the economic and fiscal contributions of esco in oregon · 2013. 1. 18. · business. needing...

The Economic and Fiscal Contributions of ESCO in Oregon

January 18, 2013

222 SW Columbia Street, Suite 1600 Portland, Oregon 97201

503-222-6060

ECONorthwest ESCO Economic Contributions Page i

Acknowledgements This report was prepared for ESCO by staff at ECONorthwest's Portland, Oregon, office. Alec Josephson, senior economist, was the primary author of this report. He received valuable research assistance from Tessa Krebs, economist. Mr. Josephson can be reached by phone at (503) 222-6060, or by email at [email protected].

mailto:[email protected]

ECONorthwest ESCO Economic Contributions Page ii

Table of Contents 1. Executive Summary ................................................................................................................ iii

2. ESCO .......................................................................................................................................... 1

2.A. History ................................................................................................................................. 1

2.B. Current Operations .............................................................................................................. 2

3. Measuring ESCO’s Economic and Fiscal Impacts ..................................................................... 2

3.A. General Approach ............................................................................................................... 2

3.B. The IMPLAN Model ........................................................................................................... 3

3.C. Three Types of Impacts ....................................................................................................... 4

3.D. Impact Measures ................................................................................................................. 4

3.E. Gross vs. Net Impacts .......................................................................................................... 5

4. ESCO’s Economic and Fiscal Impacts ....................................................................................... 5

4.A. ESCO’s Day-To-Day Operations in Oregon, 2011 ............................................................ 6

4.A.1. ESCO’s Payroll and Employment................................................................................ 7

4.A.2. ESCO’s Non-Payroll Operating Expenses ................................................................... 9

4.A.3. ESCO’s Taxes and Contributions .............................................................................. 10

4.B. Economic Impacts of ESCO in Oregon, 2011 .................................................................. 11

4.C. Conclusion ......................................................................................................................... 13

ECONorthwest ESCO Economic Contributions Page iii

1. EXECUTIVE SUMMARY ESCO Corporation (“ESCO”) is a designer, developer and manufacturer of highly engineered products used in mining, oil and gas resources, infrastructure development, power generation, aerospace and industrial applications. With operations in 28 countries, ESCO maintains headquarters and manufacturing operations in Portland, Oregon.

ESCO commissioned ECONorthwest to evaluate the economic and fiscal impacts associated with its operations in Portland, Oregon. Corporations such as ESCO frequently use economic impact studies to understand the contributions of their activities on local, state and/or national economies. Using economic impact modeling techniques and the IMPLAN economic impact modeling software, ECONorthwest traced how and where ESCO’s expenditures circulate through the local and state economies. The results are broadly divided into two categories: 1) economic contributions, which are the effects of ESCO’s operations on output, income and employment; and 2) fiscal contributions, which are the tax and fee revenues that local and state governments receive as a result of ESCO’s operations.

We consider the economic and fiscal contributions at two geographic levels. First, we consider the impacts of ESCO on the Multnomah County economy, where they are the most direct and immediate. Second, we examine the spillover effects of ESCO’s Portland operations on other parts of the state. These economic and fiscal contributions are measured for ESCO’s operations in 2011.

The key findings from this study include:

1. ESCO is associated with almost $432.8 million in economic activity, including $180.9 million in income and 2,975 jobs in Oregon in 2011. Almost all of the revenues associated with ESCO’s Oregon operations come from non-Oregon sources that, but for the basing of the company in Oregon, likely would have accrued to non-local businesses. As such, the economic contributions associated with ESCO represent net gains for the economy.

Table ES1: Combined Economic Impacts of ESCO in Oregon, 2011

ECONorthwest ESCO Economic Contributions Page iv

2. ESCO’s Oregon operations are concentrated in Portland. As a result, about 80 percent of the total economic impacts attributed to ESCO’s operations accrue to workers and business owners in Multnomah County. In 2011, ESCO’s Portland operations employed 1,075 persons who earned almost $91.3 million in wages, salaries, bonuses and benefits.

