April 17, 2009 Volume 110 Number 8

SolarWorld gets tax breaks while dumping union workforce

By DON McINTOSH, Associate Editor

Two dozen union workers were laid off last month from a SolarWorld silicon ingot factory in Vancouver, Washington. Next Friday, 27 more will be let go. But it wasn’t the recession or foreign competition that killed their jobs. Rather, SolarWorld is progressively downsizing its union workforce while aggressively ramping up employment at a new nonunion facility in Hillsboro, Oregon — for which the company is getting nearly $43 million in tax breaks and other public subsidies.

German-headquartered SolarWorld, one of the world’s largest solar energy companies, acquired the Vancouver plant and another in Camarillo, California, when it bought Royal Dutch Shell’s solar division in 2006. The Vancouver workers had been represented by Machinists Local 1432 since the 1980s. SolarWorld promised there’d be no job cuts for a year.

Then in March 2007, SolarWorld bought a 480,000-square-foot silicon chip factory in Hillsboro from the Komatsu Group. SolarWorld paid $40 million for a factory that had cost Komatsu $472 million to build, and announced it would spend $400 million to turn it into the largest solar wafer manufacturing facility in North America. The company employed mostly union building trades subcontractors on the changeover, and the Hillsboro plant opened on schedule in October 2008.

Would the company’s own workers be union as well? When Machinists District Lodge 24 Business Representative Scott Lucy met with SolarWorld last summer to negotiate a new contract, he hoped the company would agree to remain neutral toward any future efforts by its new Hillsboro workers to unionize. SolarWorld rejected that proposal.

It also demanded concessions, including elimination of the severance benefits that workers would get if laid off. Members voted Nov. 2, 2008, to authorize a strike, for the first time ever. But at length they agreed to a cut in severance pay — from three weeks pay for every year of service to one week.

On Jan. 27, SolarWorld announced 52 permanent workers and 11 temps in Vancouver would be laid off in March and April 2009. A skeleton crew of about eight would remain to recycle scrap silicon.

Workers were told they could apply for jobs at the Hillsboro site — 32 miles away. But those would be non-union, at-will jobs, with lower pay and benefits and none of the union job protections; work shifts would rotate every other week between 12-hour-long graveyard and 12-hour-long day shifts; and if they took jobs in Hillsboro, they would lose their severance pay. Only a half-dozen accepted jobs at the new plant, Lucy said.

SolarWorld spokesperson Anne Schneider wouldn’t tell the Labor Press what Hillsboro production workers are paid, other than to say it’s “competitive.” But Vancouver workers say they were told to expect $11 to $13 an hour. That compares to $12.24 to $26.27 an hour under the union contract, depending on skill and experience. Most of the Vancouver workers made between $14 to $19 an hour.

If $11 to $13 an hour is the norm at SolarWorld Hillsboro, that wouldn’t meet the conditions of its enterprise zone tax break.

Under a state program, companies locating in designated “enterprise zones” pay no property taxes for up to five years on new equipment they install. For SolarWorld, that’s an estimated tax savings totaling about $11.5 million. The State of Oregon asks almost nothing in return for that, but local governments can put extra conditions on zones in their jurisdictions, and Hillsboro requires that at least 75 percent of the jobs pay at least double the Oregon minimum wage, which is currently $8.40.

However, in satisfying that requirement, the company can count managers, and can choose not to count temps. The temp agency Kelly Services has been recruiting workers for SolarWorld since at least last summer — and even set up a branch office at the plant. Schneider wouldn’t say how many temps the company is employing. SolarWorld has to submit wage data to get the tax break, but the information won’t be available to the public, Hillsboro city officials said.

Are these the much-talked-about “green jobs of the future” that politicians at every level are eager to attach themselves to?

Oregon Gov. Ted Kulongoski was there with a prepared statement when SolarWorld opened in Hillsboro: “Oregon must remain aggressive in developing economic opportunities in industries that will create high-wage jobs and be in high demand for the long-term — industries like renewable energy,”  he said.

