PUBLIC HEARING: HB 3183, HB 2372 A

 

WORK SESSION: SJR 2, SB 5

 

TAPES 139-140, A-B

 

SENATE REVENUE COMMITTEE

JUNE 4, 2003   1:00 PM   STATE CAPITOL BUILDING

 

Members Present:                        Senator Ryan Deckert, Chair

                                                Senator Ted Ferrioli, Vice Chair

                                                Senator Tony Corcoran

                                                Senator Charlie Ringo

                                                Senator Bruce Starr

 

Members Excused:                      Senator Lenn Hannon    

 

Witnesses Present:                        Senator Frank Morse, District 8

                                                Representative Wayne Scott, District 39

                                                Matt Meador, Representative Nelson’s Office

                                                Erik Amos, Columbia Sportswear

                                                Mark Modjeski, Tektronix Inc.

                                                Al Logan, Nike Inc.

                                                Tim Nesbitt, Oregon AFL-CIO

                                                Laurie Wimmer Whelan, Oregon Education Association

                                                Curt Copenhagen, Longview Fibre

                                                Mark Nelson, Oregon Metals Industry Council

                                                Jim Craven, American Electronics Association

                                                Jim Geisinger, Association of Oregon Loggers

                                                Juan Yraguen, Basco Logging

                                                Bob Luoto, Cruss & Crown

                                                Craig Hanneman, Oregon

                                                Gil Riddell, Association of Oregon Counties

                                                Hasina Squires, Special Districts Association of Oregon 

                                                Michelle Deister, League of Oregon Cities

                                               

Staff Present:                            Paul Warner, Legislative Revenue Office

                                                Lizbeth Martin-Mahar, Legislative Revenue Office

                                                Mazen Malik, Legislative Revenue Office

                                                Tara Lantz, Committee Assistant

 

TAPE 139, SIDE A

 

004

Chair Deckert

Calls meeting to order at 1:16 pm.

 

OPENS WORK SESSION ON SJR 2

 

022

Sen. Morse

Asks for the adoption of SJR 2-3 amendments, and the SB 5-1 and SB 5-3 amendments.

 

Clarifying questions and answers follow.

 

 

 

056

Paul Warner

Discusses the SJR 2-3 amendments, which corrects the language to reflect the General Fund and clarifies the 10 percent requirement. (Exhibit 1). Discusses SJR 2-4 amendments, which makes the same language changes and raises the reserve fund cap to 25 percent (Exhibit 2). Discusses SJR 2-5 amendments, which corrects the language and make technical treasurer changes (Exhibit 3). Discusses SB 5-1 amendments, which makes wording changes (Exhibit 4). Discusses SB 5-2 amendments, follow the SJR 2-3 amendments (Exhibit 5). Discusses SB 5-3 amendments, which makes technical changes (Exhibit 6).

 

Discussion follows.

 

 

 

112

Sen. Deckert

Asks Sen. Morse if he is asking for SJR 2-5 amendments and SB 5-1 amendments.

 

 

 

114

Sen. Morse

Responds affirmatively.

 

 

 

115

Warner

Adds that they need to adopt SB 5-3 amendments as well.

 

 

 

118

Sen. Ringo

MOTION: MOVES SJR 2-5 AMENDMENTS DATED 6/4/03 BE ADOPTED.

 

 

 

122

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 4-1-1.

SENATORS ANSWERING AYE: CORCORAN, RINGO, STARR, DECKERT. SENATORS ANSWERING NO: FERRIOLI. SENATORS EXCUSED: HANNON.

 

 

 

126

Sen. Ringo

MOTION: MOVES SJR -2 TO THE SENATE FLOOR WITH A DO PASS AS AMMENDED RECOMMENDATION.

 

 

 

130

Sen. Corcoran

Thanks Sen. Morse and Sen. Burdick for their hard work.

 

 

 

132

Sen. Deckert

Agrees with Sen. Corcoran.

 

 

 

134

Sen. Starr

States that this is an important issue to discuss on the Senate Floor.

 

 

 

142

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 4-1-1.