• ESCO’s headquarters and manufacturing operations in Portland require a broad array of highly specialized labor services, including millwrights, engineers, analysts, and managers. ESCO’s average annual gross wage, not including company-paid benefits and taxes, was about $71,500 in 2011. This is approximately 65 percent greater than the statewide average ($43,092 in 2011) and 47 percent greater than the Multnomah County average ($48,683) across all industries.1

• Between 2008 (when Oregon entered the latest recession) and 2011, ESCO added more than 200 jobs, a 23 percent increase, to its Oregon operations. During this same time period, covered private employment in Oregon declined by about 95,000 jobs, a 6.6 percent decrease. Similarly, private employment in Multnomah County fell by 20,600 jobs, a 5.4 percent decrease.

3. In addition to payroll, ESCO purchases a wide variety of goods and services from other Portland- and Oregon-based businesses. ESCO purchased almost $90.6 million in goods and services from more than 500 Oregon-based businesses in 2011.

• ESCO’s supply-chain spending indirectly supported an additional 430 jobs in Multnomah County and 240 jobs elsewhere in the state.

4. Spending associated with ESCO’s headquarters and manufacturing operations generate “multiplier effects” that benefit workers and business owners in other sectors of the local and state economies. In essence, economic multipliers provide a shorthand way to better understand the linkages between a company and other sectors of the economy, i.e., the larger the economic multipliers, the greater the interdependence between a company’s operations and the rest of the economy.

• In Multnomah County, ESCO’s income and job multipliers are 1.7 and 2.1, respectively. Thus, every million dollars in income paid by ESCO is linked to another $700,000 in income elsewhere in the county. Similarly, every 10 jobs at ESCO are linked to another 11 jobs in Multnomah County.

1 Oregon Employment Department job and payroll data was obtained through the Oregon Labor Market Information System (“OLMIS”) at www.olmis.org. Note: Covered employment payroll data does not include employee benefits or employers’ share of payroll taxes. Thus, removing benefits and payroll taxes for employees at ESCO provides a more apples-to-apples comparison of average wages in the economy.

http://www.olmis.org/

ECONorthwest ESCO Economic Contributions Page v

• ESCO’s statewide income and job multipliers are 2.0 and 2.8, respectively.2 Thus, every million dollars in income directly paid by ESCO supports another $1.0 million in income for workers in other sectors of the Oregon economy, and every 10 jobs at ESCO support another 18 jobs elsewhere in Oregon.

5. Table ES2 provides another perspective of the multiplier effect by showing how the direct economic activity attributed to ESCO’s Oregon operations supports jobs in other industry sectors. ESCO headquarters and manufacturing operations are classified as manufacturing in this analysis. As a result, the largest job impacts (1,291 jobs or 43 percent of the total job impacts) accrue to the state’s manufacturing sector. However, ESCO’s above-average payroll and extensive non-payroll operating spending are associated with job impacts in nearly every sector of the Oregon economy. There are significant job impacts for the state’s service sector (1,242 jobs, 42 percent of total), and retail and wholesale trade sector (285 jobs, 10 percent).

Table ES2: Total Job Impacts of ESCO in Oregon, by Industry and Geography, 2011

Note: Columns may not add up due to rounding.

6. ESCO’s economic impacts in Oregon include more than $200,000 in voluntary contributions to charities, non-profits and schools. These contributions benefited almost 50 different organizations including United Way, Junior Achievement, Grow Oregon, Portland Public Schools, the Boy Scouts of America, and HOPE.

7. The economic activity attributed to ESCO’s Oregon operations in 2011 supported approximately $19.5 million in tax and fee revenues for state and local governments in Oregon. ESCO or its employees paid nearly $6.7 million in taxes and fees. This represents approximately 34 percent of the total taxes and fees generated as a result of ESCO’s operations in Oregon.

2 All else the same, larger economic study areas will have larger economic multipliers. This is due to the greater ability of the economy to accommodate a given change in final demand, i.e., the economy will import less so changes in spending circulate more.

