City OKs tax breaks for Boeing, ON

In the largest enterprise zone request to come before Gresham city councilors since such zones were created in 2006, the council on Tuesday, Feb. 19, unanimously approved an agreement with Boeing that will bring in an anticipated $300 million in investment at the company’s Gresham plant.

According to the agreement, Boeing plans to finish the expansion of a shipping and receiving building while also replacing old equipment at its sprawling 60-acre campus in the 19000 block of Northeast Sandy Boulevard in exchange for an estimated $12 million property tax abatement over three years, with partial abatements for the last two years of the five-year deal.

But really the abatement and investments will take place over the course of seven years due to the rolling nature of the agreements, said Janet Young, Gresham’s Economic Development Manager.

Boeing will have three years to invest in new machinery. Once the equipment is in place for five years, it returns to the tax rolls, resulting in an estimated $145 million in additional assessed value, Young said.

Councilors also unanimously approved a five-year property tax abatement for ON Semiconductor, clearing the way for a $4 million investment in new equipment and at least 55 new jobs at it’s Gresham facility. ON Semiconductor is considered a premier supplier of high performance, energy efficient silicon solutions for green electronics with clients in automotive, communications, computing, consumer, industrial, LED lighting, medical, military/aerospace and power applications.

It purchased the former LSI Logic facility in 2006, maintaining much of the existing work force on its 83-acre campus in the 23400 block of Northeast Glisan Street. The Gresham fabrication plant employs 547, a number that will top 600 under the new tax abatement.

Under the conditions of these agreements, the city isn’t the only entity affected: Metro, Multnomah County, TriMet and the East Multnomah County Soil and Water Conservation District also will temporarily forgo additional tax revenue under the agreement.

No new jobs are pledged as part of the deal because such requirements are waived when investment totals more than $25 million. But Young pointed out that the agreement requires Boeing to maintain existing job levels, adding that companies that apply for enterprise zone tax abatements have track records of adding jobs even when they’re not required to under the terms of the agreement.

In addition, tax abatement agreements can also spur even more investment than originally planned. For example, On Semiconductor’s 2010 enterprise zone agreement on a $7 million investment ended up generating $30 million of investment, plus 100 new jobs, for a total of 600 jobs, Young said.

The abatement agreement that Gresham city councilors approved this week is Boeing’s third request for a property tax break under Gresham’s enterprise zone program, launched in 2006 to attract industry that creates family-wage jobs with benefits to key parts of the city.

Gresham also granted Boeing abatements in 2007 and in 2010, adding up to $200 million in local investment, allowing Boeing to expand its Gresham facility and create more than 400 new jobs locally.

The 2010 agreement paved the way for creation of 350 new jobs and $120 million in investments, including a massive chemical plant, enabling it to process larger parts for the new 787 Dreamliner. The plant was completed this summer and early this month, two of the plant’s four tank lines were brought online, said Vicki Ray, Boeing spokeswoman. The other two plant lines are expected to bin operation early this summer, she added.

Boeing boasts 1,758 employees at its Gresham facility, which specializes in complex machining, gear systems and flight controls. The plant includes more than 1.3 million square feet of manufacturing and facilities space where employees make plane parts out of aluminum, steel, titanium, magnesium and other specialty metals for Boeing 737, 767 and 787 planes.

Boeing also recently made headlines for the worldwide grounding of its much anticipated 787 Dreamliner. The malfunctioning batteries blamed for the problems that plague the new jetliner are not manufactured at the Gresham plant.

Young said the abatements are designed to create an incentive for companies with local ties to expand here instead of a different facility in another state or even another country.

“These companies have choices,” she said. “And programs like this help create a local climate that encourages those companies to make their investments in Gresham. ... It’s just a really good tool.”

According to the agreement, Boeing also pays a community service fee of an estimated $1.3 million earmarked for economic development.

Boeing is the city’s largest private employer and its largest taxpayer, paying $2.8 million in property taxes last year.