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defined by the zone sponsor. The exemption is designed to encourage new investment via a short-term exemption, with the long-term goal of increasing tax revenue for taxing districts following the exemption period. A qualified business is basically a (non-retail) manufacturing, processing, call-center, headquarters, distribution, or warehousing business that will increase its base employment by at least 10%. Businesses can request two additional years of tax exemption if they agree to specific wage requirements and other conditions that the zone sponsor may impose. There are 49 active enterprise zones in Oregon, four of which are in Lane County: Springfield, Cottage Grove, Florence, and Oakridge/Westfir. Zones are established for a ten-year period through a competitive state application process. There are a maximum of 49 zones available in the state. The next state application opportunity for establishment of a new zone will occur in Spring 2005. In urban enterprise zones, the sponsor may require businesses to satisfy conditions in addition to the basic state eligibility criteria (applicable to the three-year exemption). However, these conditions must be "reasonably related to the public purpose of providing opportunities for groups of persons to obtain employment." The conditions must be imposed pursuant to an adopted local policy, and must be in addition to, and not in lieu of, state program criteria. The state has specific rules regarding the reasonableness of conditions required by the zone sponsor. The expired West Eugene Enterprise Zone was in place from 1987 to 1997, and was jointly sponsored by the City of Eugene and Lane County. The zone boundary included approximately 6.5 square miles in West Eugene. During its ten-year life, 57 companies participated in the program, and 87% of the companies that used the program were existing local businesses. Not including the large investments made by Hynix and HMT Technology, the average investment in the West Eugene zone was approximately $800,000. The average three-year tax exemption benefit for those investments was approximately $32,000. The largest investments that occurred within the zone were made by Hynix ($1.66 billion investment, $48 million tax exemption) and HMT Technology ($90 million investment, pending disqualification of tax exemption). All other investments made within the zone totaled $62.5 million. Although the West Eugene Enterprise Zone expired on June 30, 1997, state statutes allow companies that were participating in the program at the time of the zone's expiration ("grandfathered" companies) to continue to use the program's three-year tax exemption benefit on additional investments made after the expiration of the zone so long as the company has an active tax exemption at the time that a new investment is qualified. There are only two remaining grandfathered companies, Hynix and Lanz Cabinets. Their grandfathered status expires in 2007. RELATED CITY POLICIES The enterprise zone tax exemption addresses the following related City policies: · Growth Management. The enterprise zone advances the City's Growth Management goals by encouraging more intensive industrial development in a defined area that has been zoned accordingly, and where existing public infrastructure investments have already occurred. · Sustainable Community Development. The council's Sustainable Community Development goal addresses high quality of life and a healthy economy. The creation of an enterprise zone will meet this goal by creating a healthier business climate, providing an incentive for redevelopment, L:\CMO\2004 Council Agendas\M040929\S040929C.DOC