January 31, 2005

Urban Renewal, Property Tax Bills, And The Special Levy (Oh My!)

Should Anyone Be Thinking About This In The Very Early Morning?

There's nothing quite like a little late night excursion into the arcana of (as the headline says) urban renewal, property tax bills, and special levies. But there's been a nice little thread raging over at Jack Bog's Blog spurred by a post about South Waterfront.

We've always tended to find ourselves in a peculiar position when it comes to urban renewal in Portland, because many of the people we tend to run into have serious reservations about the Portland Development Commission in particular, and urban renewal (or at least the way it seems to function) in general. We say a peculiar position because what tends to irritate us about that opposition is how frequently some of those in that camp don't seem especially interested in understanding how urban renewal is structured.

It would seem to us that even opponents, or mere critics, of something should be up to speed on that something rather than just talking or acting reflexively.

Which is not to say that the details of urban renewal aren't almost barbarically maze-like. They most certainly are just that. For some reason, however, they seem to appeal to us as a late-night exploration as we sit here at something before 3:00 AM with a cigarette burning and a cup of hot chocolate stationed at the corner of our desk.

At any rate, we don't want to divert people from getting into the subject over in the thread at Jack's, but we find the entire field rather compelling (although we say that at the risk of betraying some sort of wonkish masochistic streak), and thought we should try to pull together the bits and pieces we've been contributing over there.

While it's nice that the Portland Development Commission and Portland State University have joined forces to offer a ten-week course on urban renewal and redevelopment this Spring, we get the sense that there needs to be some sort of broader outreach geared towards informing Portlanders in general just how urban renewal works.

That's a task for too outlandish for us to contemplate personally, but consider this post something of a stab at trying, to the best of our ability, to fill in some of the knowledge gaps that appear to crop up from time to time.

First, people often argue that they would rather the money that goes into urban renewal instead go to pay for essential City services. The tricky thing here is that different urban renewal areas (URAs) function in different ways, and they aren't as simple or obvious as some critics pretend.

But here are some of the basics (pdf): When a URA is created, the value of the property in that district is assessed. Property values up to that amount, (the cap, or the "frozen base"), continue to be paid to the various taxing jurisdictions in that district. Meaning, those districts don't drop off the tax rolls altogether, and do still contribute to those essential services with which people are naturally concerned.

As the value of property in the district increases above the cap, that increased value is what ultimately enables the repayment of the debt used to help fund redevelopment in that district. That, in very short form, is what's meant by the term Tax Increment Financing.

However, there is also a certain type of URA where the increase in value above the cap doesn't go only to TIF uses related to the district, but where some of that increase in value is divided up with the other taxing jurisdictions as well. In these URAs, then, the taxing jurisdictions -- which, among other things, fund essential services -- receive revenue both from the capped value and from part of the increase in value above the cap.

Of course, it gets murkier still. Many people notice and/or grumble about a line item on their property tax bill devoted to urban renewal -- normally, the people who so notice or grumble are those who know full well that they don't live in an urban renewal area. So what the Hell is this?

That line item is the result of special levies which urban renewal agencies are authorized to impose as a result of the passage of Measure 50, which altered property tax structures in ways way too convoluted for us to grasp fully, let alone communicate here. What we can say is that the changes brought by Measure 50 would have resulted in URAs instituted prior to December of 1996 not having the capacity to repay their debts.

(See an earlier item of ours, as well as this document from the Oregon Department of Revenue.)

To address that, Measure 50 authorized the imposition of special levies to make up the difference between what the capacity those pre-1997 URAs would have had if Measure 50 did not exist and the capacity they would have under Measure 50's new rules.

Those special levies, of course, are placed upon all property owners in the City, not just those in urban renewal areas. And they exist because voters adopted Measure 50, and because without them Measure 50 would have led to pre-1997 URAs being unable to repay their debt.

In our own City, there are four of these so-called "Option 3" urban renewal areas: Convention Center, Downtown Waterfront, South Park Blocks, and Airport Way.

Which at some point raises the question: What happens to the special levies when any or all of those four Options 3 URAs expire?

