Friday, April 12, 2013

Economist's Notebook: How Far Should Portland Go to Land Nike?

Rough concept drawing for the Zidell's proposed mixed-use development
Pretty far.

There is no clear answer to this question, but that is my personal off-the-cuff opinion. The Oregonian is reporting that Portland is pondering about $80 in incentives that could rise to $140 if Mult. Co. kicks in tax incentives.  Whatever is invested in Nike is a gamble, there is no guarantee that related development will occur ex-post, but it has got to be about the safest bet around.  It is also a gamble with a huge potential social return: given the investment in the South Waterfront, the light rail, streetcar and so on, having Nike provide a workforce anchor would be a huge boon to the development of the entire downtown.  It accentuates the focus on density and transit and backs one of the few Portland area companies whose future is totally secure.

Critics will point out that you may end up overspending for Nike, that they would come for less or that the value of their presence is too little.  It is entirely possible.  But even if so, it is probably a good bet to take.  Remember that Nike is Oregon's only Fortune 500 company, that its presence in Oregon, along with good old Columbia, has led to a cluster of sportswear and apparel firms in Portland, and that, all things considered, it is a pretty nice industry to have.  Such a huge business employs a huge range of people from management, to design, to engineering and sales there is a lot of demand for a wide array of local graduates.  They are a forward-thinking company that is not belching out lots of waste.  In may ways, they are an ideal company to lure to the south waterfront.

It may not be the ├╝ber-cool biotech firm that was dreamed about long ago when the south waterfront district was conceived, but it is a pretty good alternative.

Now there are some caveats: Nike's fortress mentality expressed so effectively in Beaverton would have to change.  I would hope that any potential Nike presence would be an open, accessible area welcoming to outsiders.  It would have to be given the light rail and streetcar links, I should think.

So is $80 to $140 million in incentives and tax breaks the right amount? Who knows, but it does not seem extreme given the potential benefits.  

Anyway, these are my initial reactions from afar, but I'd love to hear from others - what do you think?


GeoGeek said...

I have difficulty imagining this working, simply for the reason you mentioned – Nike's fortress mentality. I think they like sealing themselves off.

And given the way Nike threatens Beaverton anytime there's a whiff of raising their taxes, I would think any tax incentives granted would end up being permanent, and I'm not sure that's good policy.

Patrick Emerson said...

Good point. I am less concerned about the hold up problem if they are building themselves however. They will make a substantial fixed capital investment that may not be easily resale-able.

Jerome Cole said...

I think that instead of doling out corporate welfare to Nike the city and county should eliminate their outrageous business income taxes.