State Approves $5M Tax Break for Columbia Distributing

Business Oregon on Friday approved a sizable tax break for Columbia Distributing’s new, half-million-square-foot facility in Canby — despite staunch opposition from the local fire district.

The incentive comes from the state’s Strategic Investment Program. It means the company must pay full taxes only on the first $25 million of its property’s assessed value, with the remainder being exempt for 15 years.

It’s not yet known what the ultimate assessed value of their property will be, but it’s estimated to be in the $50-$60 million range. Columbia estimates it has spent more than $70 million on the 530,000-square-foot beverage warehouse and distribution facility, including the purchase of 42 acres of former farmland on the corner of SE First and Walnut in the Canby Pioneer Industrial Park.

Friday’s decision by the Business Oregon Commission, the nine-member body that directs the state’s economic development agency, closes a protracted saga that has been part of the earliest discussions between Columbia and city and county officials dating back to at least August 2018 — but which has been publicly known only since January or so.

That’s when the issue of the company’s Strategic Investment Zone application first came before Canby city councilors, almost all of whom expressed having no knowledge of the program or that such a request would be coming their way. The SIZ has been in place since Canby, Clackamas County and other city leaders agreed to it in 2010, but Columbia was the first company to take advantage.

A subsequent records request by the Canby Now Podcast produced email correspondence between representatives of Business Oregon, Columbia and the city, which demonstrated that the company had not followed the application process and appeared to be ineligible for the program.

The error — failing to file the SIZ application before beginning construction — would have cost Columbia an estimated $5 million.

Although dismissed by at least one city councilor as a simple “technicality,” others argued that the process Columbia undertook had detrimental impacts to the city.

In exchange for the tax incentives, prospective companies make several concessions to the local jurisdictions — one being that they will make a good faith effort to hire local employees and local contractors.

In this case, the building was virtually complete by the time councilors first heard of the proposed tax breaks in January. Now, five months later, landscaping, signage, exterior paint and most of the other “finishing touches” appear to be in place.

Under the language of the program, Columbia should have been required to spend its estimated $65 million in construction and design fees on local contractors, if at all possible, but it was not. That obligation did not kick in until Friday, when the state approved its application.

This was a point made in a letter to the Business Oregon Commission by Canby Fire District attorney Bob Blackmore, who called the company’s SIZ application an “afterthought” and argued that they cannot fulfill the program’s intended purposes.

“[T]he employment and engagement of local businesses were already lost prior to the applicant filing the application,” Blackmore wrote. “As a result, the purpose of the SIZ program, which is to incentivize development and employment in rural areas, cannot be fulfilled. The applicant is applying after the fact to benefit from tax avoidance.”

Senior Assistant Attorney General Wendy Johnson told the commission that the AG’s office has spoken with Blackmore, and they have a difference of opinion. The company’s application was proper under Oregon law, she said, because applicants are permitted to proceed with construction while their Strategic Investment Program applications are being reviewed.

And in terms of the timing, she pointed out that the company was asking for an abatement only on the property constructed after its application was received on July 2, 2019, discounting concrete work and other activities that had happened prior.

Canby Fire will be one of the more than two dozen local taxing districts to be impacted by the loss of property taxes, which also includes Canby School District and the city. The fire district estimates its loss at more than $800,000 over the 15-year life of the program.

On Friday, Canby Fire Chief Jim Davis told the commission that this will negatively affect the level of service they are able to provide, since they are still obligated to provide full fire protection services to the property. District firefighters have already spent an estimated 140 hours on site for compliance, inspection and planning.

Yet to be decided is how city, school and fire district leaders will agree to divide the community service fee, which is a 25 percent “refund” of the abated taxes that the company must return each year. Its disbursement must be agreed upon by the impacted taxing districts within 60 days.

When the council approved the company’s application last month, at least one councilor said he would support the city’s share of the community service fee being allocated to the fire district, to “make them whole.”

“I certainly hope the fire district and the local governments can work together in the next couple months to come to a satisfactory conclusion,” Oregon Business Commission Chair Kanth Gopalpur said after Columbia’s application was approved.

The Canby facility will serve as Columbia’s new Portland metro area headquarters, consolidating three existing locations currently situated on Portland’s Swan Island, NW Yeon Avenue and NW Guam Street.

Columbia says the facility will operate around the clock and employ 300 full-time employees, who will receive, pick and deliver an estimated 16 million cases of product per year. It is expected to be fully operational by October of this year.

The company also has design plans for up to two future expansions, which would add an additional 112,000 square feet each. No timeline for expansion has been given.

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