ECONorthwest ESCO Economic Contributions Page vi

Figure ES1: Total Tax and Fee Revenues for State and Local Government, by Major Category, 2011

ECONorthwest ESCO Economic Contributions Page 1

2. ESCO 2.A. HISTORY Charles Frederick “CF” Swigert arrived in Portland in 1883 as general manager of the San Francisco-based Pacific Bridge Company, which was run by his uncle Charlie Gorrill. Swigert’s job was to oversee construction of the Morrison Street Bridge and to scout locations for other bridge projects. He followed the Morrison Bridge project by winning contracts to build the Burnside, Ross Island, Oregon City and St. Johns bridges across the Willamette River, and the Interstate Bridge that spans the Columbia River to connect Oregon and Washington.

Swigert, however, wasn’t content to work in one industry and parlayed his business acumen to start several businesses. Swigert formed the Willamette Bridge Railway Company. His first line connected downtown Portland to the city’s northeast neighborhoods.

It was the streetcar business that ultimately seeded the roots for Swigert to venture into the steel business. Needing wheels, gears and other parts for his streetcars, Swigert financed the formation of a small foundry called the Portland Bronze and Crucible Steel Company to manufacture those parts. Portland Bronze and Crucible Steel was reorganized in 1913 to become the Electric Steel Foundry. Swigert went from financially backing the operation to taking control of the business along with his two sons, CF Jr., and Ernie.

By 1926, the Electric Steel Foundry had advanced from a job shop to a company manufacturing products using proprietary methods. Swigert needed a trademark to identify his products and found it in Everett, Washington, where painted on the front of a foundry was the name “ESCO.” Swigert paid the owner $500 for the name. This was the same year that ESCO designed its first dragline bucket and began opening offices in Los Angeles, San Francisco, Seattle, and across the Pacific Ocean in Hawaii. A brief history of ESCO’s development:

• By the 1940s, ESCO’s product line stretched well beyond rail cars and logging equipment, and the company’s identity was now more closely tied to the construction industry. Specialty alloys were introduced and used to design and build parts for machines. In 1946, ESCO unveiled its “R” system, the first two-piece ground engaging tooth system that became the industry standard.

• The 1960s and 70s ushered in an era of expansion as ESCO opened or broke ground on manufacturing plants in Port Hope, Canada, Newton, Mississippi and its first European operation in Saint-Priest, France. The Super Conical, a two-piece tooth system, was launched during this time period.

• The 1980s saw rapid expansion of the company, its product line and continued innovation as metallurgists. ESCO U.K. was established in 1983. Beginning in 1987, three consecutive years of acquiring businesses started with Gray-Syracuse Inc., then Concorde Castings and finally Bucyrus Blades. The Helilok tooth system and a new alloy for crushing products were introduced in 1982. Another new alloy, 45D, came to market in 1986, and in 1989 the Veralok tooth system became available.


• In the 1990s, Super V, one of ESCO’s most popular products, and S-Posilok tooth systems hit the market. This decade also featured the opening of foundries in Covington, Kentucky, Guisborough, U.K., and a joint-venture plant in China.

• The arrival of a new millennium coincided with ESCO’s push to transform the company into a truly global enterprise. Turbine Technologies of Mexico was founded in 2001. ESCO broke ground on a foundry in Xuzhou, China in 2006.

• In 2009, ESCO assumed full ownership of its manufacturing plant in Brazil. Australia was the focal point in 2010 when ESCO ended a long-term relationship with its dealer in the region to work directly with customers. ESCO also bought foundries in Australia and New Zealand.

• The move to work directly with customers continues today as sales and service offices have been opened in Australia, Indonesia and South Africa. ESCO also broke into the underground mining business with the purchase of U.K.-based Hydra mining, a manufacturer of shearer drums, bits and conveyor systems.

2.B. CURRENT OPERATIONS Swigert’s most successful venture, ESCO Corporation, continues to thrive nearly 100 years after its opening. Today, ESCO manufactures equipment used primarily in mining, construction, dredging, and oil and gas.

