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Hynix requests tax break on upgrade.

Byline: SHERRI BURI McDONALD The Register-Guard

As Hynix finishes retooling its west Eugene computer chip plant and hires back workers it laid off in July, the company is requesting another property tax waiver worth several million dollars.

Hynix is asking for tax waivers on the $120 million it says it has spent, mostly on equipment, to produce more advanced memory chips in Eugene.

The state-sanctioned enterprise zone program allows three to five years of tax breaks for companies locating or expanding in the zones. As joint sponsors of the zone, the city of Eugene and Lane County must both vote on the request.

A three-year waiver would save Hynix an estimated $3 million to $4 million in taxes, said Denny Braud, city development analyst. Semiconductor equipment depreciates rapidly, so the value of an additional two years would be "pretty nominal," he said.

Hynix has already been granted enterprise zone tax waivers worth about $46 million, Braud said.

The Eugene City Council is set to discuss Hynix's request on Jan. 30.

Councilor Gary Rayor said he thinks the council may approve some or all of the request, given the importance of Hynix jobs to Eugene's economy and the near-bankruptcy of the factory's parent company, Hynix Semiconductor Inc. in South Korea.

The city hasn't budgeted for the taxes it would receive on the upgrade, Rayor said, adding that Hynix needs the financial help.

"They are struggling, and if the city can help Hynix be profitable, that's to our benefit," he said. "I'd rather keep people employed than get every last penny of tax out of that business."

Typically, a company applying for the tax breaks must pledge to increase employment by a certain amount. Hynix, however, is asking for a rarely used waiver of the employment requirement. Under state law, a company may ask the sponsor not to require it to increase employment if it invests at least $25 million, Braud said.

In exchange for the employment waiver, the city or county can require the company to retain a certain number of employees, or place additional conditions on the firm.

City planning staff haven't submitted a recommendation to the council. City and Hynix officials are talking about the company's hiring projections, and the city staff recommendation will be based on Hynix's ability to commit to a certain level of employment, he said.

Struggling with a market slump, low chip prices and huge debts, the Hynix factory laid off 600 of its 800 workers in July. The company has gradually rehired some workers, but Hynix on Wedneday declined to provide a current head count. The factory on Monday resumed "normal operations," Hynix spokeswoman Kitsy Knoche said. Hynix spent $120 million on the upgrade, must less than the $160 million to $200 million it initially budgeted, she said.

In late June, the council and Lane County Board of Commissioners denied an earlier request by Hynix for enterprise zone tax breaks worth about $16 million on previous improvements at the facility. City and county elected officials said those Hynix taxes were included in their revenue projections, and their budgets couldn't take the hit.

But the economic climate has grown much chillier in the past six months.

"There appears to be a lot more interest in economic development given what we're experiencing - a pretty high unemployment rate and lots of layoffs that have occurred in this community," Braud said.

Rayor said he expects most councilors will lend a sympathetic ear to Hynix. "I think the center of the voting public would understand," he added.

Hynix is one of a handful of grandfathered companies that can continue to request tax breaks until 2007, even though Eugene's enterprise zone expired in 1997.

Business Editor Christian Wihtol contributed to this report.
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Title Annotation:Economic development: The waiver, if granted by Eugene and Lane County, would save the company $3 million to $4 million.; Business
Publication:The Register-Guard (Eugene, OR)
Geographic Code:9SOUT
Date:Jan 17, 2002
Words:622
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