Why hasn't Google Fiber come to Portland? Why didn't Apple build a solar farm in Prineville? It could be the same reason.
State lawmakers are racing to address a quirky provision in Oregon tax law they fear could be deterring Google Fiber in Portland and blocking a massive expansion of Apple's data center in Prineville.
The issue revolves around a wonky term called "central assessment," a tax formula that taxes Oregon utilities' property based on the value of their brand and other "intangible" assets.
A five-year court fight to overturn the rule ended last fall when the Oregon Supreme Court ruled in favor of Oregon counties, which were fighting to keep $17 million in taxes paid by Comcast.
Rather than settling the issue, though, lawmakers, counties and companies all say the ruling created more uncertainty about what kinds of technologies could be taxed, and how.
That raised concerns at Google Fiber, state and local officials say, and may have been a factor when the company passed over Portland – for now, at least – in the ongoing expansion of its hyperfast Internet service.
That same court ruling opened the door, in some interpretations, to similar taxes on Apple, Facebook and Amazon, all of which operate data centers in central and eastern Oregon.
"The Supreme Court decision threw this all into a brier patch. So that's a problem," said state Sen. Mark Hass, D-Beaverton, the incoming chairman of the Senate Finance and Revenue Committee. He said dealing with central assessment is now a top priority for the upcoming legislative session.
"It'll be the first issue we take up in the Senate revenue committee on the first day we meet" next Tuesday, he said.
Google won't comment on the tax issue and hasn't explained why it opted not to expand in the Portland region, one of nine metro areas the company identified last February as strong candidates for its service. Portland had responded promptly to Google Fiber's document requests and made a series of financial and regulatory concessions when the city approved an operating franchise for the company last June.
Apple declined comment Wednesday, but Hass said the central assessment issue caused the company to abandon plans to expand its data center in Prineville and build an accompanying solar farm to help power it.
"When the court decision came down, they pulled back that plan, said 'there's no way,'" Hass said, adding that Apple left the door open to reviving the expansion once the tax issue is resolved.
"They're willing to resurrect that if we do this in a timely way," he said.
That's what Hass aims to do.
It's possible that the data center issue might be addressed first, he said, because it's less controversial. Central assessment hadn't previously applied to those server farms and so counties hadn't been collecting that tax, or counting on it.
For the utility taxes, Hass said the goal is to cap utility taxes rather than wipe out the revenue stream entirely.
"The counties are held harmless and the companies have certainty. That's good," Hass said. "How you get there is more complicated."
It's unclear how telecom companies would respond to that solution, and whether the counties would buy in.
The Association of Oregon Counties hasn't taken a position on central assessment, according to Eric Schmidt, the organization's communications director. But he said the association's policy managers are talking with the governor's office and revenue department about a range of options.
"Those are conversations that we hope will bear fruit and have some impact on whatever the Legislature decides to do," Schmidt said. He declined to put a dollar figure to the revenue the counties receive from the current tax structure.
"It's an important issue to the counties and we want to be fair and make sure everyone is heard," Schmidt said.
-- Mike Rogoway
mrogoway@oregonian.com
503-294-7699
@rogoway