Employers on state borders weigh location costs

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A worker with onions in a Froerer Farms warehouse. Photo courtesy of Owyhee Produce.

The growing minimum wage differential between Oregon, Washington and Idaho hasn’t led to sharp changes in business on the border. As the minimum wage in the neighboring states of Oregon and Washington has risen, while Idaho’s has remained unchanged, some thought businesses would leave higher-cost states for Idaho. But while some companies are moving, their reasoning is more nuanced than simply wages.

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Karl Dye

The minimum wage in Washington rose to $11.50 on January 1 and will increase to $10.75 in Oregon outside of Portland on July 1. The minimum wage has been unchanged in Idaho at $7.25 since 2008Although some business owners said they have moved to Idaho because of the lower wage, companies general take many more factors into account than wages when contemplating the best place to locate, said Karl Dye, president and CEO of Valley Vision Inc.,  the Lewiston-based regional economic development agency covering Lewiston, Clarkston, Asotin County in Washington, and Nez Perce County in Idaho.

Dye said companies sometimes use consulting services to weigh factors such as taxes, regulation and workmen’s compensation rates.

For example, while Idaho has a lower minimum wage, Washington doesn’t have an income tax, though it does have a business and occupation (B&O) tax, Dye said. Depending on the type of business, the B&O tax can range from 0.47 percent for retailing to 1.5 percent for “services and other activities,” according to the Washington State Department of Revenue. “I don’t know that minimum wage changes have affected the relationship,” he said.

Minimum wage is less of an issue than regulatory and governmental issues, said Shay Myers, general manager of Froerer Farms Inc., in Nyssa, Oregon. After the winter of 2016-2017, where four of the company’s onion sheds collapsed under the weight of unusually heavy snowfall, the company chose to rebuild in Idaho, partly because of the lower minimum wage. But especially with today’s tight labor market in both states, the minimum wage differential is less of an issue, particularly in comparison with three or four years ago, he said. “You’re paying nowhere near minimum wage in Idaho,” Myers said.

Other factors also made Oregon less attractive. “It’s a harder state in general to do business with,” Myers said. For example, Oregon employers are required to provide workers with one week’s paid time off for sick leave, he said. And when the company was faced with having to rebuild its onion storage facilities in less than nine months, Oregon’s land use laws made that more difficult than in Idaho.

“When it came down to it, Idaho was very willing to do everything they could to speed up the process,” he said. Moving to Idaho also meant the company could apply for a Tax Reimbursement Incentive, though he wasn’t sure whether it had received one yet.

On the other hand, after a number of companies like Myers’ left, Oregon started to pay attention, he said. “They’ve taken some significant steps to soften the blow of these regulatory challenges that are different between Oregon and Idaho,” he said. For example, while Oregon raised its minimum wage

Onion sheds collapsed in Nyssa, Oregon and in other western Idaho and eastern Oregon cities in early 2017 because of unusually heavy snowfall. Photo courtesy of Owyhee Produce.

again, it approved a gradual increase with a lower minimum wage in rural areas like Nyssa, he said. The state is also adjusting its land use policies to make it more competitive, he added. “I have to recognize the steps and efforts they’ve made to make policies fair and equitable and reduce collateral damage to the rural part of the state,” he said. “They have really stepped up and tried to make a difference.”

In some cases, other factors influenced the company’s location decisions. “We’ve taken our sweet potato operations that were in Weiser, where we can’t get labor, and moved them to Oregon,” Myers said. With workers coming from as far as Marsing, Caldwell, and Kuna, Weiser was just too far away, he said.

In retail, some multistate companies considered Boise before larger cities such as Seattle and Portland. However, that’s also due to the higher cost of land in those larger cities, as well as the lower wages. For example, while the Garden City-based Gyro Shack has locations in Boise, its Washington locations are outside Seattle because of the high cost of land there.

And some people live in Washington and work in Idaho, Dye said.

“In the past, jobs were created by Clearwater Paper and Potlatch,” as well as sawmills in both states, he said. “There’s always a mix and a blending across the border.”

Lewiston plans its economic development future

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Barge traffic at the Port of Lewiston. File photo.

Economic development in Lewiston faces infrastructure challenges but also new opportunities, according to Karl Dye, who was hired in June as the president and CEO of Valley Vision Inc.

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Karl Dye

Based in Lewiston, Valley Vision is the regional economic development agency covering Lewiston, Clarkston, Asotin County in Washington, and Nez Perce County in Idaho, Dye said. Other participants include two port districts in Washington, the Port of Lewiston – Idaho’s only seaport, and the Nez Perce tribe, he said. All the entities contribute financially, as do some private local companies, he said.

“The mission of our organization is to make sure we have a positive business environment, so companies already here stay here and grow, and we facilitate companies interested in moving here,” Dye said.

The biggest challenge Lewiston faces, not surprisingly, is lack of a skilled workforce, Dye said. He hopes to work with local school districts and other interested parties on training and apprenticeship programs. “That will create a talent pipeline to help fuel our economic growth,” he said.

Dye also needs to deal with the problem of retaining and increasing flights to and from the Lewiston Airport, as well as the changing role of the Port of Lewiston. In 2015, a labor dispute in Portland ended container shipping up the river to Lewiston.

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Anthony Jones

“The only real option was to send containers to Seattle, and the only way to do that was by train or truck,” said Anthony Jones, owner of Rocky Mountain Econometrics, who served as staff economist for the Idaho Public Utilities Commission and as advisor to Idaho governors Batt and Kempthorne on Lower Snake River dam issues. A petroleum pipeline to Spokane didn’t help. “That ended, to all intents and purposes, petroleum shipping to Lewiston,” he said.

The remaining two items shipping out of the port are in decline, Jones said. “Wood fiber and pulp peaked at 450 million tons in the 1990s. They’re currently running at 250 million tons.” While wheat and barley remain a major shipper out of the port “that peaked at 4 million tons in 1999, and it’s currently at about two-thirds of that level,” he said.

In addition, between the costs of maintaining four dams on the Lower Snake, reduced prices for the surplus electricity they produce through the Bonneville Power Administration, and concerns about salmon survival, those dams might be breached, Jones said. “If the dams didn’t exist, the port wouldn’t exist,” he said. “It’s about that simple.”

Manufacturing – which might take a hit due to President Donald Trump’s tariffs – is also a major part of the Lewiston economy, Dye said. “There’s a lot of local aluminum production,” he said. “We have been working with the Idaho Department of Commerce to keep our ears open for local manufacturers who might be affected.” While tariffs increase the price of Chinese materials and make American materials more competitive, the increase in demand for American products might increase their prices as well, he said. The firearms industry is also a major contributor. “They’re a great part of the employment community and a big part of our economics,” he said.

Lewiston is also the gateway to recreational opportunities in central Idaho. “We have access to millions of acres of rivers and lakes,” Dye said. “We get over 100 tour boats from the Columbia and Snake Rivers, and they dock in Clarkston.” The region is also the home of Idaho’s latest viticultural district, the Lewis-Clark Valley Viticultural Area, created in 2016. It was split off from the Columbia Valley one, which covered the Walla Walla area, he said.

Lewiston – where the port has been investing in fiber-optic networks – might want to look at technology for expansion, Jones said. “High tech is the future, and commodities like timber and wheat are very stable and very safe,” he said. “You’re always going to need them, but if you’re looking for high growth, to need to look for something else.”