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Lawmakers divided on tax break Bill gives millions in property tax relief to some of Oregon's largest businesses By PETER WONG SALEM -- Southern Oregon representatives were divided Monday on a bill that would give a multimillion-dollar break on property taxes paid by some of Oregon's largest businesses. The 34-25 vote by the Oregon House, largely along party lines, sent House Bill 2050 to the Senate. Even if it passes in the Senate, the bill faces a likely veto from Gov. John Kitzhaber, who rejected a similar measure in 1997 and who says the current one represents "piecemeal" tax reform. The measure would exempt phone companies, airlines, railroads, and gas and electric companies from paying property taxes on the value of "intangible" property such as stocks, bonds, software and customer lists. The tax break would begin in mid-2000 and be phased in over three years. Despite his rejection of the 1997 measure, Kitzhaber's administration made arrangements that cleared the way for United States Cellular to choose Medford as the location of a service center. The company sought advance assurances that its Federal Communications Commission license would not be subject to property taxes. State Rep. Rob Patridge, R-Medford, was a member of the City Council then. He said U.S. Cellular has invested $20 million, hired 150 of a projected 400 employees, and has a payroll of $4 million. "They more than made up for a tax on intangibles," Patridge said. "If we had not been able to secure that (assurance) during last session, the company would have had to go to a neighboring state because of an uncompetitive business environment. It would not have wanted to invest that much capital or payroll in our city." California, Washington and Idaho have exempted from taxes intangible property. But Oregon has levied taxes on such property in most cases. The bill's floor manager, Rep. Ken Strobeck, R-Beaverton, said utilities have threatened to sue to overturn the law if the Legislature does not provide for the exemption. Rep. Judy Uherbelau, D-Ashland, stuck to her opposition of two years ago. She said the cumulative effect of the tax break cuts further into the property taxes of schools and other local governments. They have lost money under tax limits that Oregon voters approved in 1990 and 1996. "Maybe it is fair to these businesses we are giving this tax break to," she said. "But how about the students? They do not have a vote, or big political action committees that can come to you and give you money when you are running for office. So fairness is in the eyes of the beholder." Uherbelau said lobbyists can use House Bill 2050 as an indicator of a lawmaker's support or opposition for business, but lawmakers are aware Kitzhaber probably will veto it anyway. "I would ask you whether that is an honorable way to conduct our business," she said. She and Rep. Mike Lehman, D-Coos Bay, voted against it. The region's other representatives, all Republicans, voted for it. Estimates of property tax losses to school districts and other local governments vary widely. The state Department of Revenue estimates a $13.5 million loss statewide when the tax break takes full effect. Utilities estimate a far greater loss of $29.2 million, based on a broader definition of "intangible" personal property. The Legislature's own experts estimate losses of $8 million to $16 million annually. Jackson County Assessor Dan Ross said he has been furnished two conflicting sets of estimates. According to state figures, total losses to the county's local governments are pegged at $42,251 the first year, $136,431 the second year and $306,046 in the third year. According to industry figures, losses are estimated at $107,445 the first year, $284,224 the second year, and $543,160 the third year. School losses are estimated at a third of those figures. In Josephine County, the third-year loss is estimated at $64,390 by the state, or $107,905 by industry. (The Associated Press contributed to this story.) Today's Business Index Mail Tribune Copyright � The Mail Tribune 1999, Medford, Oregon USA