It took nearly a year for Wayfair to decide to move to Springfield. And it took a coalition of the willing to make the pitch: PacificSource, Lane County, Symantec, Business Oregon, the city of Springfield and both Eugene and Springfield Chambers of Commerce.
The Boston-based business announced on Jan. 7 it would have a customer service branch operating in Springfield. Attracting an out-of-state business like Wayfair often requires a slew of tactics. In this case, it took enterprise zones and a grant from Business Oregon with the hopes that Wayfair will invest long-term in the area, though there is some concern.
Despite the taxpayer-funded incentives, Wayfair officials say they’re in for the long haul with its westward investment.
Wayfair is an online retailer catering to a broad marketplace of furniture customers looking for a more upscale version of IKEA, says Nathan Lillegard, a University of Oregon business instructor and program manager at Lundquist Center for Entrepreneurship.
“Wayfair has got stuff that’s better quality [compared to IKEA],” he says. “Wayfair has got everything from traditional to French country. They have a bunch of styles.”
This isn’t Wayfair’s only customer service branch. In the U.S., the retailer has locations in Utah, Texas and Massachusetts.
Wayfair will be exempt from paying new taxes attributed to new investments since the city approved a three-year deal for Wayfair. Springfield has 11.2 square miles of enterprise zones. The tax abatement is estimated to be less than $300,000 for all three years of the deal, Amber Fossen, the city’s public affairs specialist, said in an email to Eugene Weekly.
From 2014 to 2015, when the property wasn’t completely utilized, Fossen says that the loss in revenue was nearly $472,000.
Fossen adds that the new jobs could result in $20 million each year in new wages in the county.
Bob Warren, a former field agent for Business Oregon and an EW columnist, says enterprise zones were created by the Legislature, so he considers it a state program. Enterprise zones exempt businesses from paying local property taxes on new investments for a period of time.
Enterprise zones were created initially for rural areas to compete with urban economic zones, he says.
The state decides on the locations of enterprise zones, Warren says. Enterprise zones impact how much is collected in local property taxes, though the increased income taxes that would come from new jobs from a business like Wayfair would go to the state through income taxes.
To overcome the tax-base loss, cities and counties bank on new employees spending money locally or buying homes. Considering call center wages, the latter most likely won’t happen, he says.
Wayfair’s presence could push call center wages upward to attract workers from other call centers in the area. Lane County already has a low unemployment rate: 4.3 percent, according to the most recent count by the U.S. Bureau of Labor Statistics.
If Wayfair offers an hourly wage of $15, for example, other call center employees could use that as leverage to get raises from their current employers, Lillegard says.
Officials from Wayfair declined to disclose how much it would pay employees. Pete Boudreaux, Wayfair’s director of sales and service, says the company will offer health insurance, stock benefits and a “fun place” to work.
In addition, Wayfair will provide opportunities to advance one’s career, he adds.
Business Oregon offered Wayfair a $400,000 grant on the basis that it must develop an internship program and employ 600 people at its Springfield location.
To offer Wayfair this money, Business Oregon used its Strategic Reserve Fund, a discretionary tool administered by the organization and funded by lottery dollars, says Nathan Buehler, a spokesperson for Business Oregon. Buehler adds that the allocation of this tool is vetted within Business Oregon and then Gov. Kate Brown signs off on it.
A past EW investigation (“Big Corporate Handouts with Little Oversight,” Sept. 20, 2018) showed that officials didn’t verify companies’ jobs claims necessary to receive its subsidies. Business Oregon is responsible for checking Wayfair’s employment data and to conduct a financial review to check if it’s keeping its promise, Buehler says.
Fossen adds that the city of Springfield will also be responsible for providing oversight of Wayfair.
Wayfair doesn’t know what its internship program in Springfield will look like, only that it will be focused on customers, Boudreaux says. The internship is part of a public benefit requirement in the grant as a way to create more opportunities for underrepresented groups, Buehler says. He adds that Wayfair has a 70 percent internal promotion rate at its East Coast headquarters.
Warren says when he worked at Business Oregon in the past, these grants were often written with the understanding that the requirements would be easily met. In fact, he says that he would meet with companies and design the requirements together to ensure the business would meet them.
Whenever businesses didn’t meet the criteria, he says that large portions of the grants were forgiven, allowing a small portion to be a loan.
If the business met 75 percent of employment goals, for example, the business would only pay 25 percent of the loan.
Buehler says the deal with Wayfair is all or nothing. If Wayfair doesn’t meet its agreement, the loan must be paid back in full.
Warren says he feels confident in the investment from Wayfair, though. He says call center jobs offer great skillsets for those who may not have them.
Boudreaux reassures that Wayfair is here for the long run. He says the business is still committed in other states it’s invested in. And, since Wayfair is looking to stay, the company wants to be a place where employees have a sense of loyalty.
“We want long-term employees,” he says. “Based on what we’ve seen in Eugene and heard from local community leaders, we believe this is a location where we can do that.”
UPDATED 10:10 am Friday, Feb. 1