Gov. Tina Kotek signs a $210 million bill for the semiconductor industry on April 13, 2023, at the state library in Salem. (Julia Shumway/Oregon Capital Chronicle)
Tax breaks for semiconductor manufacturers should be targeted and not cost the state money, Gov. Tina Kotek said Thursday as legislators focused on expanding the state’s semiconductor industry consider tax cuts.
Kotek commented after signing Senate Bill 4, a $210 million boost to the semiconductor industry. The new law includes $190 million in direct grants and loans to semiconductor companies seeking federal funding to expand in Oregon and gives Kotek the authority to hasten rezoning to build factories on undeveloped land.
It’s intended to make Oregon businesses more competitive as they seek a share of the $52 billion in federal funding made available by last year’s CHIPS and Science Act to expand semiconductor manufacturing in the U.S.
“Senate Bill 4, which we are signing today, will help us ensure our competitiveness, attracting new businesses and economic growth to our state,” Kotek said at her temporary office in the State Library in Salem.
The measure also includes $10 million for research at universities and $10 million to help with land development costs. It meets some of the goals laid out in a report from a task force led by U.S. Sen. Ron Wyden and former Gov. Kate Brown last year, but the new law doesn’t include tax credits that businesses said were essential for Oregon to compete with other states.
Lawmakers are working on tax credit proposals and expect to approve something before the end of the legislative session in June.
“Don’t worry, we’re still on the job,” said Rep. Kim Wallan, a Medford Republican and one of two semiconductor committee vice chairs. “We’re still working on these other parts of it that need to be put in place because it was very clear from the semiconductor task force what elements we need. We have some of them, we need a couple more.”
The Legislature’s initial approach to tax credits is in Senate Bill 5, introduced late last month by Senate President Rob Wagner, D-Lake Oswego. It was scheduled for its first vetting before the Joint Committee on Semiconductors on Wednesday, but that meeting and most other committee meetings were canceled as the House and Senate spent long days debating and voting on bills on the floor.
The measure would create tax credits of up to $9 million for research conducted in Oregon and “essential to the semiconductor industry or other advanced manufacturing industries.” They would expire in 2030.
Kotek said the tax credits should be revenue-neutral, or as close to it as possible, given the state’s tight budget. That means lawmakers would have to scale back other tax breaks or find other ways to ensure they don’t lose revenue by giving tax breaks to the semiconductor industry.
“We should do something on the research and development incentive side, and I’m looking to legislators to work together, both bipartisan and bicameral, both chambers, both parties coming together to figure this out,” she said. “For me, I think tax incentives are always better when they’re targeted, with particular goals and outcomes associated with them.”
The new law gives Kotek broad authority to designate some land outside urban growth boundaries – the invisible line that governs where cities can expand – for annexation for semiconductor plants or other advanced manufacturing. She has until Dec. 31, 2024, to designate up to eight sites, including two that could exceed 500 acres.
It’s the most contentious part of the measure, sparking hours of testimony and hundreds of letters in opposition to the measure from people who don’t want to see farmland replaced with factories.
After Kotek signed the measure, a bipartisan group of representatives from the state House sent her a letter asking her to consider designating golf courses, rather than farmland, as land that should be redeveloped for semiconductors. They named two facilities – the 350-acre Pumpkin Ridge Golf Course in North Plains and the 319-acre Reserve Vineyards and Golf Club in Aloha.
“If we are going to look at open spaces and available land for semiconductors, we believe we should consider all open spaces – not just farmland,” the lawmakers wrote. “Large, open fields in the Willamette Valley are not purposeless. These fields are feeding our families, Oregonians, and the world. A member-only golf course does not.”
Kotek said she hasn’t yet identified any land outside of urban growth boundaries where she would use that new power, nor has she decided whether she’ll use it at all. It depends on which companies seek state or federal funding and what their plans are.
“This idea that is all about land outside of UGBs, I don’t think it’s accurate,” she said. “We’re going to have to see the applications of companies who want to take advantage of the federal dollars before we can take up the land use conversation.”
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