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A Tale Of Two Corporations

Two weeks ago, the Oregon legislature was called into special session by Governor Kitzhaber to consider a bill that would allow the Governor exclusive rights to unilaterally negotiate future tax terms with any corporation considering expansion in the state. This bill was being considered in a rush because Nike reportedly was being courted for a large expansion in other states.

While this process dominated the headlines, a less prominent event was occuring. JELD-WEN, a door and window manufacturer in rural Southern Oregon, decided to develop its North American Headquarters in North Carolina. JELD-WEN was founded in Klamath Falls, Oregon in 1960, and has been a major employer here for decades. The natural assumption of all Oregonians was that this expansion would happen here, so it came as quite a shock that a locally grown company would look elsewhere.

Back to the Nike bill for a moment. As reported here at the time, the special session was called before the new legislature is sworn in, taking advantage of the expiring session that is still split 30-30 among Republicans and Democrats. Republicans, hearing the cries of crony capitalism and favoritism from their conservative constituents, attempted to attach amendments to the bill that would allow the tax certainty sought by Nike to be enjoyed by small businesses as well. To their credit, the Republicans on the special session ad hoc committee that considered Gov. Kitzhaber's bill fought passionately for the small business amendments, as well as assurances of legislative oversight.

But the amendments did not make it out of committee. As Rep. Sal Esquivel reported on his facebook page,

"Four Democrats kill ammendment to help small business growth in Oregon. Four Democrats vote to stop the expansion of the Nike bill to include small business. The committee voted on ammendments to change the criteria of 500 or more new jobs and an investment of $150 Million or more, to allow any small business to have this tool to grow. As we know there are few, if any companies, in Rural Oregon that meet this criteria.The four Democrats that voted to exclude small business from this bill were Rep. Read, Rep. Barnhart, Senator Hass, and Senator Burdick. The four Republicans on the committee vote to allow small business in the bill.  Does this mean our ruling Democratic party in Oregon does not really care about economic growth for Oregon small business?

WHY WHY WHY WHY ???????"

State Rep. Dennis Richardson put it this way:

"Our Governor and a majority of Oregon’s Democratic and Republican Legislators have now endorsed the principle that Oregon should nurture its businesses, that Oregon businesses create our desperately needed jobs, and that further tax burdens on successful Oregon businesses will result in driving them to more tax-friendly states.

In other words, passing HB 4200A acknowledged the fact that if successful Oregon businesses do not get assurances that their taxes will not be raised, they will move future job-creating investments to states that offer more favorable tax policies.

Conclusion: In today’s Special Legislative Session, Oregon’s Democratic Governor and Legislative leaders signed a pledge of “no-new-taxes” for Nike.  Although I have not signed such a pledge for Grover Norquist’s organization, I was pleased to see our Governor and a majority of Democrat and Republican legislators did so for Nike.  I wish every Oregon business employer could benefit from such a pledge.

Not all Republicans gritted their teeth to vote yes on this bill. Rep. Kim Thatcher voted against the final bill:

'Certainty’ is one thing I really like about this bill…I certainly want Nike to stay here. I want them to grow and expand here and do all these great things….Certainty is important to every business in this state. Government, can sometimes set businesses up to fail.
What we do in this building matters. We can either encourage or discourage a strong state economy. But our economy depends on businesses of all sizes, not just the large ones. We need them no doubt, but we especially rely on the smaller ones.

I, and others, offered amendments that would’ve allowed all businesses access to certainty. I offered an amendment which would’ve added accountability measures with legislative oversight This is a frustrating vote. We all want the same thing; we all want a thriving economy. It’s how we get there that matters. Freedom, fairness, and prosperity—that’s the path we should be taking.”     

Again, while all this was going on in Salem the week of December 10th, JELD-WEN was simultaneously announcing its expansion out of state. While the current administrative and operational facilities will remain in Oregon, it is telling that, according to media reports, JELD-WEN seems not to have approached any state officials to discuss its opportunities for expansion.

To be fair, this was straight up crony capitalism by North Carolina:

"To help facilitate this expansion, the state Economic Investment Committee awarded a Job Development Investment Grant. JDIGs are awarded only to new and expanding businesses and industrial projects whose benefits exceed the costs to the state and would not be undertaken in North Carolina without the grant.

Under the terms of the JDIG, the company is eligible to receive a grant equal to 60 percent of the state’s personal income withholding taxes derived from the creation of new jobs for each of the nine years in which the company meets annual performance targets. If JELD-WEN meets the targets called for under the agreement and sustains them for nine years, the JDIG could yield $2.54 million in maximum benefits for the company. "

However, it is also indicative of the business environment in North Carolina as compared to that of Oregon.

“We are very pleased to expand in North Carolina and establish our North American headquarters in Charlotte,” said Philip Orsino, JELD-WEN President. “As a thriving financial center, Charlotte offers access to an abundance of world class business services and amenities that are important to our growth and productivity. In addition to business necessities such as an international airport and professional services, we also appreciate Charlotte’s outstanding quality of life and affordable cost of living.”

“The Charlotte Chamber welcomes JELD-WEN to the Queen City. They join a growing list of global companies choosing to locate their North American headquarters here because of the competitive advantage we have to offer. From the sixth busiest airport in the nation for operations to our affordability and quality of life, Charlotte continues to attract top tier corporations,” said Bob Morgan, Charlotte Chamber president."

The bottom line, it seems, is that without special consideration by the state legislature, corporations regard other states to be far more favorable than Oregon. Why else would Nike have sought special favors in the first place, and why else would JELD-WEN not automatically expand in the state of its founding?