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.
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.
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