HomeMy WebLinkAboutItem 7: Resolution on E-Commerce in West Eugene Enterprise Zone
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Action: Resolution Authorizing Application for an Electronic Commerce
Designation in the West Eugene Enterprise Zone
Meeting Date: July 23, 2012 Agenda Item: 7
Department: Planning and Development Staff Contact: Denny Braud
www.eugene-or.gov Contact Telephone Number: 541-682-5536
ISSUE STATEMENT
The council is asked to consider a resolution that would add an electronic commerce designation to the
existing West Eugene Enterprise Zone.
BACKGROUND
The Oregon Enterprise Zone Program is a State program established by the legislature in 1985 for the
primary purposes of job creation, encouraging new investment, diversification, and competitiveness.
The existing West Eugene Enterprise Zone (see Attachment A) was designated in 2005 and is jointly
sponsored by the City of Eugene and Lane County. The program offers a three-year property tax
exemption for new buildings, renovation and expansion of buildings, and equipment investments made
by qualified businesses located within a designated area defined by the zone sponsor. The exemption is
designed to encourage new investment via a short-term exemption, with the long-term goal of job
creation and 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 percent. 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. The West Eugene Enterprise Zone designation expires in
2015.
Oregon State Statutes (ORS 285C.095) allow enterprise zones to receive a special overlay to further
encourage electronic commerce ("e-commerce") investments. The overlay applies to all of an existing
enterprise zone boundary. E-commerce is defined as engaging predominantly in transactions via the
internet or an internet-based computer platform. These transactions can include taking orders, closing
sales, making purchases, providing customer service or undertaking other activities that serve the
business's overall purpose. The most significant feature of these e-commerce designations is that
qualifying businesses may receive a state income tax credit against the business's annual state income or
corporate excise tax liability.
State Income Tax Credit
The state income tax credit available to qualified e-commerce businesses equals 25 percent of the
investment cost made in capital assets used in e-commerce operations inside the enterprise zone. The
investment must be incurred in that income tax year. Qualified investments include property used in the
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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.
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Regional Prosperity Economic Development Plan
Strengthen Key Industries
Identify strategies to address unique and logistical needs of existing and emerging
industries
Develop associations or networks among targeted cluster businesses for innovative
networking, information-sharing and provide opportunities for business growth
Pursue opportunities to expand and recruit businesses, ideas, and entrepreneurs into
our region
Enhance our existing business and community
Growth Management Policies
Policy 1 Support the existing Eugene Urban Growth Boundary by taking actions to increase
density and use on existing vacant land and under-used land within the boundary
more efficiently.
Policy 2 Encourage in-fill, mixed-use, redevelopment, and higher density development.
COUNCIL OPTIONS
1. Approve Resolution 5070 authorizing application for an e-commerce designation in the
West Eugene Enterprise Zone.
2. Do not approve the resolution.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends approval of the resolution authorizing application to the State of Oregon
for an e-commerce designation in the West Eugene Enterprise Zone.
SUGGESTED MOTION
Move to adopt Resolution 5070, authorizing application to the State of Oregon for an e-commerce
designation in the West Eugene Enterprise Zone.
ATTACHMENTS
A.Map - West Eugene Enterprise Zone Boundary
B.Resolution 5070
FOR MORE INFORMATION
Staff Contact: Denny Braud
Telephone: 541-682-5536
E-mail: denny.braud@ci.eugene.or.us
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ATTACHMENT B
RESOLUTION NO. ______
A RESOLUTION OF EUGENE REQUESTING THAT THE WEST
EUGENE ENTERPRISE ZONE BE DESIGNATED FOR ELECTRONIC
COMMERCE.
The City Council of the City of Eugene finds that:
A.
The City of Eugene and Lane County are co-sponsors of the West Eugene
Enterprise Zone previously authorized and approved by the State of Oregon.
B.
The West Eugene Enterprise Zone is a successful economic development tool for
the City of Eugene, contributing to the establishment and expansion of diverse businesses and
the creation of family wage jobs.
C.
The City ofEugene has established itself as a community that can support
businesses engaged in electronic commerce, particularly in west Eugene.
D.
The Eugene City Council finds that such designation will provide additional
incentives for qualified business firms to engage in electronic commerce within the boundaries
of the West Eugene Enterprise Zone.
NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a
Municipal Corporation of the State of Oregon, as follows:
Section 1
. The City of Eugene requests the State of Oregon Business Development
Department to designate the West Eugene Enterprise Zone as an Electronic Commerce Zone.
Section 2
. The City Manager or his designee is authorized to submit this resolution,
together with a similar resolution from the Lane County Board of Commissioners, as part of the
application for the Electronic Commerce designation for the West Eugene Enterprise Zone.
Section 3
. This Resolution is effective immediately upon its passage by the City
Council.
The foregoing Resolution adopted the ____ day of July, 2012.
________________________
City Recorder
Resolution - Page 1 of 1