Mayor's version of compromise on tax breaks may end impasse.

Byline: Edward Russo The Register-Guard

A high-stakes proposal from Eugene Mayor Kitty Piercy that is supported by Hynix, the city's largest high-tech employer, may break the deadlock today with the Lane County Board of Commissioners over the size of tax breaks given to businesses in Eugene's enterprise zone.

But don't look for Piercy to get unanimous backing from her own council colleagues.

City and county officials have been feuding since late June over the formula used to calculate property tax breaks for firms that invest in new plants and equipment and create jobs in the west Eugene enterprise zone.

A majority of councilors have said they only want to reward companies for creating new jobs.

Most county commissioners want both existing and new jobs to be counted in figuring the tax breaks, an approach that is more generous to companies.

To get commissioners to drop their demand to count new and existing jobs in the formula, Piercy is proposing a dramatic increase in the tax break per new job from what the City Council approved on June 27. Then, councilors passed a maximum total tax break of $30,000 per job created, over three years.

Now, Piercy is proposing a maximum total tax break of $96,000 per new job, over three years.

She acknowledged that some city councilors who previously supported the $30,000 figure may not approve her proposal, even if county commissioners agree to it.

"Although it is likely to satisfy no one, I believe this compromise to be in the best interest of the community, and I am hopeful it will be adopted," Piercy said Monday.

State officials approved the joint application for a zone from the city and county effective July 1. Until the city and county resolve their differences or terminate the zone, the city is in the position of being governed by state tax break rules. In certain cases, the state rules are more generous to businesses than the rules that the city was trying to create.

Eugene's first enterprise zone expired in 1997.

Hynix, which had qualified for tax breaks under the prior zone, is still eligible for tax waivers on new investments at its west Eugene chip plant.

The firm has invested $1.6 billion in its large plant over the years and employs 950 people. It is getting ready to invest $500 million in new equipment in the next three years, company spokesman Bobby Lee said on Monday.

The firm expects to boost employment by 10 percent, or about 95 jobs, he said.

On its $500 million investment, if Hynix received no tax waivers, it would have to pay about $13 million in property taxes over three years.

Under the state's rules, Hynix would be waived the entire amount of those taxes.

Piercy discussed the company's plans last week with Hynix's local president, Dong Won Baik, and Lee last week. Piercy said she asked Baik to wait before proceeding with the paperwork for securing the additional tax breaks on the firm's new investments.

Piercy said many people in Eugene oppose tax breaks for businesses, and that she didn't want a controversy to erupt about Hynix when she was trying to resolve the dispute with county commissioners.

"We were more than happy to follow her suggestion," Lee said.

"We could alienate local officials, and that is something that we didn't want to do," added Lee, a former city councilor.

As a grandfathered company, Lee said, Hynix would be eligible to have a full $13 million tax break on its $500 million upgrade.

But, he said, Hynix supports Piercy's proposed three-year, $96,000 per job tax break even though that would require the company to pay millions of dollars in taxes.

Under Piercy's proposal, Hynix would get a $9.12 million tax break on its $13 million tax bill, meaning that it would pay about $4 million in property taxes on the new equipment.

Interviews with the five county commissioners on Monday indicated that a majority may accept Piercy's proposal.

Four of the commissioners contacted Monday said they would be willing to consider Piercy's proposal.

Two commissioners, Bobby Green and Bill Dwyer, said they are inclined to support it.

Green said he would be willing to drop the demand to count new and existing jobs in the tax break formula in exchange for the larger per job tax break figure because "it appears that one of the largest companies, Hynix, may be comfortable with this concept."

The larger per job tax break also will "make sure the smaller companies probably will be taken care of as well," he said.

Two others, Faye Stewart and Anna Morrison, said they might endorse the idea.

Commissioner Peter Sorenson sounded as if he would be a hard sell.

"I am open to hearing the proposal, but the idea of giving almost $100,000 for a job doesn't really sound like a good bargain for the taxpayer," he said.

If commissioners agree, the proposal will be bounced back to the City Council for approval on Monday.

There is likely to be dissent from councilors who think the tax breaks are too large.

Councilor David Kelly said he is disappointed in Piercy's plan. "All of us, the mayor and the councilors, worked hard to put together an original compromise proposal that was acceptable to all of us, expect for Betty (Taylor)," Kelly said. "And this feels like that compromise is being thrown out the window. I would not have supported our original application for an enterprise zone if I thought we would be allowing a $100,000 per job exemption."