New Governors' Agendas 2011: John Kitzhaber, Oregon
Oregon Governor John Kitzhaber is focusing on everything from business taxes to education to ensure a sustainable economic future for the Beaver State.
Area Development Special Presentation (2/24/2011)

Editor's Note: This article is part of Area Development's Governors' Agendas series, which allows governors elected to office in 2011 to outline their business and economic development plans. View interviews with all new governors at www.areadevelopment.com/GovernorsAgendas2011

What resources will your administration leverage in order to attract businesses to your state?
Kitzhaber: First and foremost, Oregon is open for business. Oregon already boasts the lowest effective business tax rate in the U.S. (Ernst & Young Cost Study, 2010). It is ranked as the 6th best state in the nation to do business (Forbes, 2010), and has ranked consistently in the top 10 nationally for the best business and business tax climates.

I recently proposed new legislation (SB 766) that will help expedite permitting of industrial uses in certain designated regionally significant industrial areas. An Economic Recovery Review Council will provide swift site reviews for proposed industrial development projects. These new approaches will complement Oregon's already highly successful certified industrial site program.

As states, including Oregon, face unusually difficult budget decisions, now is the time to make smart investments to build up industries and businesses that will create the jobs and revenue that can pay for critical social services down the line. I recently proposed $18.9 million in funding for initiatives of the Oregon Innovation Council (Oregon InC). Oregon InC brings together leaders from private business and higher education to drive our innovation strategy - expanding markets for Oregon companies, creating jobs across the state, and leveraging Oregon's strengths to compete in the global economy. These initiatives helped create and retain over 1,100 jobs in the last four years, connected existing Oregon companies to important R&D assets to strengthen their competitiveness, and established Oregon as a center for innovation, as shown by CNN Money's ranking of Oregon as the 2nd most "inventive" state in the U.S.

We are also focusing on a range of other economic development tools as well, including an additional $5 million in funding for one of Business Oregon's (our state economic development agency) most important job creation tools - the Governor's Strategic Reserve Fund. I recently proposed an additional $8 million in funding to the Credit Enhancement Fund to assist small businesses in accessing needed capital, and a $10 million increase in incentives available for use by our Office of Film and Television.

And we also want to make it easy for companies to find critical business environment and site information in one place, making it easy for them to say yes to Oregon. Our new "Oregon Advantage" Web portal - accessible from my website - lays out the numerous competitive advantages the state of Oregon offers companies worldwide. The new Oregon Advantage web portal offers critical information about Oregon's competitive business environment with searchable links to available certified industrial properties and a dynamic intake form where site selectors can directly communicate with Oregon's national recruitment manager.

In addition, Business Oregon's website contains an exhaustive list of available government financing resources as well as information on how existing Oregon companies can access critical resources and talk to an expert in their local area about their business needs.

And, finally, Oregon has a work force that is ready to be on the job. On January 25, I launched the statewide availability of Oregon's Career Readiness Certificate, a nationally recognized program to provide objective documentation of an individual's foundational job skills. I've included $3.4 million for on-the-job training in my budget, and the integration with the Career Readiness Certificate Program will add efficiencies to these highly regarded work force programs.

Which particular industry sectors would be well served by your state's resources?
Kitzhaber: As a state, Oregon has focused its business development efforts for years on certain key industries. Currently, we focus on key industry sectors such as advanced manufacturing, clean technology, outdoor gear and apparel, forestry and wood products, high technology, agriculture and food products, aviation and aerospace, software, and alternative transportation/electric automotive and mass transit vehicles.

Here in Oregon, we know we must initiate, sustain, build, and attract traded-sector businesses that bring more jobs and dollars into Oregon's local economies. That is why we have worked to transform Oregon into a value-added manufacturing economy that continues to grow and prosper. Many of Oregon's manufacturing firms compete globally, in everything from high-tech and healthcare to steel fabrication and trucking.

Clean technology, and renewable energy in particular, is a booming industry across the globe, and Oregon has competitive advantages that have established the state as a recognized leader in the marketplace. For example, Oregon is home to the largest solar cell manufacturer in the United States, SolarWorld, and the state continues to draw interest from other companies looking to grow their product.

Oregon is still the largest lumber producer in the United States, yielding the highest quality lumber in the world. Advanced technology has streamlined the processing of Oregon timber and finished wood products, making the industry more competitive and less labor-intensive. New initiatives to develop biomass facilities within Oregon's forest products sector are already well under way.

Oregon is also home to the Silicon Forest, the local concentration of high-tech, small-tech, and semiconductor companies that have made a name for Oregon across the globe. Intel's largest manufacturing facility in the world is located here in Oregon, and numerous smaller companies and spin-offs have flourished as a result of their presence.

We also provide the ideal location for outdoor gear and active wear companies to flourish. Oregon is the home to global giant Nike, as well as Columbia Sportswear and Adidas America. The presence of these industry leaders has further strengthened Oregon's creative class in this industry sector and beyond.

