June 27, 2003
Pearl Development Prompts Conversation About Urban Renewal Districts
There's a really juicy article in The Oregonian today about the costs and benefits of providing things like tax abatements to developers.
Not having any particular problem with the general premise of urban renewal districts and incentives such as tax abatements, I'll leave it to the reader to click through and try to judge the specifics of the Pearl District for themselves. What I want to focus on here is this part:
The Portland Development Commission doesn't check to see whether the relatively low profits that private developers project to get tax breaks and urban renewal money really end up being that low.
And the commission, which oversees 10 urban renewal districts, doesn't periodically review them to see whether the areas have become self-sustaining.
This just utterly baffles me.
As I said, I don't see an inherent wrongness in providing incentives for certain forms of development in geographically-specific areas. But to simply decide upon a given set lifespan for a given urban renewal district (which, I believe, is how it works) and never bother to check if the district reaches self-sustainability before the end of that lifespan, or if the assumptions which went into defining the terms of the district are in fact reflected by reality is just stridently irresponsible.
Now, a comment or two on this part:
Urban renewal works by capturing property tax growth in the district, instead of sending the taxes to schools and the operating funds of local governments.
This, of course, brings us directly into the "different colors of money" metaphor of which Mayor Katz is so fond.
As a general premise, Katz of course is correct that there are different colors of money. But what she often fails to mention is nicely summarized by the above. Namely, that some of these different colors of money are not, shall we say, somehow naturally occurring, rather are the result of specific, conscious, and deliberate policy decisions -- such as creating an urban renewal district.
And if we can create a new color of money by creating an urban renewal district, we obviously can reverse that decision, returning that money to the same color as the rest of the general fund.
Which is pretty much the debate into which today's Oregonian article strikes. How do we ensure that we are properly analyzing development incentives so that they are revoked when no longer required, thereby returning areas such as those covered by urban renewal districts back into the general City milieu where they belong?
As it turns out (funny how this happens), today's Portland Tribune also covers some of this debate:
Commissioner Randy Leonard and the City Council last month threw a monkey wrench into a tax exemption for an apartment building in the Brewery Blocks development by establishing an annual review.
Leonard is proposing a similar review for all new developments that have been granted tax breaks. Neighborhoods such as the high-end Pearl District, where rents average about $1,800 per month, don't need tax breaks to stimulate development, he said.
"It's just for the Brewery Blocks now," Leonard said, "but I am sending a message to developers that this is for all projects. I'm sensing growing sentiment against this type of tax break. It's an important and powerful tool. My goal is more checks and balances. We need to make sure it's not abused."
The City Council, the city's Bureau of Planning and the Portland Development Commission are midway through a survey of the city's six property-tax exemption programs.
This Tribune article (in some ways juicier than the one in The Oregonian) also suggests that the PDC itself has been looking into issues such as the lifespan of tools such as tax abatements. Actually, it covers a number of things and should just be read in full.
All of which are becoming pressing issues as the City heads towards development of the South Waterfront District -- about whose own controversies also can be read in today's Oregonian.
(Excuse the repeated references to juiciness. It's very hot in my apartment and liquid is much on my mind.)
Comments (6)
Dave Lister on 28 Jun 2003
Personally, I applaud commissioner Leonard for advocating that this practice be examined. Development is great, particularly when run down areas are improved, but does it really make sense for folks who can afford 1800 a month in rent to exist virtually property tax free? Some very good information on these abatements can be found on the website www.saveportland.org. If you analyze the numbers posted there, you will find that the amount of forgiven or otherwise diverted property tax revenue is essentially equal to the amount the voters decided to provide through 26-48.
I think it would make more sense to get rid of the giveaways and level the playing field for all developers. If there's money to be made, the developers will jump on it with or without government subsidies.
The One True b!X on 28 Jun 2003
Well, the reason I favor the general idea of incentives is that it helps (ir could help; I don't know how much of this we do) give the City leverage in terms of what kinds of development occurs, or how it impacts the City as a whole or the neighborhood in question specifically. Whether in terms of design, livability, or, say, green building appaoches, to name a few possible examples.
But obviously, even if we continue to make use of such incentives, there's an oversight problem to be addressed.
Dave Lister on 28 Jun 2003
I agree with you. As a lifelong resident of this city, I do not want to see it become another Los Angeles. We have suburban sprawl aplenty as it is. But I think controlled development can be accomplished through intelligent zoning and land use planning achieved through citizen involvement. The part I object to are the abatements, particularly when the City and County are pleading poverty for health and safety services. On the one hand they claim that the Measure 5 property tax caps are the root cause of our public financial ills, but on the other hand a property which, by normal guidelines, would pay $18,000 a year is taxed only $150. Doesn't make sense to me.
Randy Leonard on 28 Jun 2003
Urban renewal districts and tax abatements are great tools that Portland can use to cause specifc kinds of developments to occurr that reflect the character and vision we share for Portland. What I offered as an amendment (successfully) to the most recent tax abatement (the brewery blocks) was simply an annual accounting of the financial statement for that development to make sure that we are not granting tax abatements to projects that are perfoming beyond what was projected in the original applications requesting an abatement. It is not my intent to discourage urban renewal districts and/or abatemetns (I fought for them in the legislature when others ran) but rather to make sure we can justify them to an increasingly skeptical public that these public dollar investments by the city council are in the long term best interest of the city....Commissioner Randy Leonard
Dave Lister on 29 Jun 2003
Thank you for the clarification of your position, Commissioner Leonard. In business we have a radical concept called "return on investment". If the taxpayers make an investment for development through tax abatements, what is the City's expectation for realizing a return? These abatements are huge, and they last many years. Are the returns to be realized through increased payroll taxes? Increased business taxes? How does the City quantify the return on the investment? Is that the accountability you are seeking? It's great to have a vision for sustainable development, but esthetics do not feed the public service bulldog. Tax dollars do.
Randy Leonard on 29 Jun 2003
Dave-
Your questions are right on the mark.
There has got to be an economic justification to taxpayers for granting what is essentially a public expenditure of dollars in the form of a tax abatement. For an example, you, like me, are a life long resident of Portland. We both remember the "Pearl" as a warehouse district that was a dangerous place to be after dark. Many of the buildings there were vacant and paid minimal tax due to their dilapidated condition. Using the powerful urban renewal and tax abatement tools, this city caused development that would have otherwise not have occurred. That "priming of the pump" led to development that was not tax abated and caused property tax receipts to increase, albeit those increased receipts are contained within that urban renewal district.
My concern is not that we tax abate properties per se, but rather, where is that line in creating an economic self sustaining area that no longer needs a public investment to prime the pump?
The other issue I am concerned about that I spoke to in my last posting is whether or not projects in fact out perform the rates of return that qualified the project for an abatement in the first place. If in fact we are causing development to occur that would otherwise not happen and the abatement is truly justified, I believe that we have a building that will pay taxes longer and on a much higher value once that building is on the tax rolls. The other related issue that I have concerns about is the length of time urban renewal districts exist. In other words, the quicker an urban renewal district meets it's goal of creating the proper infrastructure in a blighted area and begins causing development occur, the quicker those increased valued properties begin paying taxes into the city, county and schools general funds.
I hope I have answered your questions....Commissioner Randy Leonard