ESCO has been organized into separate operating groups:

• Engineered Products Group, or EPG, designs, develops and manufactures wear parts, wear part carriers and attachments, and provides solutions for mining, infrastructure development and other challenging industrial wear applications. EPG accounted for $964.9 million, or 86 percent, of ESCO’s net sales in 2011.

• Turbine Technologies Group, or TTG, manufactures superalloy precision investment cast components used in the power generation and aerospace markets. TTG represented $157.4 million, or 14 percent, of net sales in 2011. In November 2012, ESCO announced a definitive agreement to sell TTG to Consolidated Precision Products of Pomona, California.

The company now maintains a truly global presence. ESCO has more than 1,000 customers around the globe, with operations in 28 countries on six continents. Some of the mining clusters where ESCO products can be found include the oil sands region in Canada, coal fields in East Texas and Wyoming, and the Bowen Basin in Australia. ESCO ended 2011 with more than $1 billion in revenue, a record year for sales and profitability.

3. MEASURING ESCO’S ECONOMIC AND FISCAL IMPACTS 3.A. GENERAL APPROACH Economists have developed several approaches to measure the economic impacts or contributions of companies on the communities in which they operate. The most common method estimates the economic and fiscal impacts associated with the company’s spending on payroll, goods and services, and capital projects. This method is often referred to as the “expenditure approach.”


The expenditure approach relies on detailed client-provided payroll and non-payroll operating cost data, which is then used as the inputs into an input-output model.3 Input-output models provide a comprehensive picture of the economic activities in a given area using mathematical relationships that describe the interactions of local industries with each other, with industries outside of the region, and with households and final users of goods and services.

3.B. THE IMPLAN MODEL This input-output modeling framework is packaged into an economic impact modeling software program called IMPLAN (for “IMpact Analysis for PLANning”).4 The IMPLAN economic impact modeling software was used in this analysis.

The advantages of the IMPLAN model as they relate to this analysis are:

• The IMPLAN model is widely used and well respected. The United States Department of Agriculture (USDA) recently recognized the IMPLAN modeling framework as “one of the most credible regional impact models used for regional economic impact analysis,” and, following a review by experts from seven USDA agencies, selected IMPLAN as its analysis framework for monitoring job creation associated with the American Recovery and Reinvestment Act (ARRA) of 2009.5

• IMPLAN provides both the structure and flexibility necessary to incorporate primary source data into the economic impact model. This is particularly important in this analysis where, instead of relying on the generic industry sector data embedded in the IMPLAN model, we use detailed payroll and non-payroll operating costs provided by ESCO. This detailed expenditure approach is significantly more labor-intensive and time-consuming, but it allows for customization of the inputs that go into the IMPLAN model and, as a result, provides the most reliable estimate of economic impacts.

• The IMPLAN model is based on a well-structured, input-output modeling framework that relies on government-vetted data specific to Multnomah County and the state of Oregon. This analysis uses 2010 baseline data—the most current year available.

• After almost a decade of development, IMPLAN recently released a state-of-the-art Multi-Regional Input-Output (MRIO) or trade flow component to its standard input-output model. This will allow us to measure how ESCO’s Portland-centric

3 Although initially inspired by Quesnay’s “Tableau Economique,” and the Marxian and Walrasian analysis of general equilibrium, input-output analysis was first put to practical use by Wassily Leontief in the late 1930s. While at Harvard, Leontief used his input-output system to construct an empirical model of the United States economy. This research gave rise to his 1941 classic, “Structure of American Industry, 1919-1929.” For his research, Leontief was awarded the Nobel Prize in Economics in 1973. 4 IMPLAN is currently marketed by the Minnesota IMPLAN Group, Inc., (“MIG”). It was first developed by Scott Lindall and Doug Olson of the University of Minnesota in a cooperative effort involving the U.S. Forest Service’s Land Management Planning Unit. ECONorthwest has conducted well over 400 economic impact studies using the IMPLAN economic impact model.

