What is Urban Renewal?
Urban renewal is a program authorized under state law and implemented locally that allows for the concentrated use of property tax revenues to upgrade certain designated areas of a city or county. These areas are called “blighted” by state statute and typically contain sections of a city which are underdeveloped and not contributing fully to the local economy. These areas may contain dilapitated buildings, or utilities and street systems that are in poor repair or insufficient to provide service to new development. The underpinning theory of urban renewal is that if these properties and the surrounding infrastructure are upgraded, they will contribute more substantially to the local economy and to the property taxes which support all of the taxing jurisdictions.
If the measure passes, how would the urban renewal program be started?
For an area to be designated as an urban renewal area, a city normally completes a feasibility study to determine appropriate boundaries and to analyze the financial feasibility of the area, including the impacts on the other taxing jurisdictions. (See "Documents & Studies" in the website menu to access the 2023 Town Center Urban Renewal Feasibility Study.) Depending on the results of the feasibility study, and input from taxing jurisdictions and the public, the city would determine whether they want to proceed with the development of the urban renewal plan. Before a plan can be adopted by a City Council, the city would first establish an urban renewal agency if an agency has not been previously established. The urban renewal plan and the accompanying urban renewal report document the blighting conditions in the urban renewal area which qualify it for the use of urban renewal. An urban renewal plan establishes an urban renewal boundary, goals and objectives for the area, and outlines projects and programs which will help to improve the conditions in the area. The plan also sets a limit on the amount of money which can be used to fund these projects and programs, called a “maximum indebtedness”. The urban renewal plan is accompanied by a technical report which contains the financial feasibility analysis and projects when funding will become available to pursue projects within the area. The urban renewal plan must be adopted by the City Council.
What is the adoption process for an urban renewal plan?
The planning for urban renewal typically involves review and input from a resident and stakeholder committee and city staff. In Wilsonville the resident and stakeholder committee is the Urban Renewal Task Force. In Wilsonville, although not required by the city charter, the City Council has always sought the input of residents through an advisory vote whenever a new urban renewal area is being considered. Measure 3-605 is an advisory vote. If the City Council wishes to form an urban renewal district, the Urban Renewal Agency would direct the preparation of an urban renewal plan. Once a draft plan is prepared, it must be circulated to the impacted taxing jurisdictions for their review and comment. The plan must be presented to the Urban Renewal Agency, Planning Commission and to the City Council. Any action by the City Council must be by non-emergency ordinance, after a public hearing is held. Notice of the public hearing must be sent to each individual household in the city.
What types of programs or projects are typically eligible under urban renewal?
Urban renewal agencies can do certain projects or activities under an adopted urban renewal plan. These activities generally include: • Construction or improvement of public facilities including streets, utilities, parks and other public uses. • Acquisition and improvement of property (acquisition of private property which will then be developed as private property can only be done with a willing seller). • Participation with developers for property improvement, or the creation of jobs. • Rehabilitation of existing buildings.
If passed, how would urban renewal be financed?
Urban renewal is unique in that it has its own funding source, tax increment financing. At the time the proposed urban renewal plan is adopted, the county assessor calculates the total assessed value of the area and establishes this value as the “frozen base” for the area. Growth above the base within the urban renewal district is called the “increment”. Tax increment revenues are the property tax revenues generated from the increase in the assessed values over the frozen base. This concept is shown in the chart below.
Basic Urban Renewal (TIF) Model
How would Tax Increment Financing affect overlapping taxing districts?
If Measure 3-605 passes and a Town Center Urban Renewal District is formed, the permanent-rate property taxes on the growth in assessed value in the urban renewal area are allocated to the Urban Renewal Agency instead of the taxing districts (Though school funding is not directly impacted.) These revenues are called "foregone revenues." The taxing jurisdictions still collect the property tax revenues from all property not designated as an urban renewal area, as well as the assessed value of the frozen base, but increases in revenues above the frozen base of the urban renewal area (tax increment) would be foregone by taxing districts and allocated for projects within the Town Center urban renewal area until the urban renewal areas closes.
If passed, how would Tax Increment Financing affect property tax payers?
Because Wilsonville has previously-established urban renewal districts, tax payers already see a line item on their property tax statements for urban renewal. This would continue to be true if the measure passes and a Town Center urban renewal district is formed. This can be quite confusing because even if a property is not physically located in an urban renewal area, a property tax payer will nonetheless see an indication of urban renewal on their property tax bill. This is due to something called “division of taxes.” It is the administrative way assessors show the calculation of the tax increment (urban renewal) revenue citywide. If the measure passes, the total tax rate a property pays would not change, but the allocation of rates payable to taxing districts would be changed, as a portion of the total taxes from Wilsonville would then go to the proposed Town Center urban renewal district. Please contact City staff if you would like to discuss this in more detail.
Source
Elaine Howard Consulting
Our firm works with cities and counties throughout Oregon as they use tax increment financing/urban renewal as an economic development tool.