Another Oregon Business Bungle by Politicians

Oregon’s anti-business reputation is showing anew. And this time it’s reflected in the management of the state’s own funds. In 2003, the legislature created the Oregon Investment Fund for the purpose of investing in Oregon based business start-ups. In other words, Oregon state government entered the venture capital business and dedicated $100 million dollars to assist creating new businesses and new jobs in Oregon. A very laudable idea but one destined for disappointment given the business world’s aversion to starting, growing, or even staying in Oregon.

So how has this great experiment worked? Well, according to a recent report, the Oregon Investment Council was only able to place $7 million of that $100 million in Oregon based businesses. And what did that do for Oregon’s economy? Well, they really don’t know. They can’t tell us how many jobs were created in Oregon as a result of that paltry $7 million.

They claim that over 200 jobs were impacted — that’s the economists’ way of measuring the ripple effect of one job being created. The commonly accepted ripple effect is that each job created “impacts” ten other jobs (e.g. suppliers, support services, etc.). That would suggest that about 20-25 jobs have been created as a result of these investments — not much bang for the bucks. (Frankly, $7 million invested as 6% annually would produce enough interest income to pay 20 people $20,000 a year).

But fear not though, the money is not sitting idle. The Oregon Investment Council, through its agent Credit Suisse First Boston, has pledged approximately $76 million of that fund in the “Pacific Northwest” and in doing so has “impacted” 1,671 jobs. Let me be clear. In four years, the Oregon Investment Council has only been able to place 75 percent of the funds earmarked to invigorate business growth in Oregon. And of that 75 percent, only 10 percent went to Oregon based businesses. The remaining 90 percent went to businesses that chose to locate, grow, and develop anywhere but Oregon. Wow, there’s a ringing endorsement of Oregon’s business climate.

Let’s give credit where credit is due. The idea to create this fund was the brainchild of two Portland liberal Democrats — Rep. Mitch Greenlick and Brad Avakian. The biggest problem is that they turned it over to another Democrat to actually make it work — Governor Ted Kulongoski. And for Kulongoski, the fundamentals of business are a foreign language. It’s not that Kulongoski is malevolent — he’s not trying to drive business out of Oregon. Rather he is just inept. Kulongoski has spent virtually his entire adult life working for either government or unions. His experience in the business world is practically non-existent. He has surrounded himself with the usual cadre of liberal democrat support — environmentalists, labor union officials, and fresh faced liberal activists. Oh sure, Kulongoski can always point to some Portland businessman who enjoys having his picture taken with the governor and willingly nods at all of the nonsense that is spewed by his “blue ribbon commissions.” But, in the long run, even when Kulongoski tries to listen to them, he either can’t understand what they are telling him or their message is drowned out by the other special interests in the room.

And it isn’t much better amongst the other statewide Democrat office holders. State Treasurer Randall Edwards has announced that he is “satisfied” with the progress being made on the Oregon Investment Fund. If $7 million out of $100 million stirs Edwards to “satisfaction”, I assume that zero would only invoke mild concern and that might not be for several more years. The man charged with management of Oregon’s finances cannot be “satisfied” with such a weak performance. He should be outraged that so little has been done. And he ought to be damn well boiling over the fact that 90 percent of the investment and job creation has gone anywhere but Oregon.

But there are those out there that do understand business and business climates and their assessment is a bit more pointed. Eric Rosenfeld, a partner in a Portland based venture capital firm, responding to the news that 90 percent of the investment has gone outside of Oregon, said, “By investing in out-of-state funds, we’re really shooting ourselves in the foot. This is a chance to create our own venture capital infrastructure. Unfortunately, this is making San Francisco and Seattle stronger for venture capital at Oregon’s expense.”

So give Ted a call and tell him how much you appreciate his work in creating jobs anywhere but Oregon.

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Posted by at 08:23 | Posted in Measure 37 | 18 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jerry

    Of course investment is flowing out of Oregon like the headwaters of the Rogue after a snowmelt. Oregon is VERY, VERY anti-business. Why do you think we only have one Fortune 500 company headquartered here? And they were bullied by Beaverton for no reason whatsover.
    Oregon is a joke in the national business community. Ted can’t create jobs in the private sector – people who run businesses create jobs – and they place their businesses in places like Tennessee where the business climate is overtly friendly.
    I am ashamed of Oregon government. What a joke to think Oregon government could do anything to bring business to Oregon. They can’t and they won’t.
    They never have and they never will.

  • Rebecca

    Oh please,,,, everyone knows Oregon will soon be rebounding and in a boom as we switch to a sustainability business economy leading the green way to green bucks for all.
    I’m waiting for one of the government sustainability jobs. The rest of the $100 million should be used to jumpstart this new and exciting effort by expanding State and local agencies’ green efforts.
    The more people working for these agencies the greener Oregon will become.

    • rightOregon.org has a piece on the sustainability bamboozle in Portland.

  • John Fairplay

    The sad thing is this is the only place we’ll hear about this latest failure of the Kulongoski administration. If we had an active, balanced press corps in Oregon, this kind of thing would be exposed and ridiculed on a regular basis – because believe me, it’s out there. Unfortunately, the Oregonian and other media are so lazy and/or tied into the status quo power structure they can’t show much more concern than our anemic State Treasurer. It’s a good thing Phil Knight went to the University of Oregon. It he’d gone out of state somewhere, we’d have zero Fortune 500 companies.

