Businesses leaving Portland represents failed politics

There is a significant degree of economic myopia amongst left-leaning politicians, including Oregon’s own public employee dominated Democrats. It is hard to tell whether they don’t understand the economic consequences of their approach to government, or they simply don’t care.

There are two recent events, both predictably centered in Portland but having consequences statewide, that are descriptive of the problem. The first was an announcement by American Steel that is was abandoning Portland and Multnomah County for Canby. For fifty years American Steel has been located in Portland contributing substantially to the economic base, the employment and the tax base. Now it is relocating to Canby because of lower taxes, lower utility rates and a pro-business climate by Canby’s city officials.

Craig Schwartz, the company’s CEO, said, “They have a dedication to grow their city. They don’t throw a lot of barriers at you.” American Steel will move its $20 million in assets out of Multnomah County and by doing so will reduce their property tax bill by about 25 percent – going from slightly over $21 per $1000 to about $16 per $1000. In addition it will shed the burdensome Business Income Tax imposed by Multnomah County – the only county in the state of Oregon to make such a charge. Because Portland and Multnomah County tend to treat their businesses as if they are lucky to be allowed to operate, those two governments are going to lose a substantial amount of tax revenue.

American Steel’s announcement was familiarly reminiscent of Columbia Sportswear’s departure from Portland to Washington County, when company officials decried the high taxes and the fact that local government had become too bureaucratic. Rumor has it that the final straw for Columbia was when Multnomah County government blocked Columbia’s plans for a new business complex on the shores of the Willamette River because local government coveted the same site for its own offices.

The second event was the announcement by Israeli based Zim Integrated Shipping Services, Ltd. that it was abandoning the use of Port of Portland and focusing its West Coast business on Vancouver, B.C. only. Zim’s taste of Portland was short-lived – about fourteen months – and its departure will damage a port which had just begun to recover from the departure of all but two other overseas carriers. Much of Oregon’s economic well-being is dependent on container shipments. Everything from sporting goods to furniture and hazelnuts to electronics. The lack of a robust overseas carrier market means higher prices for both import and export goods and puts Oregon’s producers and manufacturers at an economic disadvantage in the global market.

And that is the point. In today’s global economy both businesses and people have choices. State and local governments are free to court or castigate the business community as they see fit. And the business community is free to respond in kind. They can choose to locate or leave, expand or contract, grow or close. For every Portland that abuses its business community there is a Canby or a Vancouver, WA, waiting to embrace them. For every Multnomah County who thinks that government’s desires are more important than its taxpayers, there is a Washington County waiting with aid and assistance. And, quite frankly, I kind of like that balance. Business shouldn’t be able to dictate government policy, but government should be aware of the adverse impact government policy has on business.

When I was head of U S WEST in Oregon, we tried to deploy high speed internet access through DSL. The Oregon Public Utility Commission attempted to delay that deployment claiming that we should wait until others were ready to enter the market with competing products. I told the commission that it should make its decision as to what conditions it would impose and then I would make a decision as to whether we would deploy the service. There was dead silence and the hearing, for all intents and purposes was over. U S WEST had a choice. It was prepared to exercise it. By doing so it restored the balance between government and business. The conditions imposed by the OPUC were not overly burdensome and DSL was deployed on a timely basis.

That is the same choice that every business and person has in Oregon and, with increasing frequency, that choice is being exercised. Businesses continue to leave Portland and Multnomah County. Some go to surrounding counties and many go across the river to Vancouver, WA. They join a host of individuals, including former heads of the Portland Business Alliance, who have left the state to avoid high personal income and capital gains taxes.

In a global economy, the actions of government have consequences for them as well as their citizens.