5 See excerpts from an April 9, 2009, letter to MIG, Inc., from John Kort, Acting Administrator of the USDA Economic Research Service, on behalf of Secretary Vilsack, at www.implan.com.

http://www.implan.com/


headquarters and manufacturing operations affect other parts of the state. (This MRIO component is discussed in more detail in this section of the report.)

3.C. THREE TYPES OF IMPACTS Economic impact analysis employs specific terminology to identify the different types of economic impacts.

• Direct impacts are those associated with the payroll and employment at ESCO. They also include the direct output of ESCO’s activities in Oregon, which is estimated using an expenditure approach that sums labor and non-labor operating expenses.

• ESCO will generate indirect impacts through the purchases of goods and services from other Oregon-based businesses. These businesses will, in turn, purchase a wide array of intermediate goods and services necessary to operate. Because these purchases represent interactions among businesses, indirect effects are often referred to as “supply-chain” impacts.

• The direct and indirect increases in employment and income enhance overall economy purchasing power, thereby inducing further consumption and investment-driven stimulus. These induced effects are often referred to as “consumption-driven” impacts.

This cycle of spending does not go on forever. It continues until the initial spending eventually leaks out of the local economy as a result of taxes, savings or purchases of non-locally produced goods and services or “imports.”

3.D. IMPACT MEASURES The IMPLAN model reports the following impact measures:

• Output represents the value of goods and services produced, and is the broadest measure of economic activity.

• Income (or labor income) consists of employee compensation and proprietary income. o Employee Compensation (wages) includes workers’ wages and salaries, as well as

other benefits such as health, disability and life insurance; retirement payments; and non-cash compensation.

o Proprietary Income (business income) represents the payments received by small-business owners or self-employed workers. Business income would include, for example, income received by private business owners, doctors, accountants, and attorneys.

• Jobs include both full- and part-time employment. • State and local taxes and fees include production business taxes, personal income taxes,

business and personal property taxes, social insurance (employer and employee contributions) taxes, and various other taxes, fines, licenses and fees paid by businesses and households.

We consider the impacts at two geographic levels. First, we consider the economic impacts of ESCO on the Multnomah County economy, where they are the most direct and immediate. Second, we examine the spillover effects of ESCO’s Portland-centric operations on other parts of


the state. That is, the direct economic activity associated with ESCO will generate indirect and induced impacts in other parts of the state as businesses outside of Portland accommodate the supply-chain and consumption-driven spending initiated in Portland.

3.E. GROSS VS. NET IMPACTS The economic and fiscal contributions of a company such as ESCO can best be explored by posing the following hypothetical question:

How would economic activity in Oregon change if ESCO did not exist?

One answer would be to count all of the economic activity associated with the company’s expenditures regardless of where the revenues originated. These gross impacts represent an upper bound estimate of the economic activity that can be traced back to the company, but do not necessarily reflect or measure the creation of new jobs or income. It could be the case, for instance, that some or even all of the company’s revenues may have been diverted away from other Oregon businesses (in economics, this is referred to as a “substitution effect”).

An alternative answer would be to include only economic activity that is supported by non-local revenues, under the assumption that this spending would have accrued to other non-Oregon businesses but for the presence of the company in this state. In essence, the company is an exporter of goods and services and brings new spending to the community. These impacts are called net impacts and provide a truer picture of the economic impacts of a company.

As the preceding discussion indicates, the net economic impacts of a company are determined by 1) the level and type of expenditures it makes, and 2) the source of funds used to finance those expenditures. So, to answer the question as it relates to ESCO’s headquarters and manufacturing operations in Oregon:

The economic contributions of ESCO are enhanced by the nature of its

business operations in this state and the fact that almost all of the revenues used to finance its Oregon operations are from non-Oregon sources. In this regard, all of the spending by ESCO and the associated economic and fiscal

impacts can be considered net new impacts for the state.

The next section of this report presents the economic and fiscal impacts results.

4. ESCO’S ECONOMIC AND FISCAL IMPACTS This section of the report presents the economic and fiscal impacts of ESCO in Oregon in 2011. To provide context for these impacts, as well as a better understanding of the modeling process, this section begins with a description of ESCO’s operations in Oregon.