SENATORS ANSWERING AYE: CORCORAN, RINGO, STARR, DECKERT. SENATORS ANSWERING NO: FERRIOLI. SENATORS EXCUSED: HANNON.

Sen. Morse will carry the bill on the Senate Floor.

 

OPENS WORK SESSION ON SB 5

 

151

Sen. Ringo

MOTION: MOVES SB-5 AMENDMENTS DATED 6/2/03 BE ADOPTED.

 

 

 

154

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 4-1-1.

SENATORS ANSWERING AYE: CORCORAN, RINGO, STARR, DECKERT. SENATORS ANSWERING NO: FERRIOLI. SENATORS EXCUSED: HANNON.

 

 

 

157

Sen. Ringo

MOTION: MOVES SB 5-3 AMENDMENTS DATED 6/4/03 BE ADOPTED.

 

 

 

159

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 4-1-1.

SENATORS ANSWERING AYE: CORCORAN, RINGO, STARR, DECKERT. SENATORS ANSWERING NO: FERRIOLI. SENATORS EXCUSED: HANNON.

 

 

 

164

Sen. Ringo

MOTION: MOVES SB 5 TO THE SENATE FLOOR WITH A DO PASS AS AMMENDED RECOMMENDATION.

 

 

 

166

Sen. Deckert

ORDER: ROLL CALL VOTE: MOTION PASSES: 4-1-1.

SENATORS ANSWERING AYE: CORCORAN, RINGO, STARR, DECKERT. SENATORS ANSWERING NO: FERRIOLI. SENATORS EXCUSED: HANNON.

Sen. Morse will carry the bill on the Senate Floor.

 

OPENS PUBLIC HEARING ON HB 3183

 

177

Lizbeth Martin-Mahar

Explains HB 3183 which increases the sales factor of the corporate apportionment formula from 80% , to 90% and 5% payroll and property factors beginning in 2005 and phasing in an increase to 100% in 2007 (Exhibit 7). Discusses revenue impact (Exhibit 8) and the distribution of estimated tax returns with the sales only apportionment formula (Exhibit 9).

 

 

 

316

Rep. Scott

Testifies in support of HB 3183 because it will remove the disincentive for businesses to locate and expand in Oregon and make Oregon attractive for corporate headquarters.

 

 

 

344

Matt Meador

Testifies on behalf of Rep. Nelson in support of HB 3183 it will give Oregon a competitive edge to recruit companies. Refer to written testimony (Exhibit 9).

 

 

 

384

Erik Amos

Testifies in support of HB 3183 because it would encourage in-state economic development and stabilize corporate income taxes. Gives personal experience with the current apportionment formula. Refer to letter (Exhibit 11).

 

TAPE 140, SIDE A

 

023

Sen. Ringo

Asks why Washington’s tax structure would be more favorable since Oregon has the lowest business tax burden in the Western states.

 

 

 

029

Amos

Responds that Washington’s tax structure is fundamentally different and have a business and occupation tax that would benefit Columbia.

 

 

 

034

Sen. Ringo

Asks if he could say it would benefit all companies.

 

 

 

038

Amos

Responds negatively.

 

 

 

042

Sen. Deckert

Asks if the class of manufacturers similar to Columbia would benefit as well.

 

 

 

044

Amos

Responds that wholesale distributors probably would.

 

 

 

048

Mark Modjeski

Testifies in support of HB 3183 because it would give businesses a reason to build and expand operations in Oregon and help the staggering economy. Refer to letter (Exhibit 11).

 

 

 

075

Sen. Ringo

Asks whether Oregon’s tax structure is unfriendly to business.

 

 

 

077

Modjeski

Responds that Oregon’s tax structure is hurtful to large corporations that have predominantly used capital in business operations to invest in Oregon. Discusses Tektronix operations.

 

 

 

089

Sen. Deckert

Asks how significant the change to the 80% apportionment factor has been and asks if they should wait for more data and then just make the change to 100%.

 

 

 

096

Modjeski

Responds that Tektronix has only one month of closed data, but that the apportionment factor will be lower.

 

 

 

112

Sen. Deckert

Asks if it would be reasonable to wait off a year to see more data.

