Urban renewal’s effect on taxes

Urban Ledger: Sixth in a series
2013-02-17T07:30:00Z 2014-01-03T16:45:58Z Urban renewal’s effect on taxesBy Jennifer Moody, Albany Democrat-Herald Albany Democrat Herald

Short-term revenue is sacrificed in hopes of future value

Call it an investment, call it a gamble. Either way, creation of an urban renewal district involves a guessing game.

The guess is that property values within the boundaries of such a district weren’t going to grow, or wouldn’t have grown as much, if the district had not been created.

Problem is, nobody can tell if the guess was correct, because there’s no way to tell What Might Have Been.

In Albany, where seven taxing entities were affected by the 2001 creation of the Central Albany Revitalization Area, some say they’re fine with that guess. Others say at this point, they’d prefer to have had a tangible return.

Here’s how it works: Property values within the boundary area of an urban renewal district are “frozen” at their current level by the county assessor upon creation of the district. As those values increase over time, the difference between the old value and the new value goes only to the urban renewal district.

Other taxing entities within the district — county, city, school district — effectively are frozen out of any growth benefits during the URD’s existence. The idea is they’ll receive the higher values once the district goes away.

Linn County lost $422,942.53 in foregone revenue for tax year 2011-12, according to figures from the county assessor’s office, and about $2.1 million over the past decade. Commissioner Roger Nyquist said that’s money he would have preferred to receive.

The county cut its 2012-13 budget by 4.8 percent this year, reducing staffing by 44.25 full-time-equivalent positions.

The cuts affected the health department, juvenile department, road department, sheriff’s office, surveyor’s office, assessor’s office, clerk’s office, Expo Center and general services.

“One could certainly make the case that the highest and best use of some of the urban renewal tax dollars in the last couple of years would have been to direct it toward basic services,” Nyquist said.

Sheriff Tim Mueller agreed. The sheriff’s office cut 22 positions last February, 13 of them through layoffs, and closed 48 jail beds to save $1.5 million.

Overall, the department is down 321/2 positions in the past three years. Any extra dollars would be welcome, he said.

“We’re backfilling positions with overtime at the jail, just to maintain safety and security over there,” Mueller said. “And they’re human. They get sick; they get hurt. We also have an aging workforce. We’ve got a lot of guys, they’re working here longer than they thought they’d have to, because retirement benefits weren’t what they were back in the 1990s.”

The sheriff’s office budget includes both county general fund monies and a law enforcement levy.

CARA’s impact to the levy portion of the sheriff’s office was $269,924.62 in 2011-12, according to the city’s figures.

It’s hard to say exactly how much of the county’s overall foregone revenue would have gone to the sheriff’s budget, Mueller said.

“All I know is, if there’s money available, and that money might be available depending on how I present my budget, maybe I would have a couple more guys working patrol. Maybe I wouldn’t have to close down part of the jail,” he said. “At the end of the day, if you don’t have those funds, you cut those positions.”

Some districts have been more supportive of the urban renewal gamble. Jim Huckestein, vice president of finance and operations for Linn-Benton Community College, said the college agrees with the concept. It also has benefited by it, particularly in Lebanon, where one of the three urban renewal districts in that city funneled $1.4 million to renovate the former Pace America building into an Advanced Transportation Technology Center.

Huckestein said he thinks the CARA gamble is working. Property values within its boundaries have gone up, whereas overall property values in the college’s district as a whole have not.

“It’s a short-term loss, but there’s a long-term benefit at the end, and I have nothing to dispute that,” he said.

But Huckestein acknowledged LBCC isn’t affected by CARA to the degree the county is. The college’s share of foregone tax district revenue amounted to $71,721 last year, and about $407,000 over the past decade.

“We only get about less than 15 percent of total resources in the general fund from property taxes, and urban renewal is 4 percent property taxes, so it’s like one-half of 1 percent is what we’re talking about,” he said. Considering shrinking state revenue, he added, “We’ve got a lot bigger problems to deal with than this.”

URDs can choose to collect only a portion of the taxes due. Councilors in the city of Lebanon decided last July to levy only 67 percent of the allowable taxes within that city’s Northwest Lebanon URD for one year, and to eliminate a special tax levy used to support the district.

The request came from the Linn County Commissioner’s Office. Two years ago, Nyquist had asked the city of Albany to consider something similar, redirecting about $1 million over two years in CARA funds specifically to Greater Albany Public Schools, which at the time was facing a multimillion-dollar deficit.

