Arizona competes with Oregon for Intel plant

Northwest News Channel 8
Wednesday, June 8, 2005
Northwest News Channel 8 & AP Staff

PHOENIX -- The wait is on for Arizona leaders, competing with Oregon and other states to land a major economic development project tied to Intel.

Arizona has agreed to give income tax relief to Intel Corp. and other manufacturers but only in exchange for substantial new investment in the state in the next 2 1/2 years.

Besides Arizona, other states hoping to land a new Intel plant include Oregon and New Mexico. Hillsboro has agreed to extend and expand property tax breaks on business equipment, while New Mexico's Sandoval County has agreed to provide Intel with property tax abatements.

Supporters of the change hope soon to get good news -- namely the selection of Arizona as the site for a new Intel chip fabrication plant with a construction and outfitting price tag of $2 billion to $3 billion.

"We've got a window of time for people to start looking at us," said state Rep. Steve Huffman, a Tucson Republican who sponsored the income-tax bill. "I have every expectation for us to hit that trigger."

Arizona's income tax change, signed into law May 20 by Gov. Janet Napolitano, is an enticement but the state is not alone in taking steps to catch the eye of Intel decision-makers, said Jeanne Forbi, Intel's public affairs manager for Arizona.

"We're expecting some decisions in the second half of the year," Forbi said from Chandler, a Phoenix suburb where Intel already has two "fabs" with 9,500 employees.

Santa Clara, Calif.-based Intel and other manufacturers successfully lobbied the Arizona Legislature for an optional change to the state's corporate income tax.

The state income tax for companies doing business in multiple states now is calculated according to a formula taking into account how much of a company's sales, property and payroll are located in Arizona.

Under the so-called "sales factor" change, sales would take on a bigger importance than under the current formula, providing tax savings for those companies with most of their sales outside the state. The current formula would remain in place for businesses that choose it.

At Napolitano's insistence, the bill was amended to have the change only take effect if there's at least $1 billion in new capital investment projects, such as construction of a new plant or conversion of an existing one.

The company or companies involved would have to announce and detail spending plans by Dec. 31, 2007.

The investment requirement could be difficult for the state to track and administer unless Intel or some other company commits to a $1 billion-plus project, said Kevin McCarthy, president of the business-backed Arizona Tax Research Association.

On the other hand, "I think that if Intel makes the decision to locate here, it takes care of itself," McCarthy said.

From an economic-development point of view, it'd have been better to make the change outright to "beat other states to the punch," McCarthy said. "You want to be earlier rather than later.v

State tax officials say the sales-factor change would cost the state $8 million in its first year and gradually increase to $150 million annually once fully implemented.

However, Huffman and other supporters of the change cite the 500-plus high-paying jobs that a new Intel plant would provide and note that the tax officials' estimates of lost revenue don't reflect any increased tax revenue from projects that would be attracted to the state.

"This legislation puts us in strong contention in terms of fostering new investment in the state and retaining the facilities we already have in this state," Huffman said. "I'm hoping we'll have some good news fairly soon."