April 2017

April, 2017

Inside This Issue: Dealing with the State Budget, pg 8 Curry County Hospital, pg 10 Cyber Security Legislation, pg 15

Railroad Bridge Rehab, pg 24 The End of Big Malls is a Problem, pg 26 Wine Tasting, pg 32

Curry County Hospital Ribbon Cutting

A few words from Greg There is in this April issue of the Southern Oregon Business Journal a wide range of topics addressed. The vast sources of information available to us today strains the decision making process to determine which articles deserve space in each journal issue. The selections are made based on what readers request and the information we come across that may be helpful to our region’s businesses and local public and private organizations.

The ribbon cutting ceremony of the new $30 million Curry County Hospital was attended by Gold Beach residents and by leaders from communities well outside the local area. Such interest is common when an important event occurs like the construction of a hospital four times larger than the one it replaces with state-of -the-art advanced technology and promise to make more and better care available to a region beyond the local community. This is something all of SW Oregon appreciates in an article.

Legislatively our state leaders can always attract attention. New laws and proposals of legislation is something everyone needs to know and share. Changes in Salem can have dramatic and immediate impact on how local governments make decisions. Business, large and small, is frequently impacted. With local leaders expressing concerns or thoughts and ideas for improvement it is our intent to understand and share those items. You will see in this issue examples of how involved all of us are in this corner of the state.

There are roughly sixteen different industries that gain the attention of journal writers who respond to each of them throughout the year. Some are seasonal, like tourism and agricultural harvests. Others are not. Education, health and medicine, manufacturing, timber and wood products, transportation, high-tech, and others are always on someone’s radar.

I am honored to see the commitment of residents in all of the 200 communities that make up the six counties of SW Oregon. Like the construction of a hospital that is many years in the making, steady and persistent effort across the counties guarantees a future of which we can all be proud.

Press on,

Greg Henderson Greg Henderson, Publisher greg@southernoregonbusiness.com

Southern Oregon Business Journal

2

A JOURNAL FOR THE ECONOMICALLY CURIOUS, PROFESSIONALLY INSPIRED AND ACUTELY MOTIVATED

Table of Contents PUBLISHERS NOTE 2 A Few Words From Greg

ECONOMICS 4 Oregon Economic Indicators

5 Coos, Curry, Douglas County Economic Indicators 8 Dealing with State Budget

Blue Cross Blue Shield Report 20 $1.5 Billion paid in 2016

Business and Tax Articles 21 Solar Energy 22 Compression 24 Rail Line Rehab

Strong Towns & SMALL TOWNS 26 The End of Big Malls

SMALL TOWNS & COUNTIES

28 Small Towns & New Ideas

10 Curry County Hospital 11 Energy Trust

15 Cyber Security legislation 16 Klamath County employment at 5.8%

The Last Word 32 Wine Tasting

17 Down to Business 18 Port of Coos Bay

Cover Ribbon Cutting Celebration and New Curry County Hospital Photos by Southern Oregon Business Journal

703 Divot Loop Sutherlin, Oregon 97479 www.southernoregonbusiness.com 541-315-6127

Southern Oregon Business Journal

3

Southern Oregon Business Journal

4

Southern Oregon Business Journal

5

Southern Oregon Business Journal

6

Southern Oregon Business Journal

7

Photo courtesy of www.chehalemvalley.org

Dealing with the State Budget Greg Henderson Senator Richard Devlin is proposing ideas to solve current state budget challenges. The ideas will not be popular with everyone. But, in government that is not unusual.



Cut $500,000,000 from the budget?



Increase taxes by $500,000,000?



Change the way taxes are determined for hospitals and healthcare?



Cuts in public employee compensation?

Combining discussions about budgets, taxes and cuts in expenditures will spur responses from every side. The courage to move ahead helps to define leadership and the legacy it leaves behind. Read on the next page what Senator Devlin believes to be a workable solution.

Southern Oregon Business Journal

8

Devlin Proposal May Break Budget Talk Blockade Senator Richard Devlin proposed a plan that would cut $500 million in state spending, increase business taxes by $500 million and hike the hospital tax to pay for rising Medicaid costs.

For Democrats, tinkering with PERS is awkward politically because of their support from public employee unions. But finding ways to cut back on PERS is legally challenging because of a series of court rulings and contract arrangements. Devlin included PERS cuts in his concept, but said at most there would be modest savings from what he described as “technical fixes.” He foresees cuts in public employee compensation, vendor payments and staff levels.

On the revenue side, a lot of ideas have been floated – from limits on mortgage interest deductions to a tax on coffee.

Senate Finance and Revenue Chair Mark Hass, D-Beaverton, dismissed those ideas and said he is concentrating on a gross receipts tax patterned after one in place in Washington. Hass said it would have a broad base and a low rate. He has been working on the idea since last year.

Veteran Senate Ways and Means Co-Chair Richard Devlin may have broken the deadlock on the state’s projected $1.6 billion budget hole. He called for $500 million in new taxes matched with $500 million budget cuts, including the Public Employees Retirement System (PERS).

Devlin’s idea may not be popular with everyone – or anyone, but it offers a basis for actual negotiations on how to raise revenue and what spending to trim. Until now, the major players in the budget battle have just stared at each from opposite sides of the room.

Another $500 million in tax revenue combined with $500 million in budgets cuts doesn’t equal $1.6 billion. Much of that remaining $600 million budget shortfall is expected to come from higher hospital and provider taxes to sustain Oregon’s Medicaid program.

Around $350 million of the $1.6 billion budget hole reflects the state’s requirement in the next biennium to pay 10 percent, up from 5 percent, of the cost of Medicaid. And that’s an optimistic number. Legislation Republicans are pushing in Congress could make deeper cuts in federal support of Medicaid as early as 2020. An Oregon fiscal analysis suggests the GOP health care bill, which proposes to slash more than $800 billion in Medicaid funding over the next decade, could put Oregon in the hook for an additional $2.6 billion to sustain existing coverage and eligibility by 2023.

A thorny budget debate was predictable after an acrimonious campaign on a union-backed initiative to impose a gross receipts tax, in the form of a minimum tax, on corporations with $25 million or more in sales in Oregon. After the sound defeat of the measure, business groups basically said the price of their participation in talks to raise revenues depended on making cuts in PERS.

