As she pushes a bill aimed at burnishing Oregon’s business bona fides this year, Gov. Tina Kotek has run into a problem.

Part of the governor’s House Bill 4084 would expand the state’s Enterprise Zone program, which allows local property tax breaks to businesses when they make new investments in the state. But in doing so, some say Kotek is opening the door even wider for a kind of investment many Oregonians are leery of: data centers.

“HB 4084 would function as another giveaway to the data center industry that is sucking Oregon dry,” a Portland resident named Lewis Fitzgerald Holland wrote to lawmakers, in testimony that mirrors many others’ complaints.

Kotek has been clear she sees perils in the proliferation of data centers, which are a major reason power demand is increasingly straining Oregon’s grid. She recently convened a committee to reckon with the facilities’ impact and recommend state policies.

But last week, Kotek said she would not support adding safeguards to her bill that would block data center projects from receiving the expanded tax breaks she proposed.

Lawmakers are moving forward with some protections anyway. On Monday, a budget subcommittee approved a change that would block new data center projects from receiving enterprise zone tax breaks until the summer of 2027.

“It really is a short pause,” said state Rep. Nancy Nathanson, D-Eugene, who suggested the change. “Let’s consider this very carefully.”

The move was panned by some Republicans representing rural areas that have benefitted from data centers. The hugely expensive projects have a reputation for employing relatively few people once construction has ended.

But state Sen. Mike McLane, R-Powell Butte, said data centers have helped his district – creating hundreds of long-term jobs in Crook County and stabilizing its economy. McLane said the state should let localities decide which projects merit property tax breaks.

“Once again disputes in the Willamette Valley are like a rock in a mud puddle. It splashes those of us who live east of the mountains,” McLane said. “I’m growing weary of this.”

Oregon has roughly 125 data centers, most of which are either in the Portland area or farther east, near the hydroelectric dams along the Columbia River. Prineville, in Central Oregon, also houses major facilities. Tech giants including Meta, Apple and Amazon have built data centers in the state.

Kotek has said juicing economic activity in Oregon is now a key focus for her administration. But HB 4084, her central proposal during this year’s session, has run into trouble among some in her party.

Last week, the bill was snatched from a budget subcommittee dealing with economic development that had scheduled it for a hearing. According to Sen. Jeff Golden, an Ashland Democrat who co-chairs the committee, that maneuver came after he made clear he would propose an amendment to the bill barring data centers and cryptocurrency mining operations from receiving tax breaks.

“I took that all the way to the top of the food chain,” Golden said in the committee hearing. “The next thing I know, I come here and find that the bill has been removed from the agenda and presumably is being routed elsewhere. My strong judgment is that’s not what the people of Oregon deserve.”

HB 4084 eventually showed up in a separate budget committee. Nathanson’s proposal to pause new tax breaks for data centers emerged over the weekend.

Kotek’s office said Monday that she supports the change because it will “address immediate concerns” and allow development of further policies.

It’s clear data centers are already benefitting from the enterprise zone program Kotek wants to expand. According to The Oregonian/OregonLive, data centers reaped more than $45 million in tax benefits from standard enterprise zones last year – and $85 million this year.

Business Oregon, the state’s economic development agency, says data centers account for the lion’s share of tax breaks from enterprise zones. That’s a reflection of the high expense of data center projects, a factor that leads to larger overall tax breaks.

The governor’s bill would make it easier for local governments to extend those tax breaks and allow them to stretch up to 10 years in some cases. Currently, standard enterprise zone tax abatements typically last up to five years. Longer-term tax breaks are available in some rural areas.

Kotek announced in December – the same week as she revealed her reelection bid – that she would work to pass policies that would rocket Oregon up national rankings of the most business-friendly states. Republicans and business groups cheered that pronouncement, but have bristled as the governor and other Democrats eliminate some business tax benefits to balance the state’s budget.

Meanwhile some Democrats, including Golden, are preaching caution as the state looks to seed the ground for more investment. The amendment Golden pushed last week is in line with recommendations from Tax Fairness Oregon, an advocacy group that has pushed for data centers to be ineligible for tax breaks in Kotek’s bill.

According to the group, data centers already receive more than $457 million in total Oregon tax breaks each year – a figure that includes tax incentives beyond what the governor wants to expand.

“[Even] without this extension the cost is growing dramatically,” Jody Wiser of Tax Fairness Oregon wrote in testimony. “It was $330 million a year ago.”

Tax benefits have dominated debate about HB 4084, but the bill does more. Principally, it would create a system to fast-track state permits for development projects. To qualify, those projects need to be within Oregon’s targeted industries and meet certain cost thresholds – $100 million in the Portland area, for instance, and $25 million in rural areas.

As it passed out of a budget subcommittee on Monday, the bill also significantly narrows a tax credit that Democrats created earlier this session for businesses that create jobs in the state.

That credit was created in another bill, Senate Bill 1507, that eliminated some tax breaks from Oregon’s tax code. Republicans and business groups have hammered Democrats for that bill, accusing them of making Oregon less hospitable for business.

Democrats have responded by pointing out their bill contains a new tax benefit for businesses that create jobs. But HB 4084 in its current form alters that tax benefit, limiting it to employers in certain industries, including advanced manufacturers, food and beverage companies, wood products, apparel and more.

That change will end up significantly reducing how much the credit is tapped.

According to revenue estimates, the state is expected to issue $1.1 million of the credits this budget, down from an estimated $4.6 million before Monday’s change.

In the next two-year budget the state is expected to award $5.8 million in the credits, down from the $19.6 million expected before it was narrowed.

News Source : https://www.opb.org/article/2026/03/02/data-centers-cut-bill-expanding-oregon-tax-breaks/