In 2017, the City of Portland and Prosper Portland took a bold step, turning a traditional economic development program incentive into an innovative, nation-leading model which aims to identify shared values between business, community and the public sector.
The Oregon E-Zone Program is a state economic development program that allows property tax exemptions for up to five years in exchange for certain public benefits. Participating firms are required to meet the program requirements set by state statute and the local sponsor.
The Portland Enterprise Zone exists primarily to incentivize firms to invest major capital outlays and to create or retain quality jobs by offering property tax exemptions designed to encourage existing and new businesses. The E-Zone geography has evolved over time, most recently with the 2012 addition of East Portland, reflecting the city’s commitment to ensure more broadly shared community benefit by focusing predominantly on the area east of Cesar Chavez Boulevard.
With the 2017 changes, the program is positioned to change the apprenticeship, internship and mentoring landscape for Portland workers by connecting nonprofits, schools and universities with companies that want to collaborate on workforce pipeline development.
The City, as the E-Zone Sponsor, and Prosper Portland, as E-Zone Manager, each have a unique and critical role in creating an equitable economy for all Portlanders. State of Oregon statute empowers localities to impose certain requirements to target the incentive to firms, and in 2017 Portland designated that requirement to be a “public benefit agreement,” defined as a legally binding agreement between a governmental organization and a business with the goal of creating shared value and partnership. Such agreements create an interdependent bridge between the competitiveness of a company and the health of the public.
The bridging function offers the potential to bring more shared value to both employers and communities. Unlike a one-off tax break, connecting firms to a broader system of supportive business and social groups could yield higher profits while bringing more economic opportunities to struggling families and communities. This approach represents a shift from transactional to more relationship-focused economic development and has gained attention among economic development practitioners. Its execution, however, requires locally rooted partnerships and organized stakeholders that can actually deliver shared value to businesses, workers, and communities.
Prosper Portland’s engagement with dozens of non-profits related to entrepreneurship, workforce development, education, and social justice and community building allows businesses to quickly find the right partnerships to succeed in meeting pubic benefits requirements.
How the E-Zone Works for Companies
The E-Zone program allows qualified firms that will be making a substantial new capital investment a waiver of 100 percent of the amount of real property taxes attributable to the new investment for a five-year period after completion. Land or existing machinery or equipment is not tax exempt.
Generally speaking, the tax liability for a new capital investment is around 1.5 percent of the value of that investment. So, a $20 million investment would typically produce a tax liability of around $300,000 a year. Once the five-year period is over, the improvements, along with the rest of the property, are fully taxed for the life of the improvements. After five years, the entire asset enters the tax rolls. Hence the short-term waiver of local taxes results in a long-term return to the local taxing jurisdictions.
How the E-Zone Benefits Portland
Since 1986, more than 75 companies have participated in the program, and approximately 60 projects are active. Since 1996, the City’s E-Zone programs have leveraged nearly two billion dollars in private investments and have created and retained between five and ten thousand full-time, quality jobs.
Companies have invested anywhere from $100,000 to $150 million in facilities, equipment, and machinery as part of their E-Zone qualified investments. As traded-sector companies, these firms could invest anywhere in the world. Their local investment demonstrates the power of the E-Zone program as the City’s best economic development tool for attracting industrial sector businesses to establish and grow in Portland.
In addition to the private investment and job creation requirements, the public benefits derived from the E-Zone program include:
increased business opportunities for companies within the E-Zone through the program’s local procurement requirement;
enhanced tax base in the E-Zone to the benefit of all taxing jurisdictions; and
support for local job training and financial assistance to small businesses in the area through payment of 15 percent of the value of the tax abatement into the Business Development and Workforce Training Fund.
Added E-Zone Benefits to Companies: Electronic Commerce Overlay
Whereas the E-Zone provides a property tax exemption, the Electronic Commerce (“E-Commerce”) program provides a tax credit to offset State of Oregon personal or corporate income/excise tax liabilities for companies making a qualified E-Commerce investment. Qualifying companies can receive both E-Zone property tax abatements and E-Commerce tax credits simultaneously, as long as they comply with the regular E-Zone program requirements.
A qualified E-Commerce investment includes material resources related to E-Commerce, such as facilities, computers, equipment, networks, servers or software pertaining to the E-Commerce related business-to-business transactions of the firm.
Applying and Qualifying for the Portland E-Zone Program
Search for your property address to determine if it is within one of the shaded E-Zone areas.
Contact Andy Reed, Portland E-Zone Program Manager at 503-823-7053 or via e-mail to begin the application process, get estimates, and learn about compliance.
Please do not submit an application without initiating the intake process with the E-Zone Program Manager.
The Portland E-Zone is a five-year property tax abatement program. To qualify, a firm must be making new investment in construction or equipment to leased or owned property within the E-Zone boundary and must be creating new or additional employment. Once an authorized company enters the program it will receive full tax abatement on all qualified property for five years, consecutively, as long as Annual Compliance with program requirements is met.