Southern Oregon Business Journal

Devlin hopes the inclusion of PERS on the cutting board will entice business groups to negotiate an acceptable tax-raising measure. At least some level of business support will be necessary to win the three-fifths majorities needed for passage in both the Oregon House and Senate.

The hospital tax discussion may have a different track. In the last two biennia, former Governor John Kitzhaber worked behind the scenes with the Oregon Health Leadership Council to negotiate funding for Medicaid as well as steps to slow increased spending on health care delivery. Those quiet consultations enabled a 4-year extension of the hospital tax to pay for Medicaid to pass in the early months of the 2015 Oregon legislative session.

Governor Brown doesn’t have the same health care chops as Kitzhaber, but the same side rail conversations are underway with hospitals and other health care providers to address the Medicaid funding dilemma, which seems likely to get worse if Congress enacts its American Health Care Act. Health care providers and insurers may be wary of cutting a deal on Medicaid when the individual health insurance market that is supported by federal subsidies also may face significant changes under the GOP-backed legislation.

Devlin expressed hope that a revenue package could be wrapped up as early as next month, even a final budget won’t pass until at the end of the legislative session this summer.

That may be an optimistic hope on Devlin’s part, because of the shaky relationship between business interests and union leaders. Serious negotiations could be delayed until after the May economic and revenue forecast, which includes the numbers on which final budgets are based.

Meanwhile, almost 40,000 Oregonians landed jobs in the past 12 months, bringing down the state’s unemployment rate to 4 percent, the lowest point on record. That’s good news in the short run, but it also means the current tax revenue stream is about as good as it is going to get and could be a lot worse in the next two years.

9

Curry General Hospital

A commitment to make the region a better place.

Southern Oregon Business Journal

10

Gold Beach Salutes “The General” Curry General Hospital Ribbon Cutting Saturday morning, April first was a perfect day to introduce the new hospital to a very supportive community. With the sun shining, waves dancing on the beach only a few blocks away, and a steady breeze blowing the community listened to brief speeches of praise from hospital leaders before the crowd of nearly 200 began the tour of the shiny new hospital on the hill.

Ryan Ringer, Chair of the Hospital Board gave special thanks to the citizens of Curry County whose 68% “Yes” vote made the realization of the dream a reality. He said, “To the 4,921 people of Northern Curry County who voted yes on November 3, 2013, THANK YOU.” He also reminded those in attendance that every one of those votes was a commitment to make the region a better place. “…those voters have given infants, youths, adults and seniors in this community an opportunity to attain a well-rounded existence here at home.” Looking at the crowd one could see that each of those generations were represented.

Dr. Reginald Williams, Medical Staff President, remembered a time not long after his arrival in 1972 when he looked around at the facility that had been operating as the Curry General Hospital for twenty years and thinking it would sure be nice to have a new hospital. He reflected on a time when part of the ceiling fell in due to leaks and rain in the same room where a patient was being treated. Forty years later that wish has been granted.

CEO Ginny Razo made special effort to thank and congratulate all of those who did the heavy lifting in the planning and construction of the new hospital. She especially thanked staff for volunteering their time to organize and conduct the tours while never neglecting their medical staff responsibilities.

They were called the “Heartbeat of the hospital.” Evidence of that appreciation was apparent when staff members were asked to perform the ribbon cutting instead of executive team members.

Chairman Ringer talked about the Hierarchy of Needs as taught by Abraham Maslow in the 1960’s and how the construction of this hospital is a representation of Dr. Maslow’s theory. He said that the first two levels of Dr Maslow’s theory stress the necessity of satisfying the basic needs of survival and safety by providing food, shelter and safety from life threatening events that include physical hazards like disease and injury. The new hospital will certainly make it more likely that a person would attempt to accomplish more with their lives.

Deconstruction of the old hospital will begin soon after final walk-through inspections are completed by the State of Oregon and certification is granted.

Southern Oregon Business Journal

11

CAL-ORE Life Flight Director Joe Gregorio checks out patient monitoring system.

Ocean view patient room

State of the Art patient care.

Facilities Operations Officer David Sanford

Southern Oregon Business Journal

Curry County Hospital CEO Ginny Razo

12

Energy Trust of Oregon board elects officers for 2017 The board re-elected three members to leadership posts and appointed a new treasurer PORTLAND, Ore. — March 9, 2017 — Energy Trust of Oregon Board of Directors has elected officers for 2017. Susan Brodahl was elected as the new treasurer while Debbie Kitchin was re-elected president, Ken Canon was re-elected vice president and Alan Meyer was re-elected secretary.

“Energy Trust is strengthened by the skills and oversight of our volunteer board,” said Michael Colgrove, executive director, Energy Trust. “This new slate of officers will provide valuable leadership as Energy Trust continues to deliver services and results at and above the level of performance that Oregon ratepayers have come to expect.”

Energy Trust directors represent a broad spectrum of expertise from the private sector and public institutions. All volunteers, board members provide strategic and policy direction for the nonprofit, which helps residential, commercial, industrial and agricultural customers save energy and generate renewable power, delivering benefits to all utility customers.

The 15-member board approves the organization’s annual budget and major expenditures.

The new treasurer, Susan Brodahl, is a vice president in the Portland office of Heffernan Insurance Brokers and an owner of Heffernan Group. Susan is a frequent featured speaker at regional and national conventions and is published in various trade and mainstream journals. She replaced Dan Enloe, who served as treasurer since 2012.

The returning president, Debbie Kitchin, is a Portland resident and co-owner of InterWorks, LLC, in Portland, a construction business specializing in sustainable building practices. Kitchin joined the board in 2004, serving three terms as vice president from 2011-2013 and four terms as secretary from 2007-2011. She was elected president in 2014.

Ken Canon, a Myrtle Creek resident and co-owner of Canon and Hutton law firm, was re-elected vice president. He was first elected vice president in 2014. Canon joined the board in 2012. In 1981, he founded the Industrial Customers of Northwest Utilities, a regional trade association focused on electric energy issues.

Alan Meyer, a Salem resident and retired director of energy management for Weyerhaeuser Company, was re-elected as secretary. He has held the office since 2013 and originally joined the board in 2005, bringing expertise in energy efficiency for industrial operations.

