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States Spar Over Prized Jobs

Washington adds to arsenal in war with Oregon for high-tech firms

VIEWED from an airplane, Oregon and Washington share the rumpled hills, snow-crowned mountains, and rugged beaches for which the Pacific Northwest is known.

But from corporate board rooms, the two states could hardly look more different.

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Oregon has become a national model of business-friendly policies, luring thousands of high-tech jobs in the past few years.

Washington State has missed out on much of the corporate migration. In fact, one of its own studies found it ranking 11th in a 12-state comparison of economic-development policies.

Now, however, Washington is fighting back. Armed with a big new tax break and less burdensome regulations, the state is suddenly trying to get back into the job-location game.

Its moves underscore the growing intensity of a nationwide war between the states over luring industries believed crucial to the economy of tomorrow.

''I think there has been a sense of envy'' toward Oregon, says Paul Sommers, an economist at the University of Washington in Seattle.

Indeed, the state has watched while Intel Corp., Fujitsu Microelectronics, and half a dozen other semiconductor firms set up shop in the ''Silicon Forest'' on the other side of the Columbia River near Portland, Ore.

Those moves, coupled with hard times at some of Washington's biggest employers, has prompted the state to act. In June, Gov. Mike Lowry (D) signed into law a tax incentive to make Washington an attractive place to invest.

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Manufacturing jobs typically pay higher-than-average wages. But states are finding they are hard to get without low taxes on investment. Technological change, for one thing, causes manufacturers to invest in new equipment more often than they used to.

The new law takes that into account by exempting machinery purchases from Washington State's hefty sales tax. It is already bearing fruit.

Recently Intel Corp. announced it would build a research and production plant near Tacoma, Wash., employing more than 6,000 people. Days later, on Sept. 19, BHP Steel of Australia said it would build a 230-worker plant in Kalama, a Washington community hard-hit by the decline of the region's logging industry.

The tax break ''was critical for both these cases,'' says David McCraney, director of business development for the state's Department of Community, Trade, and Economic Development.

These victories are especially welcome since several of the state's largest employers, including the Boeing Company, have cut thousands of jobs.

In signing the bill, Mr. Lowry forecast that ''it will help create more than 45,000 family-wage jobs over the next nine years.''

The law has also spurred fresh investment by existing firms such as snack-food giant Frito Lay and SEH America, a Japanese maker of silicon wafers. And the state study that ranked Washington near rock-bottom for its economic- development policies, now lists it second from the top.

But Oregon isn't exactly shaking in its boots. A spokeswoman for the state's economic-development agency says Oregon sees itself going up against Texas, Arizona, and New Mexico more than Washington in the fight for jobs.

Others in both states, however, acknowledge a budding rivalry amid the fir and cedar of the Northwest. ''We're ... friendly competitors,'' says Robert Levin, president of the Columbia River Economic Development Council, a private group based in Vancouver, Wash., a town just across the border from Oregon.

Though both states offer cheap water and electricity, Mr. Levin has seen many jobs lost to the other side of the mighty Columbia River. Pacific Gas Transmission, a subsidiary of Pacific Gas & Electric Company, put its corporate headquarters in Portland rather than in Clark County, Wash., (where Vancouver is). LSI Logic chose Gresham, Ore., over Clark County for a $4-billion computer-chip plant.

''We win some too,'' Levin says, citing chipmaker Linear Technology, which is building a plant near Vancouver. The BHP Steel plant also could have landed in Oregon.

Although Washington has moved to level its playing field against Oregon, the two states still have very different approaches. Oregon's big lure is a property-tax cap for big investments - anything over $100 million is exempted. The caps must be approved by voters at the county level case by case. By contrast, Washington's tax-break on machinery helps companies of all sizes.

Moreover, where Oregon relies on an income tax (taking a percentage of corporate profits), Washington taxes general business activity, regardless of profits.

''If I was doing a startup I probably would be more attracted to Oregon than Washington,'' says John Mitchell, chief economist for US Bank in Portland.

Oregon's policies are part of a long-term economic-development plan that included significant public involvement. The state faced upheaval, more than Washington, from the decline of the timber industry in the Northwest. Washington State's policies, Levin laments, have come and gone with the political winds in the state capital.

But many industrial firms first choose a region, and then compare the opportunities in different neighboring states, says Bruce Mann, a historian at the University of Puget Sound in Tacoma.

''Once they make the regional choice, ... it's head to head,'' he says.

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