 

 

 

114

Modjeski

Responds that there probably wouldn’t be any more to see because it takes longer than a year. States that he believes they should move forward on this now.

 

 

 

120

Sen. Starr

Asks if the timing for this is would coincide with expansions done in the future and decided on today.

 

 

 

131

Modjeski

Responds affirmatively.

 

 

 

141

Al Logan

Testifies in support of HB 3183 because it would encourage businesses to locate and build in the state. Discusses data from the early 1990’s after the formula was changed from equal weighting to double weighting. Refer to letter (Exhibit 11).

 

 

 

191

Sen. Deckert

Asks if this bill would make Oregon a favorable state for business or if there would be other changes that would be contemplated.

 

 

 

199

Logan

Responds that it would make Oregon a favorable state. Discusses taxes paid by Nike.

 

 

 

218

Amos

Responds that companies are continuously updated on tax reform in states.

 

 

 

239

Modjeski

States that some companies would not be happy with this bill, such as businesses that just use Oregon for marketing and that this might get them to build here.

 

 

 

246

Sen. Starr

Asks how this compares the repeal of the unitary tax in the eighties that the state is open for business.

 

 

 

255

Logan

Responds that this would have less of an effect because of the shift to 80% last session.

 

 

 

267

Sen. Ringo

Asks why they are phasing in the increase to 100 percent.

 

 

 

270

Logan

Responds that they are recognizing the situation that the state is currently in.

 

 

 

284

Sen. Ringo

Asks how they would feel about going to a single sales factor and raising the corporate income tax rate.

 

 

 

287

Amos

Responds that it would impact every single business in Oregon.

 

 

 

301

Tim Nesbitt

Testifies in opposition to HB 3183 because Oregon’s corporate income tax system already has the lowest rates and the lowest tax share. Discusses history of the single sales factor and who would benefit from the bill and who would not.

 

 

 

383

Laurie Wimmer

Whelan

Testifies against HB 3183 because it would decrease revenues. States that there are many reasons why companies locate in a certain state and tax policy is not among the top ones.

 

TAPE 139, SIDE B

 

021

Sen. Deckert

States that you can never measure what causes companies to move or relocate and asks if there is any benefit in conveying to companies that Oregon is friendly and open to business.

 

 

 

026

Nesbitt

Responds that more companies are probably worried about whether Oregon has fixed their schools than their tax policies.

 

 

 

030

Wimmer Whelan

Adds that there was a study done on the top reasons for business location and tax policy was not on the list, but education was.

 

Discussion follows.

 

 

 

084

Curt Copenhagen

Testifies in opposition to HB 3183 in its original form because it would cost Longview Fibre between $5 and $6 million over a 10-year period. Proposes HB 3183-1 amendments, which would exempt Longview Fibre from the bill. Refer to written testimony and amendment (Exhibit 12).

 

 

 

103

Mark Nelson

Testifies in support of HB 3183 because it will help businesses to look forward to coming out of the economy to expand and invest in Oregon. States that he doesn’t believe Oregon is a tax friendly or business friendly state.

 

 

 

134

Sen. Deckert

Asks what makes Oregon a tax unfriendly state if this bill is enacted.

 

 

 

137

Nelson

Responds that tax policies do not drive final decisions, but that CEO’s make decisions based on what is going to affect them and the income tax structure is one of the highest in the country.

 

 

 

155

Jim Craven

Testifies in support of HB 3183 because it would benefit companies that are located here, manufacture here, and sell their products on a global market. Discusses the success of previous economic development measures. Points out that there is no revenue impact and it won’t take away money from schools, and that it won’t affect Oregon grown companies that don’t operate in other states.

 

 

 

255

Sen. Ringo

Asks if Craven believes the OTIM forecast that twenty jobs will be created from this .

 

 

 

257

Craven

Responds that he doesn’t know but that it seems false to him.

 

CLOSES PUBLIC HEARING ON HB 3183

 

OPENS PUBLIC HEARING ON HB 2372 A

 

302

Jim Geisinger

Testifies in support of HB 2372 because the exemption helps small business, contributes to protecting the environment, and puts the logging industry on equal footing with agriculture. Refer to written testimony (Exhibit 15).

