The Strategic Investment Program (SIP) was adopted by the
Oregon Legislature in 1993. It allows businesses and local governments to enter
into agreements if these businesses are willing to invest at least $100 million
at an urban site or at least $25 million at a rural location in Oregon. The
purpose of this program is to attract and keep companies that provide good jobs
Intel SIP Agreements
Washington County, the City of Hillsboro and Intel
Corporation recently reached a 30-year agreement
that would provide up
to $100 billion of investment over multiple, concurrent 15-year periods
beginning as soon as 2015. As with past agreements, the 2014 agreement will require Intel to pay the equivalent of full property taxes on all land and
buildings associated with each SIP project. The agreement will allow for partial
property tax savings to Intel for investment in machinery and equipment used
for semiconductor manufacturing. This machinery and equipment costs billions of
dollars to create and can become obsolete within a few years.
The 2014 agreement is the fifth for Intel since the program's
inception. Two SIP agreements were approved in 1994, a third in 1999 and the
most recent in 2005. The two 1994 agreements provided for Intel
investment of up to $3.4 billion, the 1999 agreement for up to $12.5 billion and
the 2005 agreement for up to $25 billion.
What is the Strategic Investment Program (SIP)?
The Strategic Investment Program (SIP) was authorized by the
1993 Legislature to increase Oregon's ability to attract and retain
capital-intensive industry and high-wage jobs. Projects approved for the SIP
must pay full property taxes on the first $100 million invested, or first $25
million in a rural area, a cap that increases 3 percent each year. An annual
Community Service Fee equal to 25 percent of abated taxes, up to $2 million in
an urban area or $500,000 in a rural area, must also be paid. Additional fees
can be negotiated.
Who was involved in the 2014 SIP agreement?
The Strategic Investment Program is a partnership on several
levels. In terms of inter-governmental cooperation, the process involves the
Governor's Office and Business Oregon working together with local governments
to recruit major employers and support economic development. Public-private
partnership is also at the heart of the process where local governments
negotiate with capital-intensive businesses to create employment in areas where
major investment would occur. These partnerships are critical for working
through the details and complexities of such an investment.
Why would the City and County enter into a SIP agreement?
SIP agreements have allowed local governments throughout
Oregon to attract and retain capital-intensive businesses and high-wage jobs. Since
1993, agreements in Washington County have resulted in nearly $30 billion in
investment and 18,000 jobs locating here. In the case of Intel, ECONorthwest, a
private consulting firm, recently identified the following:
- In 2012, Intel had an annual payroll of $2.8 billion and
16,500 employees, making Intel the single-largest private-sector employer in
- For every one Intel job, three additional jobs were created
- This ripple effect added up to nearly 68,000 jobs; about 4
percent of the state's workforce.
- Intel's total economic impact was also measured at $26.7
billion in 2012, or about 8.7 percent of the state's total.
- This ripple effect of economic impact has led to gross payments
totaling $327.7 million in state income taxes and local property taxes in
support of public services statewide.
What are the terms of the 2014 agreement?
The 2014 SIP agreement requires Intel to make
payments under two categories, those required by state law and those negotiated
locally. The statutorily required payments would total to an estimated $122
million in property taxes and fees over the life of the agreement. Additional
fees would total to an estimated $228 million over the same period. Actual
amounts would vary depending on how much and over what timeline Intel invests.
The agreement is focused on investments in the
company's unique cycle of equipment replacement and retaining the 17,500
employees working in Washington County at the time the 2014 agreement was adopted. The multi-million-dollar
machinery and equipment used in Intel's manufacturing process can become
obsolete within a few years as the technology rapidly evolves. As with earlier
SIP agreements, property taxes would be partially abated for investments in
these leading-edge tools.
How does the 2014 SIP agreement compare with the current Intel SIP agreement?
In 2005, Washington County and the City of Hillsboro
negotiated a SIP agreement with Intel that set the stage for up to $25 billion
of investment over 15 years beginning in 2010. Here is a side-by-side
comparison of the 2005 SIP with the 2014 agreement:
What taxes and fees would the agreement generate?
The 2014 SIP agreement requires Intel to pay
an estimated $350 million in property taxes and fees over the life of the
agreement. This is significantly greater than the amount required by Oregon law
under the Strategic Investment Program.
The agreement follows a precedent established with other
Washington County SIP agreements of requiring fees equal to full property taxes
on all land and buildings.
How much in taxes and fees would Intel pay under this 2014 agreement as compared to other businesses?
The exact amount of taxes and fees would
depend on the level and timing of investment under the 2014 agreement.
