Intel's tentative 30-year deal with Washington County and the city of Hillsboro, announced Monday, has interesting timing: it will take effect just as its 1999 agreement is expiring.
The agreements, made possible by the state's Strategic Investment Program, allow Intel massive property tax breaks on its expensive equipment – the company could potentially invest $100 billion and avoid over $2 billion in property taxes under the new deal. Under the 1999 agreement and the current SIP deal, passed in 2005, Intel saved at least $123 million in the last fiscal year alone.
Property tax breaks affect school districts' budgets, and on Wednesday, Hillsboro schools spokeswoman Beth Graser sent me the district's reaction to the deal, which I included in an earlier post. She touched on the pending expiration of the 1999 deal:
"Intel's 1999 SIP will end this year, which means that the $12.5 billion that was abated under that agreement will come onto the tax rolls," she said. "What is unclear is how much of that has already been fully depreciated."
I took the question to Washington County: What's the value of the Intel equipment exempted under the 1999 SIP that will come onto the tax rolls after the deal expires?
The answer: We won't know until the assessment process concludes this fall, said Philip Bransford, a Washington County spokesman. But the taxable amount will likely be less than $1.5 billion.
"Wait!" you exclaim. "Graser said it was $12.5 billion. What gives?"
The $12.5 billion refers to the total investment allowed to receive tax abatement over the 15-year period beginning in 1999, Bransford said. Much of that equipment has depreciated in value.
"The real market value of the property associated with the 1999 agreement as of 2013-14 was about $1.5 billion for that year," Bransford said in an email.
So, assuming some further depreciation, the 2014-15 amount will be less than that, and it will go back to being taxed as usual.
In 2013-14, the potential levied tax on the approximately $1.5 billion in exempted Intel equipment was about $25.5 million, according to Washington County data. The company was taxed normally on the first $100 million and paid various fees required by the SIP, for a total of $10.6 million. So the total amount abated in 2013-14 under the 1999 SIP (remember: by that time, much of Intel's tax breaks fell under the 2005 SIP) was almost $15 million.
Again, we must assume some depreciation, so that means the county, its cities and its school districts can expect less than $15 million in extra tax money once the 1999 SIP expires.
Here's where it gets more complicated. Of the $10.6 million Intel did pay under the 1999 SIP in taxes and fees in 2013-14, only $2.3 million was "actual tax paid" – the tax on the first $100 million of equipment exempted under the SIP. The rest of the money came from SIP fees like the annual "community service fee" and "guaranteed annual payment," plus the fees in lieu of taxes the company pays on its land and buildings.
Those fees-in-lieu will also go back into the general funds of the county, its cities and its school districts. Under the SIP, the fees were discretionary – for example, Hillsboro used them, in part, to create a fund that is separate from its general fund and pays down the debt on projects like Ron Tonkin Field.
The taxes abated under the 1999 SIP have been decreasing since the exemptions peaked at over $51 million in 2009-10, which makes sense – again, Intel renewed the SIP in 2005 and began getting separate exemptions under that agreement.
Confused yet? If you have a question, leave it in the comments section below.
-- Luke Hammill