558 N. Main St., Prineville, OR 97754 | (541) 447-6205
When news first broke that the Oregon Department of Revenue intended to centrally assess data centers for taxation, the legislature didn’t wait long to act.
Within a month, Oregon Representative Mike McLane and fellow lawmakers began crafting a bill to protect data centers from the state tax.
Now, with the legislature convening this week, Governor John Kitzhaber has announced an administrative fix to the same issue.
Despite the later date, Kitzhaber spokesperson Tim Raphael says the Governor’s Office began working on the central assessment issue when they first learned of the situation.
“From the start, we recognized that the state wanted to provide more certainty for these companies, and began working on that several months ago,” he said.
That work included a conversation with the state department of justice, who found a difference that sets apart data centers from other centrally assessable companies.
Ultimately, it comes down to whether the company provides internet connectivity — such as an internet service provider — or merely offers a service — like e-mail — that requires an internet connection.
Under a rule developed by the Department of Revenue, those companies providing connectivity will still be centrally assessed while companies like Facebook, who provide an internet-reliant service, will be locally assessable.
When they first learned that the state wanted to tax Facebook, local leaders felt it might cause the company to leave and discourage other data centers from choosing Prineville. Facebook chose Prineville in part because of a locally-negotiated enterprise zone deal that gave them a 15-year property tax exemption. The state tax would essentially render the benefit moot.
The situation became all the more precarious with another large data center company, code-named Maverick, showing serious interest in the community.
In response, McLane intends to introduce a bill during the upcoming legislative session that will protect data centers located in enterprise zones from central assessment. So far, the law seems to have legs.
“It has bipartisan support,” McLane said. “Forty-eight members of the 90-member legislature are co-sponsoring the bill including both co-speakers of the House, both caucus leaders of the House, and all the chairs of the Senate and House finance committees.”
While that is the case, Kitzhaber intends to fix the issue administratively in the interim, and wait until the longer 2013 legislative session to address the central assessment issue statutorily.
“This is a statute that was written almost 40 years ago,” Raphael said. “This is a very short session for a complex issue.”
Prineville City Manager Steve Forrester said he appreciates Kitzhaber moving quickly and taking a step forward with administrative fix to provide certainty on the issue. However, he believes that Facebook and perhaps Maverick would prefer a legislative fix before 2013.
“We’re concerned,” he said. “I think this shows a real sense of urgency on his behalf to do this, but at the same time, I think it will not provide the absolute certainty that these companies . . . are looking for.”
McLane called the administrative solution a step in the right direction, but shares Forrester’s concerns.
“I still have information that three companies who want to build multiple data centers in enterprise zones do not see the administrative change as the long-term certainty they need to invest over $1 billion in construction and equipment, and all other related items,” he said.
As far as the future of his bill is concerned, McLane does not see any waning support yet.
“We’ll have to see what the impressions are of House and Senate members as to their sense of urgency,” he remarked.
If it doesn’t pass, Forrester worries that Prineville could miss out on a lot of new business.
“If they are not satisfied with this, it could delay or eliminate future build-outs and future data centers from coming here,” Forrester said. “We just don’t know.”
