Data centers are among the state’s biggest energy consumers and largest tax break recipients, collecting incentives worth more than $180 million last year. Amazon secured new property tax breaks worth $1 billion from tiny Morrow County last month.
Reformers sought to curb those incentives by limiting their duration and, separately, to reduce environmental impacts by requiring new data centers and cryptocurrency miners to shift to renewable energy by 2040. Carbon emissions are soaring in eastern Oregon, in part because of the rapid growth of Amazon’s data center footprint in Morrow and Umatilla counties.
The climate proposal died in a legislative committee, apparently for lack of support, while lawmakers opted to extend the tax credits with only modest changes.
Amazon fought hard against House Bill 2816, spending more than $93,000 on lobbyists in the first three months of the year — among the biggest tabs by any company during that period. The company faulted the bill for imposing clean-energy mandates without providing any incentives to connect renewable energy projects to the regional electrical grid.
“Accelerating energy infrastructure permitting and interconnections for renewables like solar and wind would have a greater impact on reducing emissions, bringing more clean energy to the grid, and helping achieve our goal of accessing more clean energy in Oregon,” Amazon said in a written statement.
Amazon has pledged to move to 100 percent renewable power on its own and says clean energy projects it is building elsewhere in the West compensate for fossil fuels used to power its Oregon data centers.
Still, the company’s efforts to defeat the Oregon legislation attracted national attention, and Rep. Pam Marsh, D-Ashland, who introduced the bill, said she wants to revisit the concept in future legislative sessions.
“We need to regroup,” Marsh told The Oregonian/OregonLive. “Things quite often don’t get through the Legislature on first go. Most of the time they don’t. So, we started the conversation.”
TAXES
Tax watchdogs also sought reforms to Oregon’s enterprise zone program, which was designed for small manufacturers in the 1980s but is now used primarily to underwrite server farms. Reformers sought to cut the length of rural enterprise zone agreements from 15 years to 10 and to make data centers in urban and suburban areas ineligible for the incentives.
Good government advocates also sought more transparency into how local governments award the incentives.
In Morrow County, local officials who own Amazon’s local fiber-optic provider are under investigation by the state’s government ethics commission for approving data center tax incentives that could benefit their fiber business. And the state Department of Justice is investigating how local officials acquired the fiber provider from a nonprofit that used to own it.
Local governments and business organizations from across Oregon testified during this year’s legislative session on the importance of the enterprise zone program in attracting businesses to their communities. But data centers seldom came up during the testimony, even though they account for three-quarters of the tax breaks.
Lawmakers ultimately dropped proposals that would have made data centers ineligible for tax breaks in places like Hillsboro, where server farms occupy more than 300 acres of prime industrial land. The data centers received $16 million in tax breaks in 2022 even though they employ few people. Twitter, for example, received $5.6 million in incentives despite reporting just 18 Hillsboro workers.
But House Bill 2009, which consists mostly of incentives for the semiconductor industry, does include some modest changes to the enterprise zone program.
Under pressure from the powerful Oregon Education Association, lawmakers will require companies to negotiate with school districts over how their tax breaks affect local education funding in the later years of enterprise zone agreements. Previously, the state compensated local districts to cover their losses from property tax incentives.
And local governments will have to give the public 21 days’ notice before enterprise zone deals take effect (though there are no additional notification requirements before local governments vote on the agreements). City and county officials often keep tax break negotiations secret, ostensibly to protect companies’ proprietary information, and they opposed the notification requirement and additional public input into the tax breaks.
“We think companies are going to perceive it as a risk and that it will give the public a false perception that they can change the outcome of the agreements,” Hillsboro lobbyist Andy Smith told lawmakers.
The enterprise zone program had been due to expire in 2025. HB 2009 extends its sunset date to 2032. Local governments had sought to extend it at least until 2035, or perhaps indefinitely, but taxpayer advocates argued for the shorter extension so lawmakers could take a fresh look at the program then.
John Calhoun with Tax Fairness Oregon said his organization was pleased with the shorter extension but was frustrated it didn’t make more headway with limits on data center incentives.
“We’re disappointed with that,” Calhoun said. “But the basic sunset was what it should have been.”
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