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KTVL CBS Channel 10 :: News - Top Stories - Nike looks to expands; asks state to keep tax rules the same

Tuesday, December 11 2012, 03:20 PM CST
Nike looks to expands; asks state to keep tax rules the same
By Jonathan J. Cooper/Associated Press

SALEM, Ore. (AP) -- Athletic footwear and apparel giant Nike Inc. plans to expand its operations in Oregon and hire hundreds of workers but wants the government to promise that tax rules won't change, prompting a special session of the Legislature.

Gov. John Kitzhaber said he'll call lawmakers together Friday in Salem to create a new law authorizing him to grant Nike's wish, and legislative leaders said they'll go along.

The Legislature is due to meet in its regular annual session beginning Jan. 14, but Kitzhaber said Nike needed certainty sooner. The company was being wooed by other states, he said.

"Getting Oregonians back to work is my top priority," Kitzhaber said in a news conference.

Nike wants an agreement that its state income tax will continue to be based solely on the company's Oregon sales, regardless of any future changes in the tax code, for a negotiated time period. Before in 2005, Oregon also included a company's in-state payroll and property in the corporate tax formula.

Kitzhaber is asking for authority to make such a guarantee if a company invests at least $150 million and hires 500 or more workers.

Nike has not specified its expansion plans, and spokeswoman Mary Remuzzi wouldn't say how many people would be hired beyond the 500 required under the proposed legislation. The company hasn't decided where it would expand.

"We support this proposed legislation as a way to help us continue to grow in Oregon," Don Blair, Nike vice president and chief financial officer, said in a statement.

The proposal is not a tax break for Nike but rather a tool to offer tax certainty to any company planning a big investment, Kitzhaber said.

Nike employs 44,000 people globally, including 8,000 in Washington County, home to its world headquarters in the Portland suburb of Beaverton. The company said its Oregon workers make an average wage of more than $100,000.

Kitzhaber said he expects the Legislature to adopt the legislation in a one-day special session. House and Senate leaders from both parties responded positively to the governor's proposal.

"This is a rare opportunity and we're not going to miss it," said Democratic state Senate President Peter Courtney.

Oregon's current tax formula, known as a "single-sales factor," benefits corporations like Nike that have a large share of their payroll and property in Oregon but a small share of their sales here.

Chuck Sheketoff, director of the liberal Oregon Center for Public Policy, has been a critic of the single-sales factor and compared Kitzhaber's proposed legislation to a no-tax pledge created by anti-tax activist Grover Norquist.

"The governor's asking the Legislature to take a Norquist-like pledge for one company," Sheketoff said.

Nike began discussions with the governor's office about a month ago, Kitzhaber said.

The governor and Nike pointed to an economic impact study by AECOM that said a potential Nike expansion could create as many as 12,000 jobs and $2 billion a year in economic impact by 2020. But the actual impact is murky. The study was based on a theoretical Nike expansion, not necessarily any specific plans the company has. It counts hiring by Nike as well as a multiplier effect from those workers buying more goods and services.

The study was commissioned by Nike, which declined to release it.

Nike has been selling off brands and making other moves to focus on its most profitable businesses, which include its namesake Nike brand, Jordan, Converse and Hurley.

It sold its Cole Haan brand to private equity firm Apax Partners for $570 million in November and in October said clothing licensing company Iconix Brand Group Inc. would buy Umbro for $225 million.

Like most consumer product makers, Nike has faced rising costs for packaging, fuel and other raw materials.

In its most recent fiscal first-quarter, net income fell 12 percent as the boost from higher sales was offset by increased costs and ad spending. The company said then it was facing a slowdown of futures order growth, particularly in China. Those are orders from retailers of products that are scheduled for delivery between September 2012 and January 2013.

In November, Nike said it was boosting its dividend payment and planning a 2-for-1 stock split.

Companies typically split their stocks when they think the price of an individual share has gotten too expensive or if the stock is trading too far above similar companies' stock. Nike stock is up about 2 percent since the beginning of the year.

Nike built its current headquarters campus near Beaverton in 1990. It had a scuffle with city leaders in 2005 when it filed a lawsuit to find out if Beaverton leaders had plans for annexing company property. A judge found that city officials were in contempt for deliberately withholding public documents from Nike, including a draft annexation plan that showed city leaders considered forcing the company's headquarters into city limits in 2002. Nike got a 35-year exemption from forced annexation in Beaverton.

Either the governor or the Legislature itself can call lawmakers into session at times other than the state Constitution specifies.

For much of the state's history, the Legislature's regular sessions have been held every other year, at the beginning of odd-numbered years. That's the kind of session the Legislature is scheduled to begin early next year.

In recent years, the Legislature has moved to meet annually, running briefer sessions in even-numbered years. Those led to voter approval of a constitutional amendment in 2010 that called for annual sessions.

Records list 38 special sessions since Oregon's statehood, ranging from one day on eight occasions to 37 days in 1982.

Associated Press writer Tim Fought in Portland and AP Retail Writer Mae Anderson in New York contributed to this report.
Nike looks to expands; asks state to keep tax rules the same

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