The state economic development agency and Clackamas County are “hoping to come to a solution” with regard to sizable tax incentives that Canby’s largest industrial park user, Columbia Distributing, appears to be ineligible for under the law.
The disagreement is over the county’s Strategic Investment Zone, a Business Oregon program administered by the county, which grants a 15-year property tax abatement for a portion of the assessed value of developments valued at over $25 million.
The incentive was a “fairly significant factor” in Columbia’s decision to consolidate three warehouses and relocate their Portland area operations to Canby, according to the company’s CFO, but the company may fail to qualify due to beginning “physical construction work” (in this case, pouring concrete for the building’s foundation) before the state received their application on July 2.
In a Feb. 5 email from Business Oregon Communications & Research Manager Nathan Buehler, he explained that the agency tries “to work through challenges with applicants and partners when issues arise.”
“With this one, construction is indeed supposed to start after the application process has been completed,” he said. “Because here, some construction was happening prior to and concurrent with the application submission, we’re hoping to come to a solution that will still fit with the rules of the program.”
That solution is still very much a work in progress, but the basic framework would involve separating out the work that was done prior to the application (essentially, the pouring of the concrete slab and the work leading up to it) from everything that came afterward.
“At this point, that compromise seems to be acceptable within the program,” Buehler said. “So, nothing firmly decided yet, but that seems to be the direction after reviewing the situation and the applicable laws.”
Buehler was clear that the state believes Columbia, and everyone else involved, acted in good faith.
“The activities around this appear to be in good faith by everyone,” he said. “There was just some misunderstanding about how the process and timing works.”
That sentiment was echoed by Lynn Longfellow, appraisal manager for Clackamas County Department of Assessment and Taxation, who has been involved in these discussions.
“I do not believe the company was told that construction of the building was not to begin prior to the submittal of their application,” Longfellow said in an email to Business Oregon Incentives Coordinator Art Fish. “There seems to have been several misunderstandings here — including by the county and the city.”
Longfellow also appeared to endorse the idea of isolating — and removing — the costs associated with the construction that happened in the 21 days before the state received Columbia’s application on July 2, and proceeding to grant the exemption on the remainder of the project.
Longfellow expressed the belief that such a compromise would “avoid potential lengthy litigation,” and that the costs of the ineligible portion of the construction would be “pretty nominal.”
Click to access RE_-Law-with-SIZs.pdf
In response, Fish did not seem to object to the matter being handled through state and local tax administrators. Though he “remain(s) leery about slicing and dicing property or property value too finely,” he said the state departments of justice and revenue have “put in good time regarding how to make it work defensibly and legally, and we feel very confident in their formulation.”
Once a local agreement is in place, the project would come before the Oregon Business Development Commission to make a final determination on the project’s eligibility. The commission is next scheduled to meet on April 10 in Bend.
