Andy Tullis / The Bulletin file photoFacebook's Prineville Data Center.

State lawmakers are taking action to appease the tax concerns of some of the nation’s largest telecommunication companies, a move that could ensure the future of data centers in Prineville and other rural Oregon communities.

The state Senate Committee on Finance and Revenue modified a bill Thursday that would cap some taxes for cable television and Internet companies and fully exclude them from others.

Senate Bill 611 tackles the concept of “central assessment,” Oregon’s property taxation formula for communication businesses that includes assessing intangibles — things such as brand value, financial worth and patents — in addition to actual property. The taxation policy is not unique. The state centrally assess airlines, railroads, oil and gas pipelines, and electric companies.

But for telecommunication companies such as Facebook, Apple and Amazon, which have built massive data centers in Oregon based on promises of tax-friendly enterprise zones, central assessment would add millions of dollars a year to their property taxes. The data centers are not currently being taxed under the central assessment formula, but a recent ruling by the Oregon Supreme Court would likely change that.

“The current tax system we have makes Oregon one of the most difficult places for technology and communication companies to locate to,” Oregon House Republican leader Mike McLane, of Powell Butte, said Friday afternoon. “Take Apple (which has one data center in Prineville and plans for another). If they were subject to central assessment, their tax bill every year would exceed their investment in their data center.”

The new bill would make several changes to Oregon tax law, the biggest for Central Oregon being that data centers would be exempt from central assessment. SB 611 would also use a formula to cap central assessment taxation for communication companies and their non-data center buildings, and provide tax exemptions for “gigabit” Internet services, a not-so-subtle attempt to lure Google Fiber and its blazing fast Internet service to Portland.

“We’ve been talking about this ever since Facebook arrived,” Prineville Planning Director Phil Stenback said about the possibility of working with the Legislature to rewrite Oregon’s central assessment taxation formula. “These data centers, they’re a sophisticated group. We’re Plan A, but they’ve got a Plan B out there. They could always move to Plan B if Oregon takes too long.”

Cable giant Comcast has fought central assessment since 2009, the first year after the Department of Revenue adopted the rule that communication businesses should not be locally assessed but centrally. Comcast’s property taxes in the state skyrocketed the first year of central assessment, as its properties across the state were valued at $224.2 million during the 2008-09 fiscal year but jumped to an assessed value of $1.013 billion in 2009-10 with the new central assessment. In 2011 the Oregon Tax Court ruled that Comcast had been improperly assessed, but last October the state Supreme Court overturned that decision, ruling that Oregon counties could keep the almost $17 million in property taxes they had already collected from the cable television, Internet and phone service provider.

That decision, in which the Supreme Court unanimously agreed that both Comcast’s “cable television and Internet access services qualified as data transmission services and were, therefore, communication services subject to central assessment,” sent legislators scrambling to protect data centers from central assessment and make it financially feasible for a project like Google Fiber to come to the state.

“Clearly it’s a two-pronged problem,” said McLane, who in 2012 sponsored a bill that gave companies such as Facebook that operate in enterprise zones certain tax protections. “The taxing scheme of central assessment is broken. These current tech companies with high values expose the problem. And there’s a lack of clarity of who is assessed in what scheme. This bill is fixing those things.” Though McLane said he expects the bill to pass the House and Senate and be signed into law by Gov. Kate Brown, the proposed legislation is not without its critics. A revenue impact study conducted by an economist for the Oregon Legislature projected approximately $16 million in lost revenue during the 2016-17 fiscal year for local governments and education districts if the bill, with the tax caps and exclusions, is passed.

“We have and continue to support the provisions in the bill that would give breaks to and address competitive issues in attracting new and keeping existing data centers,” said Mike McCauley, the executive director of the League of Oregon Cities, in a written statement. “These data centers represent economic growth for Oregon and additional, rather than diminished, resources to support schools and essential municipal services.

“We also support the one gigabit provisions to create new facilities and capabilities for Internet access and speed,” he added. “We cannot support the total bill as it is currently written as it provides excessive tax reductions to existing telecom and cable providers, at the expense of local services, without generating new economic development.”

Locally, Prineville Mayor Betty Roppe and Bend City Manager Eric King both sent the Senate Committee on Finance and Revenue letters in support of a bill that excluded data centers from central assessment.

“In Prineville/Crook County, the data center industry has made significant investment and provided much needed family-wage jobs,” Roper wrote on Feb. 10. In her letter she credits Facebook with providing 120 direct jobs and numerous other ancillary support positions.

“Crook County has had (the) unfortunate distinction of the highest unemployment in the state through the Great Recession,” she added, “and just recently with … (Woodgrain Millwork) laying off 200 workers, has regained the unemployment title. I cannot imagine what our county’s unemployment would be today if the data centers had not been successfully recruited.”

Or as McLane put it: “If a business never comes here, you get a cut of nothing.”

McLane, whose House District 55 includes portions of Deschutes, Crook, Jackson, Klamath, and Lake counties, said the Legislature’s response to the question of central assessment should help the state attract more new businesses.

“(If the old tax law stood), Apple would have cut all growth in Oregon and looked at leaving,” McLane said. “Now I don’t think they’ll do that. They and other businesses are seeing that Oregon works.”

— Reporter: 541-617-7829, beastes@bendbulletin.com