Oregon's Wineries Are Thriving—and Demanding a Million-Dollar Subsidy

The Oregon Wine Board seeks a marketing handout from a state that's broke.

By any measure, Oregon's wine industry is a great success.

In 2000, there were 122 wineries in Oregon. Today, there are nearly six times that many—702 wineries, bottling varieties from albariño to zinfandel. Oregon grape harvests continue to break records, with annual volume increasing nearly 40 percent between 2013 and 2015, and now totaling just under 85,000 tons.

Yet industry representatives are seeking a hefty subsidy at a time when the state is broke.

The Oregon Wine Board, which spends about $2.2 million annually on marketing, education and research, is asking state lawmakers for a $1.5 million annual subsidy to encourage wine tourism and help it sell more bottles to out-of-state customers.

That money would come out of the state's general fund—the pot of money that also funds schools, health care and public safety.

Edith Rusch, a retired management professor who volunteers for the watchdog group Tax Fairness Oregon, says now is not the time to subsidize a booming industry.

Lawmakers usually seek to subsidize businesses such as solar or wind energy that are not yet economically competitive. But the wine industry's growth shows the business is attractive and can raise private capital.

"I think the legislators' intentions are good," Rusch says, "but we haven't yet taken care of the state's basic revenue requirements."

WW Staff

A lot of crazy bills have been introduced in this year's Legislature—a coffee tax, a tax on old cars, and a bill that would expel college students convicted of rioting. But those bills are dead on arrival: They'll either never get a hearing or never move out of committee.

The wine subsidy is different, perhaps because many lawmakers have wineries in their district, and even those who don't are fond of small, homegrown successes. After a Feb. 27 hearing, lawmakers voted unanimously to send the bill to the budget-setting Ways and Means Committee.

State Sen. Jackie Winters (R-Salem), one of 13 sponsors of the bill, was the only one to testify on its behalf last week. Winters, an 18-year veteran of the Legislature, acknowledges that general fund dollars are scarce. But she says sometimes lawmakers have to spend money on economic development.  "Without job creation, we don't produce the revenue that we need for family stability and other issues," Winters tells WW.

The wine industry's choices of spokesmen at the Feb. 27 hearing in front of the Senate Committee on Business and Transportation were telling.

Making the industry's case were Steve Thomson, chief operating officer of Salem's Cristom Vineyards, and Jim Bernau, founder and CEO of Willamette Valley Vineyards in Turner, just south of Salem.

Thomson's winery sold 35,760 gallons last year. And like most Oregon producers, Cristom is exempt from paying a per-unit tax on the wine its produces.

Bernau runs the state's ninth-largest winery. Records show publicly traded Willamette Valley Vineyards is solidly profitable and rewards Bernau generously: His compensation from the company in 2015 was $436,446. He also owns shares in the company worth about $4 million and lives rent-free in the winery's chateau.

Oregon's wine industry, Bernau told lawmakers last week, has been a "huge economic engine for Oregon and a remarkable success."

There's no disputing that.

Oregon wines continue to command high prices—$38.09 per bottle shipped out of the region, second only to Napa wines nationally, according to Wines & Vines magazine.

Oregon wineries already benefit from a 1983 law that exempts that exempts producers of less than 40,000 gallons a year from paying the state production tax of about 67 cents per gallon.

About nine in 10 Oregon wineries fall below that cutoff. The result is that California wineries, which dominate the Oregon market, pay most of the wine tax in Oregon. Not surprisingly, the California wineries dislike the possibility of Oregon producers grabbing $1.5 million of that tax money to find new customers.

Dan Jarman, a lobbyist for the Oregon Winegrowers Association, acknowledges the state's wineries are flourishing. But he also says their share of the market is small, both here and across the country. Oregon wineries account for just 12 percent of the wine sold in the state and just 1.5 percent of sales in the nation overall.

"How do we really open up new distribution and sales channels for Oregon wineries?" Jarman asks.

He says the $1.5 million marketing subsidy would return multiples of that amount to the state in the form of new jobs and more taxes.

Rusch says Tax Fairness Oregon is skeptical of such claims. She notes that the growers association could simply assess its members to fund new marketing efforts.

Rusch adds that the tradeoff is easy to calculate: Giving the wineries what they want is the equivalent of cutting preschool for low-income children or failing to retain or hire 176 teachers in the public schools.

"Every time you take money from the general fund," she notes, "you have less that can go to school districts and other basic services."

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