Lane County Gives UPS Five-Year Tax Break
Lane County Board of County Commissioners unanimously approved a two-year enterprise zone property tax extension for UPS’s new $10 million packaging facility in west Eugene at the Dec. 8 meeting. The company had already received a three-year exemption. UPS said during the meeting that the tax break was crucial, but past research by Eugene Weekly, and even the San Francisco Federal Reserve, question the effectiveness of enterprise zones in job growth.
During the meeting, Commissioner Pete Sorenson said the board should consider the costs of approving such property tax exemptions in the future because of the financial impact on education revenue.
UPS’s enterprise zone will be a total of five years, but the multinational corporation pledged to donate $10,000 for five years to Lane Community College’s Diesel Technology program and a minimum of two vehicles for educational purposes.
“It provides a lot of training for the industry, including for UPS that uses trucks, fixes trucks or involved with trucking,” Sorenson said. “It’s a very well-paying occupation when people get into it and get trained for it,” he said of the diesel technology program.
According to county meeting materials, to qualify for the two-year enterprise zone extension, a company has to increase by 10 percent its base employment by adding jobs that have annual wages of at least $65,676 (150 percent of average local wages).
The company said it would create seven jobs, but the county order doesn’t indicate any penalties should UPS not follow through with the job growth. UPS is moving its operations from Glenwood to west Eugene, where it plans to construct a $10 million, 43,000 sq. ft. facility that could be finished next year. The building will be located at the northwest corner of the Northwest Expressway and Irving Street.
Over the next five years, UPS is exempt from paying $366,400 in property taxes, according to meeting materials. During this time, UPS’s property taxes will be about $8,000 year one and up to $9,000 by year five. Starting year six, should UPS stay in west Eugene and isn’t awarded another tax break, the company will pay $89,300, with an annual increase of about 3 percent each following year.
Amanda D’Souza, who manages enterprise zones for the city of Eugene, says property taxes are still collected when a business receives the tax break. But the business defers its tax payments on property improvements.
When asked by Commissioner Joe Berney how important the two-year extension is, regional tax manager Shane Simpson of UPS said the incentives are seen as critical because the company is investing so much to build the facility. He added that small businesses and the community are also dependent on UPS’s services.
Berney asked that UPS management consider paying 50 percent of its years four and five property tax exemption and consider a community benefits agreement (CBA) when building its new facility.
Among other things, a CBA would have the company pledge to adhere to living wage jobs and hire people from underrepresented communities, such as people of color, women and veterans. According to the Portland-based Metropolitan Alliance for Work Equality, a CBA is a way to strengthen union and private sector relationships. And UPS has a large union membership. According to the Teamsters’ website, the shipping company is the largest employer affiliated with the union.
The West Eugene Enterprise Zone was established in 2005, and in 2016 the state of Oregon extended it for 10 years. A 2018 EW investigation found that local officials handed out millions of dollars in taxpayer money by awarding enterprise zone awards to attract business investment, but there was a lack of oversight in monitoring job creation.
A 2015 economic report published by the San Francisco Federal Reserve Bank found that enterprise zones are not effective at creating jobs and that it’s hard to make the case that the tax break has reduced poverty. The report continues that it’s likely enterprise zones mostly benefit real estate owners, who are not the intended beneficiaries of the program.
Sorenson voted to approve UPS’s enterprise zone application and said the company is important for local businesses. But he reminded other commissioners that supporting enterprise zones could impact funding for education since its revenue comes from property taxes. He added that enterprise zone tax reform could happen at an upcoming legislative session in Salem.
“By approving this today, we’re going to be reducing the amount of property tax money that goes into public education,” Sorenson said. “It can be at odds against the overall legislative picture to make sure that public education is funded not only by means of income taxes but also means of property taxes.”
Sorenson added that drafters of the enterprise zone program use the state’s general fund as the replacement for school districts that lost revenue from property tax exemptions.
But Berney said that enterprise zones create more tax revenue by attracting private investment. He added that the private party wants the investment to work as much as the local government wants more property tax revenue.