Intel's last package of tax breaks was due to last 15 years, exempting up to $25 billion in investment from the property tax breaks other businesses pay.
But Intel expects to exhaust its exemptions in less than half that time. The company's current package of tax breaks, which took effect in 2010, is now projected to run out in 2016.
That's why Intel went to Washington County and Hillsboro officials to propose a new deal, and a new package of exemptions under the state's Strategic Investment Program (SIP).
They announced their agreement Monday, outlining a 30-year package of exemptions on up to $100 billion of Intel spending. (It's actually multiple packages bundled into a single agreement, which enables the long, 30-year term.)
It's potentially worth more than $2 billion to the company, surely the largest property tax break in Oregon history.
So why did the current deal run out so fast?
It's because Intel's been on a construction binge, inflating the real market value of its Oregon property by more than $5 billion in just five years. Intel is building a pair of research factories, collectively known as D1X, which will increase its manufacturing capacity and make room for new production technologies.
The real market value of Intel properties covered by the SIP increased by more than 60 percent – $3 billion – last year alone.
Combined, the two D1X factories are 2.2 billion square feet. That's two-thirds the size of the Pentagon.
And the manufacturing tools inside, which would otherwise be subject to Oregon's property taxes, cost millions of dollars apiece. Oregon lawmakers created the SIP to lure big-ticket manufacturers like Intel who might otherwise find those taxes prohibitive.
Monday's deal doesn't obligate Intel to spend anything in Oregon. The SIP is structured so that the more a company invests in Oregon, the more it saves. Intel's mighty spending over the past few years have triggered tremendous exemptions – nearly $123 million in Washington County's last fiscal year alone.
With a pending transition to 450-millimeter silicon wafers, which could trigger another big spending binge as Intel retools its fabs, the chipmaker wanted a long-term deal that would encompass all that spending and keep all those new tools exempt from property taxes.
That's not sitting well with Tax Fairness Oregon, a tax equity advocacy group, which says Intel's pending deal is beyond the scope of what lawmakers envisioned when they created the SIP in 1993:
The proposed Intel deal is a massive change, tying the state's hands for 30 years and increasing the amount of property on which Intel will pay very limited taxes to $100 billion...We agree that a company with the huge machinery investments that Intel makes should receive some reduction in property taxes. But a 30 year deal for more than 3 times what Intel's invested in the 38 years since they arrived in 1976 -- that's too much.
Washington County commissioners will discuss the agreement at an 8:30 meeting Tuesday (this morning); The Hillsboro City Council gets a briefing Aug. 19. Then the commission and council meet in a joint session at 7 p.m. Aug. 26 for a public hearing on the agreement, followed by a vote on approving the deal.
-- Mike Rogoway; twitter: @rogoway; 503-294-7699