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Business & Economy

Critics of Intel's incentive package in Ohio's capital budget say it lacks safeguards for Ohioans

An artist rendering of the two semiconductor chip factories that Intel plans to build in Licking County.
Intel
An artist rendering of the two semiconductor chip factories that Intel plans to build in Licking County.

Ohio's new capital budget sets aside up to $2 billion in cash incentives for Intel’s megaproject in Licking County.

Some policy advocates and government officials think it falls short of promising jobs to Ohioans and protecting the state if the project fails.

Intel promises up to 3,000 jobs at the new semiconductor chip campus. But the billions promised to the company does not mandate that mostly Ohio residents will work those jobs.

That's a problem for Zach Schiller. He directs research for the left-leaning think tank Policy Matters Ohio.

“The least that we could require is that Ohioans are the main ones who are working at this facility. That seems like an extremely modest thing given how much the state and we as Ohioans are all spending to support it.”

Policy Matters advocated for assurances that 80% of Intel’s workforce should be Ohio residents.

It was also brought up in a proposed amendment by House representative Michael Skindell at last week’s House Finance Committee meeting before the budget passed, but the amendment was not considered.

"It's nice to bring in other people, but we want to try to get Ohioans employed first," Skindell said.

Intel is investing $50 million in Ohio colleges to develop a "pipeline of talent", semiconductor education and research programs

Schiller also raised concerns about what Intel will have to pay back if the project fails. It includes $600 million in what the state calls, “onshoring activities” and $300 million for a water reclamation facility.

That money is guaranteed based on performance, but it is unclear what that means. If Intel fails to uphold its part of this agreement, it will have to pay that money back. That agreement has not been made public.

The nearly $306 million that would go to road improvement and construction, plus local water and sewage infrastructure is not protected in the bill.

Rep. Skindell said, “There are some clawbacks instilled in this legislation, and that’s positive, but it doesn’t go far enough."

The amendment proposed in the House Finance Committee would have addressed some of the language in the onshore and water reclamation facility clawbacks and required repayment of infrastructure money if the project failed.

Below is a handout given to Ohio House representatives during the House Finance Committee meeting that provides information about the tax breaks and other incentives given to Intel.

In a statement from Governor Mike DeWine’s office, spokesman Dan Tierney said “there are no clawbacks on the infrastructure as those are direct to local governments and have broad benefit to the community. It is also just impossible to clawback a road or unbuild a road.”

Below is an information sheet from the Ohio Department of Development that details some of the incentives given to Intel.

Schiller lastly questioned tax breaks in the bill. One of those will not require any taxes paid on equipment over $100 million regardless of the supplier location.

An example is a key piece of equipment used in chip production, a UV lithography. It will be purchased from ASML, a semiconductor supplier, in the Netherlands.

The machines cost between $180 and $250 million dollars.

“Basically, we’re saying that the company that's selling the equipment does not have to pay the commercial activity tax, that would otherwise be due in when it’s shipped in Ohio,” he said.

The Ohio Legislative Service Commission, a bipartisan research and budget analyst agency, said in a report that these tax incentives could “decrease state revenue by hundreds of millions of dollars across several fiscal years.” But that will depend on the level of investment by Intel and suppliers in Ohio.

Representative Skindell advocated that Intel do business within the state.

“We should make sure that we are promoting Ohio businesses,” he said.

Intel’s construction is set to start this year. It's contracting with Ohio-based team Gilbane Building Company, McDaniel's Construction Corporation, Northstar Contracting Inc., and GTSA Construction Consulting to start the first phase of the build.

In a statement, Gilbane Building Company said it's committing 50% of its staff to Ohio residents and 20% to a diverse workforce. Construction of the project is poised to provide up to 7,000 jobs.

Tyler Thompson as a reporter and on-air host for 89.7 NPR News. Thompson, originally from northeast Ohio, has spent the last three years working as a Morning Edition host and reporter at NPR member station KDLG Public Radio and reporter at the Bristol Bay Times Newspaper in Dillingham, Alaska.