Oregon awarded millions to reopen a Eugene tech factory; a property tax fight could stand in the way – OregonLive
Hynix spent $1.5 billion on a computer chip factory that opened in Eugene in 1998. It closed 10 years later and has been idle since 2008. (File photo)Rob Romig/The Register-Guard via AP
One of Oregon’s largest factories, idle for 15 years, is facing fresh obstacles to reopening as Lane County fights with the plant’s latest owner over how much the company owes in taxes and how much it should pay in the future.
Oregon just offered the Eugene factory’s owner, an Ohio company called Stratacache, $19 million in subsidies to help get the 1.2 million-square-foot plant restarted. Stratacache says it would employ hundreds at the site, making micro-LEDs for electronic displays.
But Stratacache’s plans are in limbo while it’s in court working through the tax dispute with Lane County. The state says it won’t fund companies with outstanding tax liabilities, and the two sides are far apart: Stratacache values the property at $11 million, while Lane County says it’s worth as much as $50 million.
The gap represents millions of dollars in annual property taxes. Stratacache says its future in Eugene may hinge on how much the Oregon Tax Court says it owes. The fight is over 2020 taxes but the court’s ruling, expected next month, will set a baseline value for the property and help determine what it’s worth in subsequent years. That could add millions of dollars to Stratacache’s annual operating costs in Eugene, or save it millions.
“If we lose, it depends on what the magistrate comes back with,” said Chris Riegel, Stratacache’s CEO. “We have many options on the table. But if we find an adverse tax environment in Lane County, it may threaten the project.”
South Korean memory chip manufacturer Hynix invested $1.5 billion in the Eugene site to prepare for its 1998 opening. It was to be the first in a complex of factories on the 200-acre property. But Hynix operated the factory for only a decade before shutting down and laying off 1,400 amid a downturn in the memory chip market.
The Hynix factory had been one of Eugene’s major economic engines. Reopening the plant under a new owner has been a top priority for Lane County and Oregon economic development officials since Hynix left town in 2008.
The property has sold three times since then to manufacturers who each had plans to restart the factory, none of which has materialized. As the factory aged, the chances of it reopening appeared slimmer. Prior owners had planned to put it up for auction before Stratacache stepped in and bought it for $6.3 million in 2020.
Stratacache said the pandemic disrupted its supply chains and postponed its plans to begin production in 2021. But it has remained active on the site and sought funding to accelerate the reopening through Senate Bill 4, the Oregon CHIPS Act, which state lawmakers approved earlier this year. The law gives Gov. Tina Kotek authority to award $240 million in grants and loans to boost the state’s tech industry.
Lane County commissioners lobbied the state on Stratacache’s behalf in September, writing to Kotek that “we fully support redevelopment of a long underused technology sector asset.” Kotek’s office subsequently awarded the company $19 million, one of the state’s largest CHIPS grants, contingent on completing final negotiations with Stratacache.
At the same time the county was asking the state to help Stratacache, though, the county assessor’s office was fighting the company over its tax bill. It says Stratacache owes $2.5 million in unpaid taxes from 2020.
Lane County says the property is worth many times the $6.3 million Stratacache paid. The county assessor set the value at $29 million for 2020, but an assessment the county commissioned and submitted to the Oregon Tax Court pegged the property’s taxable value at $50 million that year.
In filings with the tax court last summer, Lane County argued that the 25-year-old factory has far more utility than Stratacache assigns to it. The county noted that Stratacache spent $3 million replacing part of the factory roof and has made other upgrades to the property, expenses that the assessor argues increased the property’s value should be included in its assessment.
And Lane County argues the land itself has considerable value. The county notes that Stratacache tried unsuccessfully to sell a vacant portion of property on the site for $25 million.
In its own filings, Stratacache maintains the factory is essentially obsolete because it was designed for an older class of semiconductor manufacturing equipment. The company notes that a succession of companies considered operating there before concluding it was impractical.
“The property is an underutilized, aging facility,” Stratacache wrote in its closing brief to the court. “Through the years, the owners of the property have continually struggled with utilizing the property for their business purposes.”
The 1.2-million-square-foot factory was among Eugene’s largest employers when Hynix closed it in 2008. It has been idle ever since. Photo courtesy Jones Lang LaSalle Brokerage
Lane County Commission Chairman Pat Farr, acting on behalf of the full commission, signed the county’s letter seeking state funding for Stratacache. He did not respond to repeated messages about the property tax fight and how the dispute affects the county’s efforts to attract state funding for the factory.
Lane County spokesperson Devon Ashbridge described the fight with Stratacache as “very routine” and, noting that it predates Oregon’s funding program for electronics manufacturers, said the dispute has no connection to the county’s efforts to attract Oregon CHIPS Act money for Stratacache.
“It has nothing to do with the state’s conversations with Senate Bill 4,” Ashbridge said.
But Anca Matica, press secretary for Gov. Kotek, said Stratacache and the county must come to terms before the company receives any state funding. She said the governor’s economic development team is tracking the dispute before deciding whether to actually award Stratacache the $19 million in funding.
“All projects will need to be in compliance with state and local tax obligations before Oregon CHIPS money goes to a project,” Matica wrote in an email. “Additionally, under contract, companies would not be able to use any funding from the Oregon CHIPS Act to retire any debt.”
— Mike Rogoway | [email protected] | 503-294-7699
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