Kulongoski also directed the Strategic Reserve Fund to make a $1 million grant to train SolarWorld employees.

All four solar manufacturers that set up shop in Oregon since 2007 are in enterprise zones, but the break on property tax is the least of it. Oregon has massively increased tax subsidies and other supports for renewable energy in the last two years. In 2007, the Legislature approved a 50 percent income tax credit for renewable energy investments of up to $20 million. Because Department of Energy policy allows a 10 percent “cost overrun,” in practice that meant wind farms, solar arrays and solar manufacturers get up to $11 million tax reduction per project. In 2008, the Legislature doubled the limit for solar manufacturers, which can now get up to $22 million in tax breaks per project.

For its Hillsboro factory, SolarWorld was approved for an $11 million tax credit under the program. As the Portland Tribune reported April 9, since SolarWorld doesn’t pay corporate income tax, it sold the credit at a discount to WalMart. [Under the state’s “pass through” rule, the tax break, known as Business Energy Tax Credit, can be sold.] SolarWorld will also get $19.45 million of tax credits for its investment in a new 210,000-square-foot logistics, distribution and production center next to its existing Hillsboro factory.

About 150 to 200 union building trades workers will be employed on the expansion, due for completion in November. But the Oregon AFL-CIO is pushing lawmakers in Salem to tweak the Business Energy Tax Credit and enterprise zone tax break to better ensure that tax-break-subsidized jobs are good jobs.

The Oregon State Building and Construction Trades Council is pushing a proposal to require that companies getting enterprise zone tax breaks on large projects of more than $5 million be required to pay area standard wages and benefits to the construction workers.

“If local residents are losing tax income off the property, they ought to at least have prevailing wage requirements to protect local workers,” said Clif Davis, business manager of International Brotherhood of Electrical Workers Local 48.

When lawmakers expanded the Business Energy Tax Credit in 2007 and 2008, the state budget was in good shape. Now, a recession is sapping state revenues, and with companies lining up to seek over $100 million a year in business energy tax breaks, lawmakers are taking a second look.

“[The Business Energy Tax Credit] is talked about as an economic development tool,” said Oregon AFL-CIO Political Director Duke Shepard at a Feb. 19 hearing, “but it has none of the standards typically associated with an economic development program. There aren’t wage standards. There’s no cost-per-job standard.”

And it’s not at all clear that the credits are necessary for some kinds of renewable energy investment to take place. Wind farms, for instance, were given a guaranteed market in 2007 when the Legislature required private utilities to massively increase the amount of renewable power they buy — and pass on extra costs to ratepayers.

Solar manufacturers have lots of other reasons to locate in Oregon’s “silicon forest.” Solar cells and computer chips use the same foundation —silicon wafers — and a similar basic technology. Oregon is a good location for wafer making because it has very pure water, relatively cheap electricity, and an experienced silicon manufacturing workforce. Judging by employment ads, SolarWorld isn’t even looking at applicants with less than two years in silicon chip manufacturing.

If it’s not clear the credits are even causing the investment, at least they ought to be ensuring decent wages, says labor ally Chuck Sheketoff of the Oregon Center for Public Policy.

Lawmakers appear to be listening. The Oregon Legislature is considering lowering the credit from its current $10 million to $5 million per project for projects that generate energy like wind farms, solar arrays, and methane digesters.

For solar manufacturers, the maximum credit would remain $20 million — and that amount would be made available to electric vehicle manufacturers as well, if any should choose to locate in Oregon.

Lawmakers are also considering requiring recipients stay in operation for at least five years, and giving the Oregon Department of Energy the authority to consider job creation, where the power will be sold, and whether the credit is necessary for the project to go forward — before credits are approved.

As State Sen. Ginny Burdick put it, “the money we spend on this credit is money that’s not being spent on health care, schools, and public safety.”

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