 

 

 

382

Juan Yraguen

Testifies in support of HB 2372 because it would help loggers invest in environmentally sensitive equipment needed to log the second growth forests they have shifted to. Refer to written testimony (Exhibit 16).

 

TAPE 140, SIDE B

 

032

Sen. Deckert

Asks why they should give tax credits for environmentally sensitive equipment that would have been bought anyway.

 

 

 

038

Yraguen

Responds that there are many companies in need of assistance because of policies that have negatively impacted the logging industry in the past decades.

 

 

 

055

Sen. Ferrioli

Responds that old style systems dragged on the ground and caused erosion and that new systems are more sophisticated and expensive to limit erosion and move towards logging second growth forests rather than old growth forests. Discusses parameters in the bill required by the Governor.

 

 

 

086

Sen. Deckert

Asks if the Governor required the sunset.

 

 

 

087

Sen. Ferrioli

Responds that they put the sunset in so that it could be a trial to see how successful it would be and that it has proved to be successful.

 

Discussion follows.

 

 

 

116

Bob Luoto

Testifies in support of HB 2372 because logging has shifted to private lands with second growth forests and this would help loggers acquire the equipment necessary to perform in an environmentally responsible manner. Refer to written testimony (Exhibit 17).

 

 

 

164

Craig Hanneman

Testifies in support of HB 2372 because it would equalize the timber industry with the agriculture industry.

 

 

 

190

Gil Riddell

Testifies in opposition to HB 2372 because the sunset clause gives the Legislature a tool for accountability and there hasn’t been enough time to analyze the effectiveness of the exemption. Refer to written testimony (Exhibit 18).

 

 

 

252

Michelle Deister

Testifies against HB 2372 because they do not agree with eliminating sunset dates.

 

 

 

261

Hasina Squires

Testifies against HB 2372 because the special districts believe sunset dates are important for evaluation.

 

 

 

277

Sen. Ferrioli

Asks if they would oppose extending the sunset date.

 

 

 

279

Riddell

Responds negatively.

 

 

 

293

Sen. Ferrioli

Asks if they are suggesting the removal of the farm equipment exemption.

 

 

 

301

Riddell

Responds negatively and states that there is a distinction between the two because of when they were adopted.

 

Discussion follows.

 

 

 

386

Sen. Ferrioli

Adjourns meeting at 3:05 pm.

 

 

 

 

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

  1. SJR 2, Sen. Morse, Proposed SJR 2-3 Amendments, 4pp.
  2. SJR 2, Sen. Burdick, Proposed SJR 2-4 Amendments, 4pp.
  3. SJR 2, Sen. Morse, Proposed SJR 2-5 Amendments, 4pp.
  4. SB 5, Sen. Morse, Proposed SB 5-1 Amendments, 1p.
  5. SB 5, Sen. Burdick, Proposed SB 5-2 Amendments, 1p.
  6. SB 5, Sen. Morse, Proposed SB 5-3 Amendments, 2pp.
  7. HB 3183, Lizbeth Martin-Mahar, Staff Measure Summary, 1p.
  8. HB 3183, Lizbeth Martin-Mahar, Revenue Impact Statement, 1p.
  9. HB 3183, Lizbeth Martin-Mahar, Sales Only Apportionment Formula Distribution, 2pp.
  10. HB 3183, Rep. Nelson, Written Testimony, 1p.
  11. HB 3183, Mark Modjeski, Letters of Support, 18pp.
  12. HB 3183, Curt Copenhagen, Written Testimony and Proposed HB 3183-1 Amendments, 4pp.
  13. HB 2372, Mazen Malik, Staff Measure Summary, 1p.
  14. HB 2372, Mazen Malik, Revenue Impact Statement, 1p.
  15. HB 2372, Jim Geisinger, Written Testimony, 3pp.
  16. HB 2372, Juan Yraguen, Written Testimony, 3pp.
  17. HB 2372, Bob Luoto, Written Testimony, 3pp.
  18. HB 2372, Gil Riddell, Written Testimony, 4pp.