  • Captain_Anon

    The Oregonian reported on this just the other day… and before this site

  • eagle eye

    Were they investing state pension funds in this Oregon venture capital scheme? If so, I’m glad it didn’t work. The pension fund should be invested for the benefit of the beneficiaries — that is the fiduciary responsibility of the fund — not to make a probably vain effort to invest in Oregon venture capital.

  • Chris McMullen

    They have to do something. The private sector won’t invest in this state:

    http://www.kgw.com/business/stories/kgw_012207_biz_benture_capital.ac63389.html

    • eagle eye

      Sorry, but it’s not the job of the Oregon state pension system — it’s probably illegal for the Oregon state pension system, if anyone wants to make a lawsuit of it — to invest money somewhere because private business won’t do it.

      Would be better for the State of Oregon to ask why venture capital is so reluctant to come here — rather than making a futile, risky, illegal effort to play at venture capitalism itself.

      • Chris McMullen

        It was meant as a sarcastic comment, Iggie.

        Oregon’s dismal economy is a perfect example of how RINOs and the ruling Democratic party have ruined private investment. Overzealous land use regulations, fees and a stifling tax code will continue to keep this state on the low end of the business spectrum.

        • eagle eye

          I would probably agree with all those reasons, and add a couple of my own, not all of them related to government.

          You seem to blame it all on Oregon government. I wouldn’t, I’d also add an unimaginative, risk-averse business/entrepreneur class in this State. In a way, the business mindset goes with the government mindset here.

  • Dave A.

    Well I know one thing for sure. I”m leaving this state in less than three years and the three jobs my small business created for the last 15+ years will be leaving also.
    Oregon is simply am economic backwater. And anyone who thinks or says otherwise is either a rube or a lying politician! I laughed in Vera Katz’s face five years ago when she said that Oregon has a “budding” biotech community. I informed her that Genentech in CA had more people employed in their shipping department than all the so-called “biotech” companies in Oregon combined. Just a small example of how lame Oregon really is. By the way, don’t expect most of the so-called “tech” compnaies in this state to last for long either. In ten years the party will be over for good!

  • Pam

    Genentech is opening a new facility in Oregon, Hillsboro to be specific. Hundreds of Oregonians will be employed there. Genentech searched all over the US for a place to locate its facilities and choose Oregon. Governor Kulongoski, the guy who gets misrepresented here on a regular basis, negotiated the deal with the assistance of the Economic Development Department. Next, you are going write AMY”S KITCHEN, another company relocating to Medford doesn’t exist nor do their well compensated employees. Sheesh.

    • Chris McMullen

      You’re being disingenuous, Pam. Genentech ‘chose’ to be here because Teddy K. stuffed our tax dollars in their pocket.

      “The total state investment in the project would be $4.8 million, including $2 million from the Governor’s Strategic Reserve Fund, which would help the company train Oregon workers and make needed infrastructure improvements for the facility.”

      from here: http://www.bizjournals.com/portland/stories/2006/03/13/daily36.html

      It’s nice to see a state so strapped for cash shelling out close to $5 million to attract a business. Once again, Oregon — just like Portland — has to subsidize businesses in order to locate here.

  • Pam

    Let’s give the readers factual information for once. The Oregon Public Employees Retirement Fund, which is includes the Oregon Investment Fund, is the pensioner’s money, not state money, and the sole focus should be on strong earnings.
    Venture capitol is inherently risky, especially with retirement dollars. The state has a fuduciary responsibility to be cautious. The bottom line is, it is the pensioners money. Need more correct informantion? Contact Ron Schmitz, Chief Investment Officer, Office of State Tresurer, Salem, whom I have liberally quoted from his letter in today’s Oregonian 2/23/07.

  • Rebecca

    Pam,
    Grow up and bone up.
    Genentech coming here was bought and paid for.
    And it’s a packaging plant. Hardly the jobs for any of your no doubt lofty friends.
    Furthermore, your pathetic status quoers tried to spin the “packaging plant” as evidence of an emerging “biotech cluster” and suggested naysayers of promised well paying “biotech research jobs” should now be silenced.
    And if I hear “Amy’s Kitchen” one more time,,,,,,,
    The governor has milked that for all it’s worth.
    Please, say something not so naseous.

  • Pam

    The real question is, “Are tax dollars wasted to encourage businesses to locate in Oregon?” Let’s do the math, using Genentech as an example. Three hundred jobs at $50,000 per year average pay, generates approximately $750,000 of personal income tax per year to the state of Oregon. A $2 million investment would be repaid in 2.67 years!!! Every year there after that, the state receives $750,000 of new personal income tax to spend on essential public services. I”d like to find a personal investment that would repay my investment in only 2.67 years!!!

    • Chris McMullen

      Once again Pam, you’re leaving out key factors in your deluded scenario. For one, the article states there ‘could’ be 300 jobs by 2015 — the plant won’t even be ready until 2010. And where do you get this $50,000 average salary? At a packaging plant? Please.

      Moreover, the total total tax giveaway is $4.8 million (not $2 million), as well as a property tax rate reduction. You also fail to include opportunity cost on the “investment.”

      Go take a peek at Portland’s $10 million subsidy given to Oregon Steel and $7 million subsidy given to Freightliner (which, by the way, those good progressives Vera Katz and Sam Adams supported). Now Freightliner is laying off 800 workers.

      So much for your positive return on investment.

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