Intel has consistently said that a SIP agreement would be required before
the $100 billion investment in its Washington County facilities would be
considered. Without this investment, there would be no "tax savings."
The 2014 SIP agreement creates a fee structure that
ensures Intel would pay an amount equal to full property taxes on new buildings
and land with any tax savings stemming from Intel's investment in machinery and
equipment. Intel estimates that most of its investment is intended for
equipment upgrades and new equipment investment required by rapidly changing
Under the Intel SIP agreements approved in 1999 and
2005 -- and not including the fees associated with these agreements -- Intel
was levied more property taxes than any other property tax payer in Washington
County in 2013-2014.
On a per-employee basis, Intel was levied substantially
more than other industrial/manufacturing businesses operating in Washington
County in 2013-2014. The 2014 agreement continues the approach
from the 1999 and 2005 agreements, although the precise amounts of taxes and
fees would depend on the timing and nature of Intel's investment under the 2014
and Sources: Property taxes levied for Industrial and Machinery and
Equipment categories from Washington County Department of Assessment and
Taxation for the 2013-2014 tax year;manufacturing employees in Washington
County from Covered Employment and Wages, Oregon Employment Department 2013.
These employers are routinely reported by the Oregon Employment Department
within the 300 series of the North American Industry Classification System
(NAICS) as manufacturing businesses: food, beverage and tobacco product,
textile mills, textile product mills, apparel, leather and allied product, wood
product, paper, printing and related support activities, chemical, plastics and
rubber products, nonmetallic mineral product, primary metal, fabricated metal
product, machinery, computer and electronic product, electrical equipment and
appliance, transportation equipment, furniture and related product,
How have Intel's property tax and fee payments been estimated?
Actual payments under the proposed 30-year SIP
agreement would depend on the nature and timing of Intel's investment.
Nonetheless, based on a scenario of two $50 billion investment packages focused
on the replacement of semiconductor manufacturing equipment, Intel's total estimated
property tax and fee payments for the full 30-year period are projected in the
table below. Other investment scenarios would result in different estimates
than those shown here.
Under the 2014 agreement, multiple exemption periods of 15 years each would be allowed. How would possible concurrent exemption periods be treated?
The 2014 agreement would continue a practice of concurrent
exemption periods applying to specific investment packages over time. A similar
approach was taken when investment under the 2005 SIP began while the 1999 SIP
was still in effect. The 2014 agreement allows separate investment packages
to be identified and accounted for so long as no exemption period extended
beyond the life of the agreement. Intel would gain greater flexibility when
timing equipment replacement and the local governments would gain an extended
period of certainty with respect to the methodology used to compute Intel's
taxes and fees.
Will significant employment growth result from the proposed agreement?
The 2014 agreement focuses on job retention, so significant
new employment is not anticipated. Intel has indicated that its investment
would be geared toward its unique cycle of equipment replacement and retaining
the 17,500 employees working in Washington County at the time the 2014 agreement was adopted. The
multi-million-dollar machinery and equipment used in Intel's manufacturing
process can become obsolete within a few years as the technology rapidly
evolves. As with earlier SIP agreements, property taxes would be partially abated
for investments in these leading-edge tools.
What would Intel's $100 billion potential investment mean for other businesses in Oregon's economy?
An analysis by ECONorthwest, a private consulting
firm, revealed that each of Intel's jobs in Hillsboro and Washington County
created an additional three non-Intel jobs throughout the state. In 2012, this
added up to nearly 68,000 jobs –about 4 percent of the State's workforce.
Additionally in 2012, Intel's payroll amounted to $2.8 billion causing a ripple
effect that led to a gross total of $327.7 million in state income taxes and
local property taxes in support of public services statewide. This and previous
studies of Intel's economic impact have measured this ripple effect across the
local and state economy, contributing revenue and jobs to smaller businesses
involved with real estate, retail, health care, entertainment and other
markets. The most recent ECONorthwest study can be found at: http://www.intel.com/content/dam/www/public/us/en/documents/reports/intel-oregon-economic-impact-report.pdf
The computers and electronics industry, and in particular
semiconductor manufacturing, forms the core of the Greater Portland region's
economy and exports. High-tech products are driving both wages and exports.
Recent data from the Brookings Institution and JP Morgan Chase indicate that
exports accounted for 24.4 percent of the Portland metro area's total economic
output in 2012, ranking Portland fourth among the nation's largest 100 metro
areas. The top three export sectors –semiconductors, computer equipment and
precision instruments, all prominent elements of the Hillsboro's technology
cluster –total more than $21.7 billion in annual exports, and make up 62
percent of the region's export value. Semiconductors are the top export, totaling
$15.17 billion, which accounts for 44.7 percent of total exports.
