 BE INTRODUCED as a committee bill.

095

 

VOTE:  7-0

 

Chair Smith

Hearing no objection, declares the motion CARRIED.

105

Chair Smith

Closes the work session and adjourns the meeting at 2:31 p.m.

 

 

 

 

 

 

 

EXHIBIT SUMMARY

 

A – Oregon Small Business – Informational material, Sandy Cutler, 20 pp

B – HB 2299, written testimony, Michael Burton, 10 pp

C – HB 2299, comparison chart, Representative Tom Butler, 6 pp

D – HB 2299, Enterprise Zone Administrative Rules, staff, 2 pp

E – LC 3185 draft dated 2/24/03, staff, 2 pp