Centered in Portland, ESCO’s operations include both headquarters and manufacturing activities. This mix of activity does not fit neatly into a single government-defined industry code.6 As such, ECONorthwest used detailed payroll and non-payroll operating cost data to build a custom production function of ESCO’s Portland operations. This technique is called “Analysis By Parts” and occurred as follows:

• ESCO provided detailed non-labor operating expense data that included invoice amounts, and vendor names/descriptions and locations. This spending was then mapped to the 440 sectors in the IMPLAN model. In addition, the vendor location data was used to override IMPLAN’s purchasing assumptions (called Regional Purchase Coefficients).7

• ESCO’s payroll information included gross wages as well as a breakout of employer-paid benefits and taxes. All payroll components are included in the measure of direct income. However, benefits, taxes and savings are excluded from the modeling process. Having calculated a net salary figure, we next estimated how ESCO employees spend their incomes. IMPLAN incorporates data from consumer-spending surveys to capture the variations in purchasing patterns for eight household income levels.

4.A. ESCO’S DAY-TO-DAY OPERATIONS IN OREGON, 2011 The economic and fiscal impacts associated with ESCO’s day-to-day operations in Oregon are attributed to the company’s staff and payroll, purchases of goods and services, tax and fee payments, and voluntary contributions. ESCO’s payroll and non-payroll operating expenditures are summarized in Figure 1.

6 Government agencies categorize businesses and industries using North American Industry Classification System (“NAICS”) codes. 7 Regional Purchase Coefficients (or RPCs) describe the ability of the study area economy to accommodate a change in demand for goods or services. IMPLAN has geographic-specific RPCs for each of the 440 sectors in the model. RPCs range from 0.0 to 1.0. An RPC of 0.0 demonstrates that the commodity is not available locally. An RPC of 1.0 indicates that all (100 percent) of the change in demand for the commodity can be satisfied by local industries.


Figure 1: Summary of ESCO’s Operating Expenditures, 2011

Source: ESCO Note: Figure 1 excludes purchases of intermediate goods and services from vendors outside of Oregon, as well as taxes and voluntary contributions.

Figure 1 isolates ESCO’s operating expenditure that accrues to Oregon workers and business owners, and helps to illustrate the economic potency of ESCO’s headquarters and manufacturing operations in Oregon. That is, ESCO’s operational spending is roughly equally divided between payroll and non-labor operating expenses. It is both the mix and level of ESCO’s spending that proves to be particularly beneficial for the state economy.

4.A.1. ESCO’s Payroll and Employment ESCO’s Portland operations employed 1,075 persons who earned almost $91.3 million in wages, salaries, bonuses and benefits in 2011. ESCO’s average annual gross wage, not including company-paid benefits and taxes, was about $71,500 in 2011. To put these average annual wages into perspective, the average annual wage across all industries in 2011 was $43,092 in Oregon and $48,683 in Multnomah County. Thus, on average, wages at ESCO were approximately 65 percent greater than the statewide average annual wage and about 47 percent greater than the Multnomah County average annual wage.8 This above average income for ESCO employees would, all else the same, tend to support greater consumption-driven impacts in Oregon.

8 Oregon Employment Department job and payroll data was obtained through the Oregon Labor Market Information System (“OLMIS”) at www.olmis.org.

http://www.olmis.org/


How has employment at ESCO changed during the most recent recession and the following slow-growth recovery period? Figure 2 compares employment at ESCO to private sector employment in Oregon and Multnomah County between 2007, when the national recession began, and 2011.9

Figure 2: Comparison of ESCO Employment and Private Sector Employment in Oregon and Multnomah County, 2007 – 2011 (Employment Indexed to 2007 Levels)

Sources: ESCO and the Oregon Employment Department, Oregon Labor Market Information System (OLMIS)

Between February 2008 and November 2009, private sector covered10 employment in Oregon decreased by 147,900 jobs, an 8.5 percent decline in all covered employment.11 During roughly the same time period, employment at ESCO declined by about 180 jobs—a 20 percent decline.