Other members currently serving on Energy Trust’s board include Melissa Cribbins, Coos County Commission, Coos Bay; Heather Beusse Eberhardt, NextEra Energy Resources, Portland; Dan Enloe, retired from Intel, Washington County; Roger Hamilton, retired from Western Grid Group, Eugene; Lindsey Hardy, The Environmental Center, Bend; Mark Kendall, Kendall Energy, Salem; John Reynolds, University of Oregon, Eugene; Anne Haworth Root, EdenVale Winery and Eden Valley Orchards, Medford; Eddie Patrick Sherman, Against the Current Consulting Group, Portland; Stephen Bloom, Oregon Public Utility Commission, Salem; and Warren Cook, Oregon Department of Energy, Salem.

Representatives from the OPUC and the Oregon Department of Energy serve as non-voting board members. Eight of the 13 voting board members are from outside the Portland region.

All board meetings are open to the public. View the full board roster and board meeting dates, agendas and materials online at https://www.energytrust.org/about/public-meetings/board-of-directors-meetings/.

Energy Trust of Oregon is an independent nonprofit organization dedicated to helping utility customers benefit from saving energy and generating renewable power. Our services, cash incentives and energy solutions have helped participating customers of Portland General Electric, Pacific Power, NW Natural, Cascade Natural Gas and Avista save more than $2.3 billion on energy bills. Our work helps keep energy costs as low as possible, creates jobs and builds a sustainable energy future. Learn more at www.energytrust.org or call 1-866-368-7878.

By: Kevin Glenn PR Account Manager Coates Kokes

Southern Oregon Business Journal

13

Southern Oregon Business Journal

14

KCEDA Press Release: Cyber Security Enterprise Zone Legislation Klamath County Commissioner Kelley Minty Morris and KCEDA assist in introduction of Cyber Security Enterprise Zone legislation House District Representatives Mike McLane (R-District 55-Powell Butte) and E. Werner Reschke (R- District 56 – Klamath Falls) recently introduced House Bill 3206 to create a tax credit for taxpayers located in qualifying county who purchase software or hardware for electronic commerce and those who hire graduates of Klamath County’s local community college (Klamath Community College) and the Oregon Institute of Technology (OIT). The legislation was spurred by Klamath County Commissioner Kelley Minty Morris and Klamath County Economic Development Association (KCEDA) director Greg O’Sullivan.

O’Sullivan and the KCEDA leadership were instrumental in helping to create this new legislation for Commissioner Minty Morris which, in turn, was presented to HD Representatives McLane and Reschke. The legislation seeks to further the employment of local graduates of the local community college and OIT by local businesses and to provide tax credits to these employers. Tax credits would also be extended to taxpayers in qualifying counties who: purchase software or hardware for electronic commerce; establishes and implements employee training programs in collaboration with a local community college; rehabilitates vacant buildings for commercial use; increases the amount of qualified research expenses; and, increases the amount of alternative qualified research expenses.

Klamath County Commissioner Kelly Minty Morris

KCEDA Executive Director Greg O’Sullivan

“KCEDA is proud to work with Commissioner Minty-Morris and the bill sponsors to create a way to champion a stronger linkage between education, business, commerce and economic development,” said Greg O’Sullivan, KCEDA director.

“When Commissioner Minty-Morris challenged KCEDA to find a way to incentivize business expansion in rural Klamath Falls, we brought together our economic development partners to craft policy to support innovation.”

O’Sullivan continued, “At the same time, we recognized that one of our biggest economic engines is the Kingsley Field Air National Guard base. It is our hope that this legislation HR3206 will be the catalyst of the Klamath County Cyber Security Enterprise Zone.”

About the Klamath County Economic Development Association (KCEDA) : Since 1975, KCEDA has reflected the best of private enterprise, responsibility and dedication. Its mission is to provide tailored recruitment and retention/expansion programs, new opportunities for jobs, and a diversified, value-added industrial base/expanded economic development climate in southern Oregon. Learn more at www.ChooseKlamath.com.

Southern Oregon Business Journal

15

Klamath County unemployment rate drops to a record 5.8 percent, the lowest since 1990 Klamath Falls, Oregon (March 28, 2017) – The most recent unemployment rates for Klamath County – just released from the Oregon Employment Department – is cause for celebration county-wide. From January’s rate of 6.1 percent, the February unemployment dropped significantly to 5.8 percent. Klamath County has never posted a seasonally adjusted unemployment rate below 6 percent since comparable records began in 1990.

The year-over-year comparison of February 2016 to February of this year is 7.4 percent versus the current 5.8 percent. The state Employment Department asserts that the declining rate is driven by a surge in employment of local residents primarily concentrated in health care, retail positions and local education (which now includes the Oregon Institute of Technology.)

“I am thrilled with the newest unemployment numbers for Klamath County, as posted by the state’s Employment Department. This clearly validates the work that KCEDA has done in helping to make Klamath County the place in south central Oregon where people want to both live and work.”

Greg O’Sullivan, director of the Klamath County Economic Development Association (KCEDA), hailed the new Greg O’Sullivan unemployment rate, saying, “I am thrilled with the newest unemployment numbers for Klamath County, as posted by the state’s Employment Department. This clearly validates the work that KCEDA has done in helping to make Klamath County the place in south central Oregon where people want to both live and work.”

O’Sullivan continued saying, “But we don’t do it alone. Dozens of business owners have invested in this county and the trickle- down effect brings jobs to our residents who in turn have the resources to purchase homes and other discretionary items that further fuel our local economy. These numbers are clearly worth celebrating.”

Specifically, Klamath County added 170 jobs in February. Overall, since February 2016, Klamath County has added 540 new jobs (+2.5 percent). Job losses in the past 12 months tend to be concentrated in leisure and hospitality.

Also of note, neighboring Lake County is also seeing a drop in unemployment. Their seasonally adjusted unemployment rate was 5.9 percent in February, down from 6.3 percent in January. As with Klamath County, this is the first time in comparable records began in 1990 that Lake County’s unemployment rate is below 6 percent.

About the Klamath County Economic Development Association (KCEDA) Since 1975, KCEDA has reflected the best of private enterprise, responsibility and dedication. Its mission is to provide tailored recruitment and retention/expansion programs, new opportunities for jobs, and a diversified, value-added industrial base/expanded economic development climate in southern Oregon. Learn more at www.ChooseKlamath.com.

