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Taking measure of 97

Companies that fear they will be affected by Measure 97 are raising red flags and encouraging their employees to oppose the measure.

Passage of Measure 97 would produce $3 billion annually for the state coffers in what is characterized as the largest tax increase in state history. It would significantly raise taxes on C-corporations, which for the most part are based out of state, but which also include in-state companies such as Lithia Motors and Umpqua Dairy.

Recent polls suggest the ballot measure — generated by Oregon's public unions — is losing steam. A poll conducted for Portland television station KPTV by DHM Research showed statewide support has slumped to 40 percent. DHM Research surveyed voters three times in a two-month period, discovering 60 percent backing in early September and 45 percent in early October.

Nonetheless, the potential impact of Measure 97 has led some employers to share their angst with the rank and file.

Lithia Motors, whose board chairman and founder Sid DeBoer has been outspoken in his opposition, circulated a memo to employees about the consequences company officials say passage would have.

"We’re particularly concerned about Measure 97 and the impact it will have if it passes," Lithia wrote its Oregon employees. "While our company doesn’t usually take positions on political issues, we strongly feel Measure 97 requires closer scrutiny by all of us. ... We believe the impact on consumer prices is drastically understated, (targeting) the very companies where most of us shop for the lowest prices. These companies will be forced to raise prices or leave the state; bad news for Oregon consumers."

Although perhaps not has emphatically, other companies also communicated potential effects.

Medford's Russ Batzer is vice chairman of Oregon Association of General Contractors' political action committee, which opposes the measure.

Batzer is the president of Southern Oregon Management and Batzer Construction. While his firms wouldn't be directly hit by the 2.5 percent tax levied on C-corporations with Oregon sales of $25 million or more, he said the ripple effect of increased supplier costs would be unavoidable.

"Construction people tend to be the least political people you will find in any industry," said Batzer, whose company passed along an AGC position paper to his workers.

"Some say they appreciated it and said, 'Yeah, I got it,'" he said. "They understand the types of corporations that get hit and the impact on the future. We wanted to make sure they understood it would cost their family $600 to $1,200."

Accounting firm Moss Adams has produced extensive research on potential impacts of Measure 97, with its figures falling in line with reports from the Oregon Legislative Revenue Office.

Jason Lukaszewicz, the partner in charge at the Medford Moss Adams office, said his firm has looked primarily at the effects on clients.

"We've discussed it in various group settings," said Lukaszewicz, who oversees 40 people. "Most of the discussions have been in relationship to our clients and the potential impacts.

"Even if you're not a C-corp, if you're buying from a C-corp, as the supply chain goes through four or five hands, it adds 2.5 percent to the cost each time."

Lithia Motors would be among the hardest hit companies because of the nature of its product. DeBoer said months ago that the tax would bump auto prices up $1,000 per vehicle, while non-C-corporation companies would not be taxed.

"We tried to stay apolitical in this," said Lithia Chief Marketing Officer Tom Dobry. "We know for different families there are different needs and there can be family members on both sides of the issue. We wanted to make research available for them, so they can decide for themselves, understanding the impacts on the company."

In its letter to employees, Lithia Motors characterized Measure 97 as "a potential tax increase 10 times greater than what we currently pay, eliminating profit and our opportunity to contribute to local and regional economies. It definitely puts us at a disadvantage and certainly affects our ability to compete."

Lithia is also putting up money to fight the measure — just over $900,000, according to the Oregon Secretary of State's Office. The largest contributors to the opposition are grocery outlets: Albertsons-Safeway, Costco and Kroger/Fred Meyer, each of which has donated $1.8 million.

Gas and electric companies stand to see their taxes climb as well, but they are governed by the state Public Utility Commission, allowing them to pass the cost of taxes and fees to customers.

"We have been talking with our employees, mostly helping them to understand why we oppose the measure," said Pacific Power spokesman Ry Schwark. "We let them know why we've taken the public stance. We want to educate everybody and we're encouraging everybody to vote, but it wouldn't be appropriate for us to tell our people how to vote. Everybody needs to vote their own conscience."

Steve Vincent, of Avista Utilities, which also would be affected by the tax, said Southern Oregon's natural gas provider doesn't make recommendations about candidates or measures. However, sample ballots without recommendations have been sent out to managers, comprising roughly 10 percent of the Oregon staff. Avista has contributed $20,000 to the campaign opposing the measure.

Other local companies that have supported the "No on 97" campaign include Harry & David ($25,000) and Timber Products ($20,000).

Business is not unanimous in its opposition, however. Phoenix resident Mark Kellenbeck, co-chairman of Main Street Alliance of Oregon, who is himself a small business owner, supported the measure in a September forum, calling it a "very reasonable proposition."

About 450 predominantly small businesses are listed as supporters of the measure on the voteyeson97.org website. The largest financial donors in support are public employee unions, led by the Service Employees International Union and the Oregon Education Association. Public employee unions have contributed about $4 million to support the measure.

 — Reach reporter Greg Stiles at 541-776-4463 or business@mailtribune.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at www.facebook.com/greg.stiles.31.

Ricardo Madrigal, a service technician at Lithia Motors in Medford, works Tuesday on an SUV. Lithia Motors is among companies that have shared their opposition to Measure 97 with employees. Mail Tribune / Jamie Lusch