9 According to the National Bureau of Economic Research, the most recent U.S. recession (dubbed the “Great Recession” because of the scale of economic decline) officially began in December 2007 and ended in June 2009. Oregon lagged the nation going into, and coming out of, the recession. The Oregon Employment Department identifies Oregon’s recessionary period as February 2008 to November 2009. Oregon was particularly hard hit by the recession and, at one point, had the highest unemployment rate in the nation. (According to the most recent statistics, Oregon has the 14th highest unemployment rate among all states. See United States Department of Labor, Bureau of Labor Statistics, “Unemployment Rates for States,” July 2012, http://www.bls.gov/web/laus/laumstrk.htm.) 10 “Covered employment” refers to all businesses with workers covered by state unemployment insurance laws. According to the Oregon Employment Department, “Oregon Covered Employment and Wages provides the most complete summary of Oregon employment and wage information published by the State of Oregon.” See http://www.qualityinfo.org/pubs/cew/cew2011.pdf.


During the last two years, however, growth in private sector covered employment in both Oregon and Multnomah County has been slow. In fact, by 2011, both Oregon (almost 115,000 fewer jobs or about 8 percent less than in 2007) and Multnomah County (20,500 few jobs, 5 percent less) had employment levels that were still below 2007 levels. Employment at ESCO during this same time period has increased by 170 jobs or 19 percent.

4.A.2. ESCO’s Non-Payroll Operating Expenses In addition to payroll, ESCO also purchases a wide variety of goods and services from other Portland- and Oregon-based businesses. ESCO purchased almost $90.6 million in goods and services from more than 500 Oregon-based businesses in 2011. As shown previously in Figure 1, the state’s manufacturing sector (36 percent of total non-labor operating expenses) was the largest beneficiary of ESCO’s manufacturing operations. Table 1 shows the manufacturing sectors in Oregon that benefit the most from ESCO’s supply-chain purchases.

Table 1: ESCO Purchases from Oregon-Based Manufacturers, Ranked in Descending Order

Source: ESCO Note: Manufacturing sectors described using IMPLAN sector scheme.

In addition to manufacturing operations, Portland also serves as ESCO’s corporate headquarters. As such, ESCO’s operating expenditures extend well beyond local manufacturers and distributors. Approximately 33 percent of ESCO’s non-labor operating costs accrued to the state’s service sector in 2011. This includes significant spending on insurance, legal, telecommunications, and management, scientific, and technical consulting services.

11Beleiciks and Krumenauer, “Key Workforce Challenges,” Oregon Employment Department, May 22, 2012.


Figure 2 shows how ESCO’s non-payroll operating expenses are dispersed throughout Oregon.

Figure 3: The Distribution of ESCO’s Non-Payroll Operating Expenses in Oregon, 2011

4.A.3. ESCO’s Taxes and Contributions The taxes and fees paid by ESCO support state and local government programs. The voluntary contributions by ESCO benefit a wide range of charities, non-profits and educational organizations and activities. Although these impacts are blended with ESCO’s operating impacts, they are important because they tend to accrue to a class of beneficiaries with much in common—children, the elderly, and the underserved—and that largely finance their activities through taxes and contributions.

Included with ESCO operating impacts are:

• Property taxes, business taxes, corporate income taxes, and other fees and assessments paid directly by ESCO, and state income and other taxes paid by its employees. This analysis, however, does not include the property taxes paid by employees on their homes. (These property taxes could be considerable.)

• Donations and contributions made by ESCO in 2011. These donations and contributions were itemized for the numerous benefiting Oregon-based charities, non-profits and schools.

ESCO and its employees paid about $6.7 million in taxes and fees to state and local taxing jurisdictions in 2011. ESCO’s charitable contributions were more than $200,000 in 2011. About


$150,000 went to charities, non-profits, and schools in Portland. The list of the 30 largest recipients is shown, in alphabetical order, in Table 2.