Southern Oregon Business Journal

16

DOWN TO BUSINESS A look at small business questions from the Southwestern Oregon Community College Small Business Development Center (SBDC).

Why do people shop out of the area when they can buy locally?

People shop where they feel they can get the best perceived value for the money they spend. Often a trip out of the area provides entertainment value as well as being a buying trip. So many options are available for shoppers today from a trip to the “big city” to online shopping with free or low cost shipping.

The local chamber of commerce, downtown association, media services and economic development personnel are always looking for creative ways to help keep shoppers in town, to support local business. They often have programs and information to assist local businesses to be more successful. If you are not sure what is available in your area, contact the chamber of commerce to find out.

Retailers can help in the effort to keep shoppers in town by joining with other businesses to support local efforts. Do an analysis of your retail store to make sure you are serving your customers’ needs. Are you offering the merchandise customers are interested in buying at prices they feel comfortable paying? Are your hours of operation convenient for shoppers to visit your store? Is your environment safe and comfortable? Is parking convenient? Do you have signage to help people find you? Are your employees courteous, helpful and providing great customer service? Are you advertising in places your customers are looking for you? Get to know the other businesses on your block. You can work with neighboring businesses to create appeal to attract shoppers to your area, creating strategic alliances or encouraging visitors to walk next door and see what’s available. You could even do a discounted price if they can prove they purchased something from your neighbor’s business. If every business on your block gave a 5%-10% discount to shoppers who could show a sales receipt from that day for a neighboring business it might boost sales for everyone in the area.

According to economic development professionals, a dollar spent in the local community creates an additional $1.88 multiplier effect. That means spending a dollar in your local community creates $2.88 worth of economic impact. That may not sound like much but when multiplied by the millions of dollars spent annually by consumers, it makes a big difference. Money spent in the local community creates and supports jobs here. It helps protect the local prosperity and builds community well-being.

Community leaders, businesses and individuals working together can create good reasons for shoppers to buy locally. Shopping locally supports independent, small businesses and helps them succeed which in turn supports local schools, events, jobs and prosperity.

By: Arlene M. Soto CMA, Southwestern SBDC Director Southern Oregon Business Journal

Southwestern Oregon Community College 17

Port of Coos Bay Tunnel Rehabilitation Project Southern Oregon Business Journal

18

The Port of Coos Bay received funding to complete renovation and improvements on all nine of our tunnels along the Coos Bay rail line through a combination of an $11 million FAST Lane grant, $8 million in Lottery Backed Bonds, and $550,000 in Port dollars. That work is slated to begin in the third quarter of 2017, and will likely take approximately two years to complete.

The Coos Bay rail line traverses 9 tunnels over an 82-mile section between Coos Bay and Eugene. The longest tunnel on the line spans 4,200’ – nearly a mile! All of the tunnels are now 100 years old, or older. Some of the tunnels still have the original timber tunnel support structures. The project will not only include structural repairs, but also address some significant drainage issues that are present in several of our key tunnels. The tunnels and the rest of the rail line had substantial deferred maintenance prior to the Port of Coos Bay assuming ownership. This project is a significant step in preserving and maintaining the line, which ensures that Coos Bay Rail Link can continue to operate safely and effectively.

Why is Rail So Important? Access to safe and reliable freight rail service on the south coast is an essential component of the economic fabric of our region. The closure of the line in 2007 had much farther reaching impacts on local businesses than most of the public truly understood. The rail customers along the line suddenly had to ship freight by truck to an inland trans load facility. At that time, the rail line had been transporting approximately 7,000 rail cars per year. Shipping by truck meant that companies were sending trucks an average of 330 miles per day to compensate. Virtually all of the shippers along the line had to reduce production, and consequently reduce jobs because of the additional cost of truck transport. Other companies delayed planned expansions because of the added shipping costs. The Port stepped in to purchase the line because it is a major economic driver for our region, and without it growth would have stymied.

We can measure the value and impact of the rail line in dollars spent and revenue cars on an annual basis, but the crux of the value of the rail line is much more significant than these numbers can truly demonstrate. The rail line supports local businesses in bringing their goods to market. These businesses employ people all along the line from Coquille to Eugene, providing family wage jobs. The rail line provides a mode of transit that is essential to attract new industrial businesses to locate here, and for businesses already operating on the South Coast to have the infrastructure they need to thrive.

Rail is important for many more reasons. For instance, did you know: •

Customers who ship via the Coos Bay rail line see substantial savings in their transportation costs, averaging $2.2 million per year.

•

The rail line supports 2 positions at the Port of Coos Bay, and 15 positions at Coos Bay Rail Link

•

The rail line currently serves 12 shipper facilities along the line, employing 750 people!

•

The shippers directly served on the line generate over $100 million in annual economic activity

•

Intermodal rail is far more environmentally friendly than shipping by truck. Rail is on average at least three times more fuel efficient than truck, which reduces greenhouse gas emissions, and is sustainable

•

Transporting goods by rail reduces road congestion and extends the life of highway systems, which reduces infrastructure maintenance costs.

•

Utilizing rail in shipping reduces highway injuries and fatalities. Rail keeps people on the roadways safer.

The Port is committed to maintaining the Coos Bay rail line to preserve this crucial component in our transportation infrastructure. The Tunnel Rehabilitation project is exciting, because it will help to ensure that the rail line can continue to support our local economy and businesses, reduce air pollution, and preserve our road systems.

Southern Oregon Business Journal

19

Regence BlueCross BlueShield of Oregon paid $1.5 billion for member care in 2016 By: Jared Ishkanian, Media Contact

PORTLAND, Ore. — Regence BlueCross BlueShield of Oregon paid $1.5 billion in medical care for its fully insured members in 2016, or $3,100 per member, according to unaudited figures filed March 1 with the Oregon Division of Financial Regulation.

Regence spent 84 cents of every premium dollar for doctors, hospitals, medications and other health care goods and services. The nonprofit health insurer reduced operating expenses per member by 9 percent compared to the previous year (excluding Affordable Care Act fees). Total enrollment, including self-funded membership, grew by 5,388 members over 2016.

On gross revenue of $1.78 billion, Regence had a net gain of 1.7 percent, or less than two cents per premium dollar. More than half of net income was driven by investment income, with the remainder attributed to an underwriting gain of 1.6 percent. The individual line of business continued to pose financial challenges.

