Q&A: How Portland and other Oregon cities remake themselves

Tuesday, May 30, 2006
RYAN FRANK
The Oregonian

A cross the state, cities spend your property taxes to fix-up historic buildings, extend sewer pipes and build downtown condo towers. Here's how the nearly 50-year-old system works. Q: What is urban renewal? A: A government program that spends rising property tax payments on projects that improve the city. The taxes are raised within districts that a City Council declares to be "blighted."

When a city forms an urban renewal district, the tax assessed value on the land is frozen. As values grow with new construction, taxes on that growth are dedicated to urban renewal. The revenue pays back bonds issued to fix up properties in the district. Q: So, what exactly is blight? A: There's no objective way to define it. The definition in state law has nine conditions that show blight. They range from abandoned buildings to bad planning. There's even one for property that got laid out without regard for its drainage. Without objective measurements, blight is typically defined by a city council. Of course, if a citizen or property owner disagrees, they can challenge the city's conclusion in court. Q: How would the property tax money be spent if there were no urban renewal? A: Most of the money would otherwise land in the pockets of counties, cities and schools statewide. The theory is that eliminating blight will raise property values and, in the long run, boost taxes for all government agencies. Q: Do I pay for urban renewal? A: Yes. Portlanders pay in two ways. The first doesn't increase your tax bill but the second does.

In the first case, your tax bill shows a line for urban renewal. That tells you that part of your taxes are going to rebuild the city instead of to teachers or cops.

The second is a special tax levy created out of Measure 50, a property tax limitation law. All Portlanders pay into that, for a citywide total of $15 million. Q: Who manages urban renewal? A: In Portland, it is the Portland Development Commission, a semi-independent agency with about 200 employees. The agency is run by a board appointed by the mayor. In other cities, like Gresham, the city council acting as the urban renewal agency manages it. Q: Who has to approve urban renewal districts? A: City councils and county boards must approve all urban renewal districts. Each district has its own plan and a cap on its debt for bonds and credit lines. The cap acts like a credit card limit. Q: What special powers does urban renewal give the city that it doesn't have otherwise? A: Two things: The power to direct growing property tax revenues into redevelopment and the authority to condemn property for private development. Condemnation authority is used less often today because of growing political concerns about private property rights. In Southeast Portland's Lents district, for example, the city prohibits condemnation for urban renewal. Q: What does urban renewal pay for? A: Construction only. It can't be used to help a company's marketing. Most of the money goes into public improvements like roads and parks or sewer and water pipes. But it can buy property to resell it to private developers at a reduced cost. Q: Why is urban renewal money spent on private development? A: Because the city thinks a specific real estate project, or the type of project it wants, wouldn't happen without taxpayer help.

For example, the Portland Development Commission spent $1.2 million to buy one property in a troubled part of downtown at Southwest Third Avenue and Oak Street. The city will spend another $500,000 to clean up contaminated soil and demolish a building considered by some to be one of the ugliest vacant buildings in downtown. The commission plans to donate the land to entice developer Trammell Crow Residential to build a 26-story condominium tower on it.

Without taxpayers' investment, the tower might not get built and the building would still stand. City officials think the tower will attract other investors to turn around the area. Q: If urban renewal exists to eliminate blight, why is it spent on expensive condo projects, parks and theater buildings in the Pearl? Those seem to be frills when the schools are running out of money and other neighborhoods continue to struggle. A: Good question. This is the most controversial part of urban renewal today. At its extreme, the city is spending millions that will help developers build and sell million-dollar condominiums downtown in the Pearl and South Waterfront districts.

Across town, the city hasn't found the same success in Lents and Northeast Portland. Derelict buildings and vacant land still dot those neighborhoods despite years of urban renewal efforts.

The theory is that when urban renewal districts in the Pearl and South Waterfront expire, schools will watch their property tax revenues jump. But that provides little help in the short term.

The Fight for Housing

City Council Steps Into the Fray

BY SCOTT MOORE

Two weeks ago, in a room packed with low-income housing advocates, city council made the first steps in a process that will keep Portland affordable. The plan: Require the Portland Development Commission (PDC) to make affordable housing a priority by setting aside a portion of its budget for inexpensive residences.

The only opposition: The Portland Business Alliance (PBA) and the Metro Association of Realtors, who don't want the city telling the PDC where to spend its money.

In March of 2006, the median cost for a house in Portland was $262,000, a 17 percent jump from 2005, and a staggering increase over 2002 prices. But during the same period, average incomes for Portland residents have remained flat or decreased.

In other words, Portlanders are being priced out of their own city.

So Erik Sten—who heads up the Bureau of Housing and Community Development—put forward a new plan: Simply force the PDC to set aside a percentage of all urban renewal dollars for affordable housing. His resolution—co-sponsored by Commissioner Sam Adams—passed 4-0, with Commissioner Dan Saltzman absent.

But in order to get a unanimous vote, Sten had to water down the resolution. The original plan was to force the PDC to set aside 30 percent of its budget for affordable housing, but Mayor Tom Potter characteristically wants to hear from "stakeholders" before finalizing the percentage. Now the resolution simply establishes a policy goal of setting aside PDC money for housing—the actual percentage will be decided this summer in negotiations between PDC, developers, city council, and housing advocates.

"I was comfortable with where the mayor wanted to go," Sten said after the vote. "His process concerns aren't unreasonable. The mayor's cooperation will make [negotiations] go smoothly. We lost almost nothing, and gaining a majority of the council was worth it."

Interestingly, Saltzman was AWOL during testimony and didn't return before the council voted. He's endorsed by the PBA and has numerous real estate agents as contributors—but, according to his chief of staff Brendan Finn, Saltzman wasn't dodging the vote. He would have voted for it, Finn said, but he had a speaking engagement to which he was already committed.