Table 2: The Largest Recipients of ESCO’s Charitable Contributions, in Alphabetical Order (2011)

Source: ESCO

4.B. ECONOMIC IMPACTS OF ESCO IN OREGON, 2011 Table 3 summarizes the combined economic impacts attributed to ESCO in Oregon. In 2011, ESCO’s headquarters and manufacturing activities are associated with almost $432.8 million in total economic activity, including $175.1 million in income and 2,975 full- and part-time jobs throughout the state of Oregon.

Table 3: Combined Economic Impacts of ESCO, 2011

Sources: ECONorthwest using the IMPLAN economic impact and detailed expenditure data provided by ESCO.

The direct impacts are based on operating expenses and employment levels in Portland. As shown in Table 3, ESCO’s direct economic impacts in Multnomah County consist of $190.4 million in output, including $91.3 million in income, and 1,075 jobs. There are no direct impacts in other parts of the state.


ESCO’s direct operations in Portland will produce secondary impacts in Multnomah County and secondary, spillover impacts elsewhere in Oregon as businesses in other parts of the state accommodate the supply-chain and consumption-driven spending associated with ESCO’s headquarters and manufacturing operations. The secondary (indirect and induced) impacts associated with ESCO’s headquarters and manufacturing operations in Portland are reported in the center section of Table 3 and consist of:

• Approximately $151.6 million in output, including $59.5 million in income and 1,130 jobs in Multnomah County; and

• More than $90.8 million in economic activity, including $30.1 million in income and 770 jobs elsewhere in Oregon.

Table 4 provides additional details regarding the makeup and geography of the total job impacts.

Table 4: Total Job impacts of ESCO in Oregon, by Industry and Geography, 2011

Sources: ECONorthwest using the IMPLAN economic impact and detailed expenditure data provided by ESCO. Note: ESCO’s operations in Portland are categorized as manufacturing.

ESCO’s Portland operations generate job impacts for other industry sectors, including more than 800 service sector jobs, 160 jobs in wholesale and retail trade, and 30 jobs in transportation and utility sectors in Multnomah County. The distribution of job impacts expands even further at the state level. ESCO’s operations in Portland support more than 440 service jobs, 130 manufacturing, and more than 120 trade sector jobs—as well as other jobs—elsewhere in Oregon.

The economic activity attributed to ESCO will generate taxes and fee revenues for state and local governments. These tax and fee revenues are shown in Table 5. “Multnomah County” refers to the state and local tax and fee revenues generated by the economic activity that takes place in the county. Likewise, “Rest of Oregon” refers to the state and local tax and fee revenues supported by changes in sales and income elsewhere in Oregon.


Table 5: Total Fiscal Impacts of ESCO in Oregon, 2011

Sources: ECONorthwest using the IMPLAN economic impact and detailed expenditure data provided by ESCO.

Based on data provided by ESCO and the results from the economic impact modeling, ECONorthwest estimates that ESCO’s headquarters and manufacturing operations in Oregon supported approximately $19.5 million in tax and fee revenues for state and local taxing jurisdictions in 2011. The largest revenue sources are income taxes ($7.7 million or 39 percent of total revenues), and business and personal property taxes ($5.9 million or 30 percent of total revenues).

4.C. CONCLUSION ESCO is associated with almost $432.8 million in economic activity in Oregon in 2011, including $180.9 million in income and 2,975 jobs. Some additional highlights of ESCO’s economic and fiscal contributions in Oregon in 2011 include:

• 1,075 direct employees who earned almost $91.3 million in wages, salaries, bonuses and benefits;

• An average wage at ESCO ($71,500) that is 65 percent greater than the statewide average ($43,092) in 2011;

• Total job impacts that benefit workers and business owners in nearly every sector of the Oregon economy, including 1,290 jobs in manufacturing, 1,240 service sector jobs, and 285 jobs in retail and wholesale trade;

• Spillover benefits for other parts of Oregon totaling $90.8 million in economic activity, including $30.1 million in income and 770 jobs; and

• Approximately $19.5 million in tax and fee revenues for state and local governments.

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