Hillsboro's high-tech cluster, anchored by Intel, is
populated by companies that range from relatively modest local specialty
service providers that clean and service equipment to large, multinational
corporations with operations on nearly every continent. A closer look at the
industry shows companies specializing in equipment, materials, components and
services are critical to primary makers such as Intel.As chip makers explore different designs,
geometries, materials and functionalities, their key partners of necessity must
collaborate with them as well. This is why Intel has attracted such a vibrant
supplier population here.
How can other capital-intensive businesses participate in the Strategic Investment Program?
Other businesses can and have participated in the Strategic
Investment Program since the Legislature created the SIP in 1993. The intent of
the program was to increase Oregon's ability to attract and retain
capital-intensive industry and high-wage jobs. Projects approved for the SIP
must pay full property taxes on the first $100 million of their investment, or
$25 million in a rural area. Given these state requirements, a business would
need to invest well over $100 million per year, or more than $25 million per
year in a rural area, before benefiting from this tax abatement program. Other
companies with SIP-eligible investments in Washington County have included: Integrated
Device Technology (SIP agreement approved in 1994) and Genentech (2006). Moreover,
other businesses have entered into SIP agreements elsewhere in Oregon.
The state of Oregon has been supportive of SIP agreements
across Oregon ranging from high tech investments in Washington County to wind-generating
facilities in eastern Oregon and a paper mill in Clatsop County. SIP presents
an excellent option for the manufacturing industries and companies relying on high-value
Would schools and other public services receive more revenue without this kind of agreement?
No, because Intel has consistently said that a
SIP agreement would be required before its billions of dollars of
investment in Washington County would be considered. Under the 2014 SIP agreement,
Intel's land and buildings will continue to generate payments at a rate
proportionate to those made by every other business in Washington County. Using
prior Washington County SIP agreements as a model, any tax savings to Intel
would come from its investment in chip-making equipment, which costs billions
of dollars to create and can become obsolete after a few years. This approach
would help continue Intel's level of investment in the community, continue job
retention and the ripple effect of jobs at other businesses. This approach
would also help continue property tax funding for county and city services, and
continue state income tax funding for schools.
How would the Gain Share program be affected by new Intel investment under the 2014 SIP agreement?
Potential Gain Share funding would depend on the future of
the Gain Share program. The City of Hillsboro and Washington County will
continue to work with the Governor and the Oregon Legislature to ensure
the long-term future of Gain Share.
What kind of impact will Intel's growth have on traffic and other aspects of livability in Washington County?
Intel's SIP-related employment under the 2014
agreement is not expected to grow significantly. As Oregon's largest
private-sector employer, Intel has worked cooperatively with the City of
Hillsboro, Washington County and other jurisdictions to support the livability
of neighboring communities. For example, Intel contributes to the cost of any
traffic improvements carried out by the City of Hillsboro or Washington County
when Intel facilities are built or expanded. In addition, Intel provides its
employees with an alternative start time program, an inter-campus shuttle
system, incentives for MAX ridership and carpooling. Through the 2014
agreement, Intel, Washington County and the City of Hillsboro have pledged to
continue working on ways to improve transportation and other infrastructure
supporting Intel's presence here and the livability of neighboring communities.
Can the County and City require Intel to only hire Washington County residents?
The short answer is "no." Instead, Washington County and the
City of Hillsboro have focused on ensuring that our communities remain great
places to start or grow a business. Through the Strategic Investment Program,
the Oregon Legislature has enabled the city and county to successfully attract
and retain capital-intensive industries and high-wage jobs benefiting the
entire state but focused here in our community.
What process was taken before the agreement was adopted?
On August 26, 2014, the proposed agreement was considered and adopted after a
joint public hearing before the Washington County Board of Commissioners and
the Hillsboro City Council.
Before a proposal under the Strategic Investment
Program can take effect, state law requires that a majority of the Board of County
Commissioners and a majority of the Hillsboro City Council approve and that the
county enter into an agreement with the business firm. If an eligible SIP
project will be located in a city, as is the case with Intel's facilities in Hillsboro, that city must
also enter into an agreement with the business firm. Finally, the business must
submit an application for approval by the Oregon Business Development
Is there an abbreviated version of the FAQs that I can print
Yes, a one page FAQ handout is available.
Can I pass along my comments and questions about the SIP?
Yes, you can comment on the agreement by contacting
Washington County Board of Commissioners or the Hillsboro City Council as