Urban Renewal Work Session. February 24, 2014

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1 Urban Renewal Work Session February 24, 2014

2 Introduction } The purpose of this work session to provide responses to subjects raised by Council regarding a Forest Grove urban renewal program } These subjects include: } Perception that some urban renewal programs have not been successful } Potential impact to property tax bills for property within the urban renewal district } Potential impact to the City s property tax collections } Assessment of how urban renewal could work at locations/ properties in in the proposed urban renewal district } Comparison of other programs that could result in similar outcomes

3 Community Benefits Why Urban Renewal } The urban renewal program has the potential to: } } } } Stimulate new housing resulting in more residents with purchasing power able to support business and job creation Promote long term viability and improvements within the Town Center and Commercial Corridor Maximize local option levy revenue to the City Be used in a variety of ways to make projects financially viable } Urban renewal has successfully enabled signature community projects (including mixed use projects such as those in Sherwood, Hillsboro, Gresham and potentially Times Litho in Forest Grove)

4 Proposed Urban Renewal Boundary } Close-In View of Urban Renewal District } } The district s land area is approximately 6.6% of the City s total The district focuses on the downtown and Pacific Avenue corridor

5 } How does urban renewal impact City property tax revenue } Canby provides a good example..

6 Canby Example

7 } How does urban renewal impact City property tax revenue? } Now for a local example..

8 Forest Grove Example

9 } Perception that urban renewal has not been successful in Oregon } Tax Increment Financing has been used successfully in 75 cities and counties throughout Oregon including small, medium and large cities } Some local examples include: Tualatin, Tigard, Sherwood, Hillsboro and Beaverton } Staff is not aware of any urban renewal district in Oregon defaulting on bonds backed by tax increment financing } Some criticism stems from the duration of some programs } Tualatin, Salem, Portland } Urban renewal programs usually take several years to generate enough revenue to fund projects

10 } Potential Impact to Property Tax Bills } 1910 Main Street } Property owner pays the same property tax with or without urban renewal. } This would be the same for other properties in district as well. Fuiten, Frye s and other existing properties within the district } Property taxes are based on the assessed value of property and established tax rates. } Urban renewal has no bearing on this. Only the tax assessor and property owner can affect property tax payments. } No financial penalty when district ends. Property Tax Without Urban Renewal Property Tax With Urban Renewal Year 0 $13,760 $13,760 Year 5 $14,173 $14,173 Year 10 $14,598 $14,598 Year 15 $15,036 $15,036 Year 20 $15,487 $15,487

11 } Analysis of Potential Signature Project in Forest Grove } Times-Litho Site } Mixed-Use Development with 12,000 square foot specialty grocer and 75 rental housing units } Current Value = $800,000 } Potential Future Assessed Value = $10,595,000

12 } Analysis of Specific Project in Forest Grove } Times-Litho Site Property Tax Revenue Estimates (with and without urban renewal)

13 } Analysis of Specific Project in Forest Grove } Redevelopment of Convenience Store and Shop at Schlegel Site } 10,000 SF Retail Space } Current Assessed Value: $581,000 } Estimated Redeveloped Assessed Value of $1,077,000

14 } Schlegel Site } Estimated Property Tax Revenue from New Development

15 } Analysis of specific project in Forest Grove } Albertson s Site } Undeveloped site on corridor } 50,000 Square Feet Commercial Space } Current Taxable Assessed Value: $873,930 } Total New Investment: $7,500,000 } Total New Taxable Assessed Value: $5,385,000

16 } Albertson s Site } Estimate of Property Tax Revenue No Urban Renewal With Urban Renewal TAV Levy Permanent Total to City TAV Levy Frozen Tax Increment Un-Frozen Total to City Year 0 $873,930 $1,398 $3,461 $4,859 $873,930 $1,398 $3,461 $0 $4,859 Year 5 $1,013,124 $1,621 $4,012 $5,633 $5,385,000 $8,616 $3,461 $17,864 $12,077 Year 10 $1,174,489 $1,879 $4,651 $6,530 $6,622,870 $10,596 $3,461 $21,260 $14,057 Year 15 $1,361,554 $2,178 $5,392 $7,570 $6,242,691 $12,284 $3,461 $25,197 $15,745 Year 20 $1,578,415 $2,525 $6,251 $8,776 $8,389,655 $14,240 $3,461 $29,762 $17,701 Year 21 $1,625,767 $2,601 $6,438 $9,039 $8,641,344 $13,826 $0 $0 $34,220 $48, Year $42,699 $105,681 $148,380 $181,095 $72,681 $36,304 $290,080 Total $375,530

17 } Operational Benefits of Urban Renewal in Forest Grove } No impact on those properties not redeveloping } No eminent domain allowed } This will be written in the plan } LOCAL CONTROL, no new agency, bureaucracy or staffing. City Council oversees the urban renewal program and makes sole decision on all aspects of the program including bonding } FLEXIBILITY, urban renewal can fund a variety of projects and financial incentives } Only program available that could offset/reimburse SDC payments } Fund public amenities such as a Town Center plaza } Enables incentives for private investment } Limited area } About 6.6% of City s land area is within proposed urban renewal area (250 acres) } Investment enabled by urban renewal could increase the sales price of surrounding properties benefitting property owners } Provides a redevelopment tool that does not require a cash outlay from current General Fund budget } In current economy, a vital tool improve the financial feasibility of desirable projects and reduce cost gaps

18 } Potential Risks } Tax increment collections could be lower than anticipated } Repayment of bonds could take longer than anticipated } Overall success depends on the specific opportunities that arise } Risks are limited and can be mitigated } Council can end program at anytime However, outstanding bonds, if issued, must be repaid } Council may choose to return tax revenue to taxing districts on an annual basis Through the annual budgeting process This returns tax revenue to the taxing districts } Council approved bonds require financial underwriting before being sold Investors will assess risk before purchasing bonds If the perceived risk is too high bonds won t be purchased

19 } Other Programs

20 Next Steps } Should Council provide direction to move forward next steps would include } Finalize Draft Urban Renewal Plan and Report } Reconvene stakeholder working group } Provide Opportunity to Meet with Taxing Districts } Begin adoption process } Conduct Planning Commission Hearing on Comp. Plan Consistency } Provide City-Wide Notice of City Council Public Hearing(s) Utility Billing Statements } Conduct Required Public Hearings } Begin 90-Day Presumptive Validity Appeal Period } Provide Notice of Adoption to Tax Assessor