The answer to that depends upon whether or not the URA in question expires having reached its maximum allowable indebtedness. If it has, then its share of special levy monies helps to pay off that debt. If the URA expires without having reached its maximum level of indebtness, there are apparently three options (pdf): Reallocating its share of the special levy monies to other Option 3 URAs, reducing the amount of the special levy and thereby reducing property taxes, or putting its share of special levy monies towards servicing that URA's incurred debt, until that debt is paid.

That in turn brings us around to the question: What happens if Portlanders, hypothetically, managed to get rid of the special levy?

To some extent, for sure, the answer to that one likely would depend upon someone studying the specific financial impacts. But in theory, without the special levy funds, Option 3 districts would be unable to repay their debts on time. Which then would lead to a problem for the City's credit rating, which of course would then cause other problems in turn.

Obviously, none of this is by any means an exhaustive look at all of this. And while we likely would not be supportive of reactionary attempts to gut urban renewal in Portland, our main and immediate concern is that its opponents and/or critics at least march into whatever battle they might be considering armed with more of the facts about it.

And by trying to offer a brief tour of urban renewal facts, we're definitely not attempting to assert that there isn't a conversation to be had about urban renewal in Portland. There most certainly is.

A final thought, which we also raised over in the thread a Jack Bog's Blog. "Although some folks like Lars would see it differently," Jack says of the urban renewal portions of his property tax bill, "I'd gladly continue to pay that for police, schools, and mental health for the indigent."

And therein lies the problem. Even if Portlanders rallied to kill off the special levy and eliminate that portion of their property tax bill which goes into certain URAs, there's no way in Hell that the conservatives in town would ever permit the institution of a tax of the equivalent amount in order to fund essential services.

In essence, presuming for the moment that the absence of special levy funds truly would prevent Option 3 districts from repaying their debts, all these urban renewal opponents would have succeeded in doing is placing the City's credit rating in jeopardy, while receiving no increase in resources for police, schools, and mental health services in return.

« Previous Next »

Comments (14)

  1. Jack Bog on 31 Jan 2005

    Are you sure that 7.89% of my property tax bill is all going to the "special levy"? It's all being used to pay off debt that was on the books in 1996? That doesn't sound right.

    As for what the right will and won't allow, don't forget this is Portland. We've passed a local income tax, twice.

  2. The One True b!X on 31 Jan 2005

    Are you sure that 7.89% of my property tax bill is all going to the "special levy"?

    Well, I'm going by the quote from Christine Egan in my March item, in which she says this:

    Yes, the "urban �renewal special levy" is the line item "urban renewal-Portland."

    It's all being used to pay off debt that was on the books in 1996? That doesn't sound right.

    I don't think that's it. My understanding is that it's not about actual debt that existed in 1996, but rather the debt capacity of pre-1997 URAs, which was reduced in terms of the property tax/TIF calculations by passage of Measure 50. So the special levy authority was created in order to capture the Measure 50-created gap in debt capacity for pre-existing URAs.

  3. The One True b!X on 31 Jan 2005

    Not "capture" -- better word would be "re-fill".

  4. Jack Bog on 31 Jan 2005

    This document appears to show that there are four URAs in Portland still imposing the special levies:

    http://egov.oregon.gov/DOR/STATS/docs/303-405-04/urban-F1.pdf

    The total revenue from the special levies in 2003-2004 from all four of these was around $14.4 million. Is that really 7.89% of the property taxes collected from Portland residents? I suspect there's something else going on beside the special levies. If so, can we get rid of it?

    The document also shows something called "unused authority" of $76 million. Can we vote not to use any of that?

  5. The One True b!X on 31 Jan 2005

    Actually, using data from this OMF report, doing some rough calculations (presuming I am doing them correctly), $14.4 million would appear to be about 9.7% of the property taxes collected in Portland.

  6. Jack Bog on 31 Jan 2005

    No, you're mixing apples and oranges. It's 7.89% of the total tax bill, including all the money paid to the school districts, county, Port of Portland, etc. Of the amount earmarked for the City of Portland, it's a much higher percentage than that.