Net income of $30.2 million is placed in the company’s capital reserves to ensure stable health care coverage for its total membership, including self-insured enrollment, of approximately 750,000 members. As a nonprofit, this is Regence’s only source of funds for improvements, investments and paying for higher than expected medical costs such as high cost specialty drugs.

“While our industry continues to experience dramatic shifts, I’m proud to report that Regence’s focus on financial stability on behalf of our members is reflected in our strong financial performance,” said Angela Dowling, president of Regence BlueCross BlueShield of Oregon. “As a nonprofit, we are focused on our long-term goals of creating a more person-focused and economically sustainable health care system.”

Community impact. Founded in 1941, Regence and its affiliated companies employ more than 3,000 people in Portland, Salem, Medford, Bend and Pendleton, driving more than $700 million in economic activity throughout the state, according to ECONorthwest. Regence and its Oregon employees also contributed $5.3 million and 4,561 volunteer hours to nonprofits in 2016.

About Regence BlueCross BlueShield of Oregon Regence BlueCross BlueShield of Oregon, headquartered in Portland, has been serving Oregonians since 1941 and now provides nearly 750,000 members with comprehensive health insurance solutions. As a nonprofit independent licensee of the Blue Cross and Blue Shield Association, Regence is part of a family of companies dedicated to transforming health care by delivering innovative products and services that change the way consumers nationwide experience health care.

For more information, please visit regence.com, facebook.com/regencebluecrossblueshield, or twitter.com/regenceoregon.

Southern Oregon Business Journal

20

New Oregon Solar Energy Development Program Enrolls First Round of Projects BY: Nathan Buehler

Business Oregon approved 15 utility-scale solar energy projects to enroll in the new Solar Development Incentive program, created in the 2016 Oregon legislative session.

The program encourages development of 2-10 megawatt (MW) solar photovoltaic energy projects in Oregon by providing an incentive per kilowatt-hour (kWh) of electricity generated.

Solar at the utility-scale is nascent in Oregon and developers face higher costs being the first to take on projects. As the industry gains experience it becomes more efficient, and in doing so, the costs of building utility-scale solar projects should decrease.

"Utility-scale solar is trending to be cost-competitive with traditional forms of energy generation very soon," said Jeff Bissonnette, Executive Director of the Oregon Solar Energy Industry Association. "Global markets have brought down the hard costs of components, and the Solar Development Incentive helps drive down soft costs by accelerating utility -scale project development and increasing installation efficiency in Oregon."

The Solar Development Incentive program helps accelerate the deployment of 2-10 MW sized projects. Qualified projects receive a monthly payment of $0.005 per kWh, for up to five years. The program is capped at 150MW worth of projects, but the 55 applications that Business Oregon received totaled 293 MW of solar energy capacity.

The 15 projects selected to date represent 116MW of the total 150MW capacity and are mostly located in central, southern, and eastern Oregon. Additional award announcements from the application pool are forthcoming.

This is a one-time enrollment incentive program and is no longer accepting applications. Additional information is available on our Solar Development Incentive program web page.

• • • • • • • • • • • • • • • • •

Approved Projects • •

• •

Coronal Energy (2 projects/20 MW) Adams Solar Center, LLC—10 MWac project located in Jefferson County. Expected to be commercially operational by April 1, 2017.

Bear Creek Solar Center, LLC—10 MWac project located in Deschutes County. Expected to be commercially operational by November 16, 2017.

Cypress Creek Renewables, LLC (3 projects/23 MW)

Southern Oregon Business Journal

• •

Hyline—9 MWac project located in Malheur County.

Commercially operational on November 19, 2016.

NorWest Energy 2, LLC—10 MWac project located in Deschutes County. Commercially operational on December 31, 2016.

Railroad—4 MWac project located in Malheur County.

Commercially operational on December 6, 2016.

ET Solar (3 projects/28 MW) OR Solar 3—10 MWac project located in Klamath County. Expected to be commercially operational by March 15, 2017.

OR Solar 5—8 MWac project located in Baker County.

Expected to be commercially operational by July 26, 2017.

OR Solar 6—10 MWac project located in Lake County.

Expected to be commercially operational by March 24, 2017.

NextEra Energy (1 project/5 MW) Old Mill Solar—5 MWac project located in Klamath County. Expected to be commercially operational by April 1, 2017.

Obsidian Renewables, LLC (2 projects/18 MW) Fossil Lake—10 MWac project located in Lake County.

Expected to be commercially operational by December 1, 2017.

Black Cap II—8 MWac project located in Lake County.

Commercially operational on November 30, 2016.

Pine Gate Renewables (2 Projects/11.9 MW) OSLH, LLC—9.9 MWac project located in Deschutes County. Commercially operational on December 31, 2016.

SP Solar 5, LLC (Mill Creek)—2 MWac project located in Yamhill County. Expected to be commercially operational by June 30, 2017.

SolarCity (1 project/8 MW) Woodline Solar—8 MWac project located in Klamath County. Expected to be commercially operational by November 30, 2017.

Sunthurst (1 project/2 MW) Pilot Rock Solar 1—2 MWac project located in Umatilla County. Expected to be commercially operational by September 30, 2018.

21

COMPRESSION Compression is an Oregon tax system issue that that reduces the amount of taxes that can be collected in a given year if the collection amount is going to exceed the pre-set maximum established by Measure 5 and adjusted by Measure 50.

The calculations, causes, and effects of compression are extremely complicated. If real market values and assessed values are converging, urban renewal can cause increases in compression. However, urban renewal can also be a tool to help facilitate growth that ultimately reduces compression. Urban renewal can also decrease compression in the schools category when school taxes are re-classified as general government taxes under urban renewal.

The recession of the 2000’s, by decreasing the real market value of many properties, has caused compression losses to increase throughout Oregon. Compression occurs when tax rates exceed tax limitations and assessed values and real market values inch closer together. Measure 5 as adjusted by Measure 50 imposed tax rate limits of $10 per $1,000 of real market value for General Government categories and $5 per $1,000 for Education categories. Urban Renewal is calculated in the General Government category. This classification reallocates the Education portion of taxes within an urban renewal district from Education and moves it into the General Government category. Urban renewal taxes divided from levies to repay general obligation bonds that are exempt from Measure 5 are also included in the General Government category. This has the effect of increasing the General Government tax rate, but reducing the Education and Exempt tax rate.