How will the state continue to serve its existing industry?
Kitzhaber: I have made a strong commitment to grow Oregon's existing industrial sector by showing leadership in three areas: state leadership that welcomes growth in this important business sector, leadership that understands the importance of a balanced economy for our longer-term prospects, and state leadership that addresses the growing costs of state government. Oregon's industrial sector can count on all three from my administration.

As noted above, I have also proposed increased funding for key business development tools and programs, including vital export assistance grants, to help Oregon companies find more markets for their products.

In addition, my website now directs business owners to resources that can help them grow their business and create jobs for Oregonians. My website also provides a comprehensive list of business-friendly resources offered by various levels of government. The programs include direct loans, loan guarantees, tax-exempt conduit bonds, and brownfield redevelopment loans.

In today's economic environment, what is your administration's policy on financial incentives to business?
Kitzhaber: Oregon intends to compete and win in a global economy. In order to do so, we will offer a reasonable set of business development incentives designed to showcase Oregon's strengths as a place to locate and grow a business.

In addition to our existing business development incentives, I recently proposed funding a new payroll-based incentive designed to retain, expand, and attract globally competitive, knowledge-based companies to our state. The Oregon Business Retention and Expansion Program (BEP) incentive would be based on increases in personal income tax revenue that accompanies new hires from expanded or relocated projects.

This new incentive would join Oregon's suite of existing, globally competitive tax incentives, which include:
Standard Enterprise Zones - In exchange for locating or expanding into an enterprise zone, eligible (generally nonretail) businesses receive exemption from property taxes on new plants and equipment for at least three years (but up to five years) in the standard program.

The Oregon Investment Advantage - This income tax exemption program helps businesses start or locate in most Oregon counties with a 10-year waiver on all income/excise taxes related to those operations, potentially avoiding state business tax liability for that period.

Strategic Investment Program - Oregon's Strategic Investment Program exempts a portion of large capital investments from property taxes. The program is available statewide for projects developed by traded-sector businesses and is most often used for manufacturing firms.

Incentives for Clean Technologies -The Oregon Department of Energy offers the Business Energy Tax Credit to those who invest in energy conservation, recycling, renewable energy-related manufacturing, and less-polluting transportation fuels.

Do you plan to undertake any specific educational initiatives to encourage businesses to locate and remain in your state?
Kitzhaber: Transforming Oregon's economy requires better access to higher education for more Oregonians. The jobs of today and tomorrow need people who have attained at least some postsecondary education. If Oregon can't provide a work force for those good jobs, the state cannot hope to achieve a full, prolonged economic recovery.

We must break down the funding and governance silos that have become barriers to effective teaching and student achievement. We have an opportunity to change course today to provide better outcomes for our students, more resources for educators, and a more prosperous future for Oregon.

I recently issued an Executive Order creating the Oregon Education Investment Team. The Oregon Education Investment Team is charged to:
• Ensure children enter school ready and able to learn by creating an accountable, streamlined system for early childhood and family investment for implementation in the second year of the budget cycle;

• Seek cost-savings and efficiencies within the K-12 system to increase resources available for classroom teaching in the second year of the budget cycle; and

• Design a unified, performance-based, zero-to-20 budget model for consideration by the 2012 Legislature.

Are there any changes to your state's tax and/or regulatory code that you are proposing in order to encourage business development?
Kitzhaber: Oregon already has a highly competitive business tax climate. As governor, I have initiated discussions about a bill I will introduce to create favorable capital gains treatment for reinvestment in Oregon.

It is always important to remember that Oregon does not have a:
• General sales and use tax
• Receipts/revenue tax
• Inventory tax
• Worldwide unitary tax
• Motor vehicle excise tax
• State capital tax on asset value
• Direct levies on intangible properties, e.g., stocks, bonds

In addition, Oregon businesses are taxed on a portion of their total income derived from sales within the state of Oregon. This corporate income tax is considered a "Single Sales Factor" tax, as it only considers Oregon sales in determining corporate income taxes owed to the state. This aspect of the corporate income tax has a tremendous impact for multistate companies based in Oregon. If a company is headquartered in Oregon but sells products throughout the country, or world, that company only pays Oregon corporate income tax based on the amount of income coming from sales within state lines.

And finally, just as we've seen important farmland get eaten up with low-density sprawl in Oregon, we're seeing strategic locations for high-density industry falling to the same fate.

Newly introduced industrial lands legislation will protect and improve regionally-significant industrial areas, and will speed up permitting for projects of state significance - those projects that create high economic value for an area, have local support, and are expanding or locating in an appropriately planned area.

By protecting and designating these industrial areas, we can insure that a local community has access to family-wage manufacturing jobs, helping to develop the community rather than stifle it with a low-wage economy.

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