Item 7: Resolution on E-Commerce in West Eugene Enterprise Zone

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business, the cost of which may be depreciated for federal income tax purposes. The annual maximum credit amount is $2 million per year. Unused tax credit amounts may be carried forward over the next five years. The credit is claimed directly on corporate or individual tax returns. To be eligible for the credit, companies must be in compliance with the enterprise zone eligibility criteria. Enterprise Zone Property Tax Abatement In any Oregon enterprise zone, an e-commerce operation would likely qualify for the property tax exemption without the e-commerce zone designation. In a designated e-commerce zone, however, the newly installed personal property machinery and equipment that qualifies for exemption is more broadly defined. Without the e-commerce designation, property that costs less than $50,000 per item qualifies only if used in the production of tangible goods. With an e-commerce designation, using personal property for electronic commerce suffices for the exemption. Qualified new investments also will include those for operations that support or ensue from the e-commerce activity - for example, shipping and storage facilities to fulfill orders mostly arising from e-commerce. E-Commerce Designation To receive the e-commerce designation, the governing bodies of the zone sponsor must both approve resolutions. Following the zone sponsor approvals, the State of Oregon must approve the e-commerce designation. State statutes allow a total of 10 e-commerce designations. (There are 59 enterprise zones in Oregon). The following 10 enterprise zones currently have e-commerce designations: Bend, Greater Redmond Area, Harney County/Burns/Hines, Hillsboro, Medford, Portland, Roberts Creek, Rogue, Salem, and most recently Springfield. It is anticipated that a designation will become available in the near future and Eugene will need to be positioned to apply in a timely manner. In accordance with Oregon Administrative Rules related to designation of e-commerce zones, applications to the state for designation are accepted and approved based on the demonstration of readiness for a qualified e-commerce investment. The potential purchase of the vacant Hynix facility has proposed a major data center investment that would anchor the facility and attract technology companies that would utilize the valuable data center infrastructure. The initial data center investment would likely be eligible for the existing enterprise zone exemption. However, the e-commerce designation would be attractive to qualifying e-commerce and technology companies seeking to utilize the data center capacity. These types of companies have significant job creation potential. RELATED CITY POLICIES The enterprise zone and e-commerce designation are enabled by state statute. Encouraging e-commerce investments resulting in economic development activity in the targeted core area is consistent with numerous adopted planning and policy documents. Examples include: Envision Eugene Pillars Provide ample economic opportunities for all community members 1(a). Plan for an employment growth rate of 1.4 percent. This growth rate translates into an increase of 35,800 jobs over 20 years. 1(c). Work with property owners of current vacant or developed industrial lands, especially those larger than 25 acres, to reduce the financial and regulatory obstacles to development, with a goal of making these sites ready for development. S:\CMO\2012 Council Agendas\M120723\S1207237-and att A.doc