The Measure 5 tax rate limits are exceeded in many areas in the state, but this did not cause significant reductions in taxes collected (compression) until the difference between assessed values and real market values decreased.

Compression occurs first on local option levies, then on permanent rate levies. While compression is a concern for all taxing jurisdictions, it is especially a concern for special districts that have local option levies, as those are compressed before any other levies are compressed.

An example of how compression works is shown below. In the first scenario a house with a real market value of $200,000 and assessed value of $190,000 experiences compression while a house with a real market value of $250,000 and assessed value of $190,000 does not experience compression.

1. Scenario I Assessed Value (AV) $190,000

Taxes levied

Real Market Value (RMV) $200,000 Actual tax rate: General Government taxes ($12.50 per $1,000 of AV)

$2,375

Education taxes ($6.50 per $1,000 of AV) Tax rate limits: General Government tax limit ($10 per $1,000 of RMV)

$1,235

Education tax limit ($5 per $1,000 of RMV)

$1,000

Compression General Government (M-5 loss)

$(375)

Compression Education

$(235)

(M-5 loss)

$2,000

In this scenario, both the general government and education taxes have to be compressed. In this situation, taxing jurisdictions are scheduled to collect $610 ($375 + $235) over the established taxation limit. To ensure the limit is not exceeded, the actual taxes collected are compressed down to the maximum $2,000 and $1,000 limits, and the taxing jurisdictions lose out on $610 of revenue.

Copyright Elaine Howard Consulting, LLC 2012 Southern Oregon Business Journal

www.elainehowardconsulting.com 22

COMPRESSION (Cont.)

If the real market value is higher (i.e. assessed value is a lower percentage of the real market value), compression is less likely to occur. In the scenario below, compression does not occur as the real market value of $250,000 allows enough capacity to levy the full amount of the taxes for tax rates in excess of the Measure 5 limits. This example is still based on a $190,000 assessed value.

2. Scenario II Assessed Value (AV) $190,000

Taxes levied

Real Market Value (RMV) $250,000 Actual tax rates: General Government taxes ($12.50 per $1,000 of AV) Education taxes ($6.50 per $1,000 of AV)

$2,375 $1,235

Tax rate limits: General Government tax limit ($10 per $1,000 of RMV)

$2,500

Education tax limit ($5 per $1,000 of RMV)

$1,250

Compression General Government (M-5 loss)

$0

Compression Education (M-5 loss)

$0

As shown above, there are two variables to watch when considering compression, the tax rates and the relationship of the RMV to AV of properties. The effect of the recession can be seen in the two scenarios above. The property in these scenarios provides $3,610 to local taxing jurisdictions when its real market value is $250,000, however, when that value drops to $200,000 (similar to what many properties have done throughout the recession), the taxes on the property are compressed down to $3,000, and the taxing jurisdictions are faced with declining revenues. Also, new local option levies can exacerbate the situation when they are passed, as they increase the tax rates, but not the tax limits.

The only ways to reduce compression are to reduce tax rates, to increase the real market values of properties, or raise the taxing limitations, that would take a state-wide vote. However, there are not that many plan areas around the state are within areas where the total general government tax rate is under $10 and therefore there is no compression at all.

According to data from the Department of Revenue, of the 102 plan areas that received division of tax revenue in 2011 -12, 22 suffered no compression loss and another 31 had compression losses of under $100. For the special levies, out of a state-wide total of 22, 10 had no loss and 5 had losses of under $100. According to Tom Linhares, Executive Director of the Multnomah County Tax Supervising Commission, The City of Portland has 92% of all of the compression losses statewide.

Urban renewal can help eliminate or offset the effects of compression in two ways, by raising the real market values of properties and by encouraging new development. Increasing real market values are dependent on a strong real estate market, which typically follows a strong economy. New development is an obvious benefit to taxing jurisdictions as it provides another source upon which to levy taxes. New development is also beneficial to school districts that are using the construction excise tax. It is the desire of many special districts and urban renewal agencies that the impact of urban renewal help facilitate growth in the community that will increase its economic vitality and both increase the real market values of properties and add new development to the tax rolls.

Copyright Elaine Howard Consulting, LLC Southern Oregon Business Journal

www.elainehowardconsulting.com 23

Coos Bay Rail Line Bridge Rehabilitation The Coos Bay Rail Line is a shortline class III railroad owned by the Oregon International Port of Coos Bay and operated through a management agreement with Coos Bay Rail Link, a division of ARG Trans, Inc. The 134-mile-long line provides connections to the North American rail network for manufacturing operations in Coos, Douglas, and Lane Counties, and for marine terminals in Coos Bay harbor. The line began operations in 1916, passing through several owners until it was shut down in 2007 due to safety issues Swing Span Bridge over Siuslaw River related to deferred maintenance.

The line was acquired in a feeder line proceeding before the Surface Transportation board in 2009, and was returned to service in October of 2011.

Since acquiring the line the Port of Coos Bay has invested over $31 million to restore bridges, tunnels, and rail structures after decades of neglect and deferred maintenance by the previous owners. Another $22.5 million has been committed to continue the rehabilitation efforts on the line to ensure continued service. Since restoration of service, the line has seen an increase in revenue car loads from 2,480 in 2012 to a peak of 7,509 cars in 2014. Revenue loads for 2015 reached 7,341 cars, and the traffic on the line is expected to maintain at around 7,500 cars annually until additional industries are brought into service along the rail corridor.

The line traverses 121 bridges between the interchange in Eugene and end of line in Coquille. The bridge structures vary in type and configuration, but include (3) steel swing span bridges, a variety of steel truss, though plate girder, and deck plate girders spans, concrete box spans, and a multitude of timber trestles. Many of the structures were first built when the line was constructed in 1914 through 1916, and many of the steel structures are now 100 years old. While most of the bridges on the line meet Federal Rail Administration mandated rating criteria for current operation loads and train speeds, several structures limit train speeds.

These structures must be constantly inspected and repaired to remain in service, and require significant improvements and upgrades to meet the optimal targeted train speed of 25 miles per hour.