“We never got a written response, but the verbal response was borderline hostile,” he said. “It’s at their discretion; one chose to, and the other didn’t. And that’s their right. We thought at the time it was an appropriate question to ask, so we did.”

Tax revenue works differently for schools than for other taxing districts, however.

Technically, Greater Albany lost more than $600,000 in tax revenue last year, $485,080 for the district itself and $169,698 for its bond levy. But in neither case did Albany residents actually see a reduction in services, said Business Director Russell Allen, although the state of Oregon as a whole might.

Allen is a member of the CARA board and stressed he was speaking only in terms of factual financial effects.

All property tax revenue for schools gets pooled in Salem and doled out by the state on a per-pupil basis, so any URD in Oregon takes money out of the overall K-12 pot. The impact is felt equally by all districts statewide.

The same situation applies to the Linn-Benton-Lincoln Education Service District, which technically lost about $32,000 last year and roughly $187,000 overall. If the CARA district were to provide more in tax funds to the ESD, the state would reduce its contribution, and the net effect would be zero, said Angie Peterman, the ESD’s chief financial officer.

As for the school district’s bond levy, Allen said, it simply levies an amount to collect each year that satisfies the conditions of the bond. If $169,698 isn’t available from the URD, a little bit more is collected from everyone else to make up the difference, he said.

“It’s a levy, not a rate,” he said.

Neither GAPS nor LBCC voiced objections to the formation of the Albany urban renewal district at the time, but Linn commissioners were wary.

According to transcripts from a June 2001 presentation, then Commissioner Cliff Wooten asked whether the county would be allowed to vote on the matter.

“I guess I’m kind of new on the board here, but I guess my concerns are that what we would be doing essentially over the next few years is shifting a greater tax burden on the remainder of the county to make up, because the county is going to continue to grow and need revenue,” Wooten said.

Nyquist and Commissioner John Lindsey echoed his concerns, asking what would happen if funding for schools and law enforcement took a turn for the worse and whether CARA would be willing to revisit its levies.

Right now, other taxing districts don’t necessarily get a say in whether a URD goes through. But Oregon lawmakers are looking at two bills so far that might change that situation: House Bill 2534, which mandates that the board of any urban renewal district include representation from all other taxing districts with jurisdiction, and House Bill 2632, which would exclude local option tax levies from urban renewal districts, potentially making more money available for schools.

“We’ve taken a position supporting both of them, but that one (2632) is probably the one to watch,” Nyquist said.

In fact, he said, the county supports any structure that brings entities to work together in good faith, he added.

“In the end, these are all taxpayer dollars,” he said. “In tough times, you don’t want to be operating in silos.”

Next up: A story about the philosophical question of who should be making final decisions about urban renewal and debt — elected officials or voters — will be explored in next Sunday’s edition.

Jennifer Moody is the education reporter for the Democrat-Herald. She can be reached at 541-6113 or jennifer.moody@lee.net.

Copyright 2015 Albany Democrat Herald. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(3) Comments

  1. Mr G
    Report Abuse
    Mr G - February 17, 2013 11:09 am
    “One could certainly make the case that the highest and best use of some of the urban renewal tax dollars in the last couple of years would have been to direct it toward basic services,”

    This quote nails the concern of many residents, both in Albany and Linn County.

    If we're going to trade-off basic services for urban renewal, then voters should make that decision, not four City councilors. We have a flawed decision making model in Albany. We need to fix this problem.

    Vote YES on Measures 22-116 and 22-117. It's your money. It's your right.
  2. Ray Kopczynski
    Report Abuse
    Ray Kopczynski - February 17, 2013 9:53 am
    Presuming he is not being quoted out of context, it's very disingenuous of Roger to make all his comments as he did. The commissioner knows full well the county has the tools at their disposal to raise their revenues to match their budget plans. To carp about the URD is simply trying to take attention away from that fact. If he wants to give back to Albany citizens over 1/3 of the sheriffs budget for patrol and investigation with basically no benefit Albany, I'll gladly engage in this conversation with him. (That comes to about a million $$ a year.) There was lots we also could have done with that money the past many-many years!

    Vote NO on both city measures!
  3. Mr G
    Report Abuse
    Mr G - February 17, 2013 8:30 am
    “In the end, these are all taxpayer dollars,” he said. “In tough times, you don’t want to be operating in silos.”

    Unfortunately, the wisdom of Commissioner Nyquist's words will probably fall on deaf City ears.

    We can give the City Council hearing aids, however.

    Vote YES on Measures 22-116 and 22-117.
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