  7. The One True b!X on 31 Jan 2005

    Oh, that was not clear. The total figure is everything going to all taxing jurisdictions combined?

  8. The One True b!X on 31 Jan 2005

    That's a trickier question, because while it's easy to find the total mount collected for each taxing jurisdiciton, it's nto easy (so far anyway) to find the numbers which represent just Portlanders' share of the amounts collected for each taxing jurisdiction.

  9. The One True b!X on 31 Jan 2005

    Ok, so I'm a renter. Any Portlander out there willing to take a copy of their property tax, redact the identifying information, scan it, and email it to us so we can look at an actual bill for ourselves?

  10. Jack Bog on 31 Jan 2005

    b!X: I will send you the numbers off my bill, off-blog later tonight. The City of Portland shares are all broken out. UR is a startlingly large percentage. I can't believe that it's just the "special levies" for the four UR areas. Some of that money has got to be going elsewhere.

  11. Rich Rodgers on 01 Feb 2005

    Bix,

    Very nice work on this. However, the system does not allow for general statements like "the Urban Renewal Special Levy accounts for x% of a tax bill." The clashing rules of constitutional Measures 5 and 50 are responsible for a system that is difficult to figure out, and one which eludes any general descriptions (other than it's a damn mess).

    One thing I would add to the mix, as if this conversation needs more complexity, is the difference between assessed value (AV) and real market value (RMV). I think this distinction is necessary in order to see how variable the proportions of different levies may be on any given tax bill.

    Measures 47/50 rolled back and capped the growth in assessed value. So, when it comes time to distribute a given levy on a /$1000 basis, this roll back and cap produces some pretty big variations. Keep in mind that the rollback covered a period of enormous growth in value in many Portland neighborhoods.

    The $10/$1000 cap on local government expenditures (which applies to city, county, and the levies) is what causes compression. It applies to RMV, not AV. Incidentally, the I-tax falls under the $10/$1000 local government cap, not the $5/$1000 schools cap. (The schools assessment, of course, is sent to Salem, where it is merged with state income tax money and distributed to the districts under the rules of the legislature's distribution formula).

    Because of this, compression affects each individual property differently. Each tax is initially distributed evenly, on a strict /$1000 basis, but then the individual circumstances of the relationship of the (tax rate x AV) to the $10/$1000 RMV kick in.

  12. The One True b!X on 01 Feb 2005

    Very nice work on this. However, the system does not allow for general statements like "the Urban Renewal Special Levy accounts for x% of a tax bill."

    Then why is it that the percentage Jack's mentioned in that context, 7.89%, I have no encountered on someone else's property tax bill as well. Different literal dollar amounts all around, but the "urban renewal - Portland" line comes to 7.89% on both Jack's bill and this other person's bill.

  13. Rich Rodgers on 01 Feb 2005

    Here's my best guess: both of their AV's are sufficiently under the RMV cap to allow for the full levy to be imposed.

  14. Rich Rodgers on 01 Feb 2005

    I'll add a bit of context, based on information I got last fall:

    For FY2004-05, about one-third of the taxable AV has an AV/RMV ratio about 0.75, which indicates little or no capacity to pay new levies. About one-sixth of the taxable AV had AV/RMV ratios at 1.0, which means absolutely zero levy capacity.

    Local option levies get compressed first, down to zero if need be, and the next level of compression is proportionately applied to fixed rate levies if need be--again the bar here is the $10/$1000 RMV Measure 5 cap for each individual property.

Trackbacks (2)

  1. Let me make myself perfectly clear on 31 Jan 2005

    In a post here on Friday afternoon, I suggested that it might be time to fight the City of Portland's real estate developer welfare system with a ballot measure repealing the city's urban renewal property taxes. It might have a...

  2. One out of every five property tax dollars on 01 Feb 2005

    In response to b!X's good work on the urban renewal tax rules, I've stared some more at my property tax bill, where that suspicious line item "Urban Renewal - Portland" appears. I've been moaning that 7.89% of my property tax...