The proposed project is the construction of improvements or replacements for selected key bridge structures to upgrade capacity on the line; to meet FRA mandated load rating requirements; to increase overall safety and reliability on the line; and to extend the useful life of the selected structures for 20 years or more of continuous operations. The project builds on repairs made in 2010 to return the line to service, and other upgrades made to meet current FRA standards. The planned work includes improvements on all three of the Swing Span bridges, replacement of the Vaughn Viaduct Bridge near Noti, Oregon, replacement of the Coal Bank Slough Southern Oregon Business Journal

24

Coos Bay Rail Line Bridge Rehabilitation (Cont.)

bridge in Coos Bay, Oregon, and capacity upgrades to steel structures between Coos Bay and Eugene to meet planned train load capacities and speed targets necessary to maintain continued traffic growth on the line.

Load ratings for the three swing span bridges on the line were completed in 2014, and ratings for the remaining steel structures were completed in 2015. The rating reports identified improvements to the swing span structures necessary to meet FRA criteria for planned operations, including a design revision to the existing floor systems on the Umpqua and Siuslaw swing span structures necessary to meet current American Railway Engineering and Maintenance of Way Association (AREMA) standards. The reports also indicated the current configuration of the Vaughn Viaduct and Coal Bank Slough bridges would not meet FRA criteria, prompting efforts to replace those structures. The Vaughn Viaduct replacement project has passed 30% design and is currently being permitted.

Additional improvements to other structures have been identified to improve capacity on sections of the line to meet projected needs for expected traffic levels over the next 5 years. Construction on these projects is planned to begin late 2016 or early 2017, depending on permitting and funding criteria.

The overall project is currently estimated to cost $24.4 million dollars. The Oregon International Port of Coos Bay intends to fund the project through a combination of grants, loans, and revenue generated by rail line operations. Currently, the Port has committed $7 million from the Oregon Lottery Bond backed grant authorized in 2013, $3 million in funds from the Oregon Lottery Bond backed grant authorized in 2015, and $400,000 in Rail Revenues to the Project. The Port intends to seek a Federally funded grant for the remaining $14 million necessary to complete the project.

Coos Bay Rail Link Office 115 Hall Ave. Coos Bay, OR 97420

Swing span bridge over the Umpqua River

The line traverses 121 bridges between the interchange in Eugene and end of line in Coquille.

Southern Oregon Business Journal

25

THE END OF BIG MALLS MEANS BIG PROBLEMS

BY RACHEL QUEDNAU

What's it like to watch a shopping mall die?

How do you know when it's happening?

First, you'll probably notice vacancies in the once-filled rows of stores that line the mall. Perhaps some of those will be temporarily occupied with cheap businesses selling things like knock-off handbags and lottery tickets. Each time you visit, you'll see more and more parking spaces empty and a general air of neglect around the place. When the "anchor stores" —the Macy's, JC Penney's, and Nordstroms— leave, that's how you'll really know your mall is doomed. Fast forward a few years: the rest of the stores have disappeared and the mall sits abandoned, becoming a hang-out spot for drug dealers and other vagrants.

This is the picture painted by a recent article in Business Insider, but it's a story we've read (and seen) dozens of times. The precarious nature of the mall model is revealed in this illustration of the domino effect that sends malls into a downward spiral.

Because of their size and the amount of infrastructure they rely on—everything from the electric lines to the heating to the roofing on out to the landscaping, massive parking lots, and special turn lanes and off-ramps—all of it, super-sized and expensive, malls are a risky endeavor.

Hayley Peterson at Business Insider writes: When anchor stores close, it can be hard to find businesses to replace them, because they occupy the multistory buildings at mall entrances that are often at least 100,000 square feet. If no replacement tenant is found, the loss could trigger a decades long downward spiral for the shopping mall and surrounding communities... When anchor stores are boarded up, traffic to the retailers in the middle sections of malls tends to decrease. That has been happening at shopping malls nationwide, and now many retailers are going out of business and closing their stores as a result.

Westland Mall in Columbus, OH (Photo by Sam Howzit)

Southern Oregon Business Journal

26

THE END OF BIG MALLS (CONT.)

When a few stores leave, suddenly the other stores have to pick up the slack. And when a large department store bows out, the mall not only loses that large source of revenue, it also loses a substantial customer draw. Replacing that department store—much like trying to refill a big box building—is a herculean task.

Now only the small stores are propping up the mall. This unsustainable revenue system combines with the natural declining public interest in a fairly empty building (one that isn't just unappealing because of its sparse businesses but also because it may be perceived as dangerous, given its empty spaces that invite criminal activity). Before long, many malls are forced to shutter their doors.

From the Business Insider article: "The communities wither away, and they never come back," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm.

Unfortunately, the trouble doesn't end there because malls leave behind massive buildings, parking lots and adjacent infrastructure that is now wasted space, not to mention that residents employed at the mall lose their jobs.

The best solution is not to build a mall in the first place. But if your town already has one, it's wise to ensure that you're not relying on it for considerable sales tax revenue and jobs. Chances are, it won't be around for long.

Rachel Quednau serves as Communications Director for Strong Towns and has been a regular contributor and podcast host for Strong Towns since 2015.

Rachel is a Midwesterner currently living in Milwaukee, WI. Previously, she worked for several organizations fighting to end homelessness at the federal and local levels. She draws from her experiences living in New York City, Washington, DC, Walla Walla, WA and Minneapolis, MN to help her build better places wherever she is. You can find her musings on Twitter @rquednau. One of her favorite ways to get to know a new city is by going for a run in it.

Walking through traditional shopping malls today is much different than the experience of the same walk twenty years ago. The effort of big box stores to compete with Walmart and other discount retailers in newer settings changed a dynamic that had seemed secure for a hundred years.

Then the internet found a place to flair elbows into the retail world of merchandizing. Amazon has become a mammoth competitor that gains the attention of Walmart and the other retailers who squeezed business away from the likes of Sears, Macy’s and Penney’s.

Malls that haven’t changed are changing now. Competition is part of doing business, but when competing to survive happens to billion-dollar companies, large numbers of consumers and employees are affected. Corrections can’t happen fast enough. Often those corrections include taking a big step backward before moving forward is possible. Every mall in America is reinventing itself in one way or another. Malls in SW Oregon are all a part of that reinvention.

Greg Henderson, Publisher Southern Oregon Business Journal Southern Oregon Business Journal

27

The small towns that survive will be the ones that are open to new ideas BY: BECKY MCCRAY

Photo by Deb Brown

Can you make a small town more open to new ideas? Yes, and it may be the most important thing you can do.

In a world driven by frenetic change, which small towns are going to thrive?

We know rural people play a key role in our society, so some small towns will have a future. Some small towns are innovative and progressive. Other small towns are stuck in the past.

Is there anything that tells us which towns will survive and prosper? The key factor is openness to new ideas.

Openness to new ideas is an advantage for rural areas addressing change, a Christian Science Monitor article said, pointing to work by Dr. David Peters, Iowa State University, and Dr. Linda Lobao, Ohio State University.

Small towns that are open to new ideas will be the best positioned to thrive no matter what change comes their way.

Great. Now what? How do we make our towns more open to new ideas? There are three parts to making your rural community more Idea Friendly.

Southern Oregon Business Journal

28

Small town survival means being open to new ideas (cont.)

Gather Your Crowd It doesn’t do any good if you are the only person in town open to new ideas. You’re going to need a crowd of people. The crowd here isn’t like a mob with pitchforks or a crowd of people watching a train wreck. It’s crowd sourcing the future of your town, a crowd of people with a positive intent.

You draw a crowd with a big vision. You start a public discussion about the kind of town you want to live in. You create the public focal point for the kind of discussion you want to have.

You can take actions like talking to people about the big vision, posting on social networks, showing public appreciation for others, giving awards for people who try new things, and welcoming newcomers.

Build Connections You turn a crowd into a capable network through building connections. You need to connect your people to each other so they become more than just a crowd, they become a network. In order to make your people even more capable, you connect them with resources and training.

You can take actions like holding networking events or backroom tours. You can help create shared workspaces like coworking, maker spaces, shared arts studios or business incubators, so participants get a chance to connect with others like them.

You can also build connections outside your local network. Bring in outside resource people to provide training or information. Connect aspiring artists or entrepreneurs with the resources that exist outside your town.

Take Small Steps You and the crowd accomplish the vision through small steps. When you start by taking small steps you make it possible for more people to be involved, you cut down the scale of the vision from huge and scary to small and doable. You also make it easier to fail (and learn) at a small scale rather than crash and burn with a huge effort all at once.

You can use the Innovative Rural Business Models to take small steps to going into business. You can use the lighter, quicker, cheaper model to take small steps in governance and infrastructure.

About Becky McCray Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband own a retail liquor store in Alva, Oklahoma, and a small cattle ranch nearby. Becky is an international speaker on small business.

Southern Oregon Business Journal

A few of Southern Oregon’s towns striving to make a difference.

29

Getting As Many People As Possible Into Business In The Smallest Ways Possible You and I talk a lot about encouraging more entrepreneurs in your community. Maybe you're wondering about where to find those potential entrepreneurs. A couple of people have asked that question lately, so let's look into it.

The more you cut down barriers to entry, the more people will be able to try different entrepreneurial experiments. The more of these tests that happen, the more likely you are to discover the people best suited to being successful, communitychanging entrepreneurs. When you let them take small steps using the Innovative Rural Business Models, you help them expand their knowledge, build up their assets and develop a following in the market.

That's why you want to find potential entrepreneurs, but not where to find them. Let's list off some places to look for potential new business people.      

Look at the booths at events. Who seems to be new, or trying a new idea?

Look in the beauty salons. Lots of budding entrepreneurs display merchandise on the counter.

Look in other stores in town for locally-made items. Who has a few items for sale, maybe handmade? They're getting started small.

Look in the hands-on classes in high school and technical schools. Do they weld porch swings in welding class? Are ag students selling baby chicks or bedding plants? More entrepreneurs there.

Look in youth education groups with entrepreneurship components. Jim Metcalf told me about their local TREP$ group.

Ask the librarians. Ask faith leaders. Ask the Chamber. Ask stylists and barbers. Rural people tell their entrepreneurial dreams to all sorts of people.

And a word of advice for that project to support potential entrepreneurs. Rather than try to pick winners even before people ever go into business, focus on getting as many people as possible into business in the smallest ways possible.

That’s the best way to find entrepreneurial individuals.

Keep shaping the future of your town, Becky PS - Stop telling people going into business is hard. I hear that way too often. Tell them it's easy to start small. Give them Tiny spaces and Temporary places to experiment with.

Becky McCray, founder and publisher

SMALL BIZ SURVIVAL THE SMALL TOWN AND RURAL BUSINESS RESOURCE

Southern Oregon Business Journal

30

Local Knowledge Regional Leader

1495 NW Garden Valley Blvd Roseburg, OR 97470 Ph: (541) 672-6651 Fax: (541) 672-5793

Escrow Service Loyalty Barry Robinson, General Manager barry@ameri-title.com Let AmeriTitle Earn Yours

OUR MISSION “To provide a reliable business information tool for the economically curious, professionally inspired, and acutely motivated.”

PROVIDING IMPORTANT INFORMATION TO BUSINESSES IN THE SIX COUNTIES OF SOUTHWEST OREGON www.southernoregonbusiness.com

Southern Oregon Business Journal

31

Wine tasting is an interesting experience.

To mention it to someone who doesn’t drink wine they might think the interest in wine tasting has to do with alcohol. A few decades ago I was one of those people. It doesn’t.

The more you go wine tasting the more you realize that wine tasting to those who understand a few things about the intrigue of it very rarely mention the content of alcohol. They swirl and sip and wash their palates in the sampling sometimes without swallowing the sip they’ve taken so not to complicate the experience of a sip from another vintage. That may be art or training, I can’t say for sure.

It’s science to some. Art to others.

Labels attract attention, but that’s marketing. Recognition in wine publications is also good for business.

I have a few friends who believe there are two kinds of wine, red and white. Hmmm, they’re not the people who fail to mention alcohol content of wine, or sip it without swallowing. They also judge wine by its price and usually spending more than $7.00 on a bottle is just going overboard. I don’t ask them to bring wine to a party.

Wine tasting is like learning to read good books by excellent authors. At first it takes instruction and at least a bit of reading for the discovery that wines vary tremendously from one to another, or that there really is a difference between one author and another.

Southern Oregon has some of the best wines in the world. There are dozens of wineries spread among our gorgeous river valleys with gold medals on display from the competitions they have won. If someone talks about wine in words you can’t understand, ask them to explain. Chances are they will enjoy sharing what they know.

G Henderson, Publisher

Southern Oregon Business Journal

32