HB 4084: Brownfields Property Tax Relief

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1 HB 4084: Brownfields Property Tax Relief Oregon Brownfields Conference May 16, 2016 David Ashton Assistant General Counsel Port of Portland

2 Preview Impediments to Brownfields Redevelopment Other approaches to taxing contamination sites How Tax Relief Authorized under HB 4084 Might Help

3 Brownfields Redevelopment Impediments Many Brownfields owners unable to clean up or redevelop Brownfield; Developers are reluctant to acquire Brownfields due to unknown extent of liability to others and the cost to clean up; METRO Brownfields Coalition has looked at multiple ways to create incentives to refloat these underwater redevelopment opportunity sites More tools in the toolbox

4 METRO Brownfields Coalition has looked at multiple ways to create incentives to refloat underwater development opportunity sites

5 Other Approaches to Contamination and Property Taxes Minnesota s Approach Contamination as a Sin Minnesota Contaminated Property Tax effective 1995 taxes contamination value of property difference in the value of the before and after contamination Owners of contaminated property who don t have agencyapproved cleanup plans pay fee at full property tax rate Contamination tax is halved for owners who have filed an approved cleanup plan Eliminate contamination = no tax tax gives property owners strong impetus to clean up

6 How Oregon Addresses Contamination and Property Taxes Property tax assessed on lower of property s maximum assessed value (Measure 50) or its real market value (willing seller/buyer in arm s-length deal). Buyers wont pay full value for underwater Brownfields Property tax takes account of reduction in RMV due to contamination: Owner must: Prove contamination site Appraise the property as contaminated deduct cost to cure from value discounted present value of estimated after-tax cost of remaining cleanup work for property on assessment date Costs of investigating, removing, remediating hazardous substances, including related transactional costs. Issues with this approach

7 What Tax Relief Tools Exist as of 2016 To Help Remediate Brownfields in Oregon? HB 4084 Property Tax Relief Authority Enacted February 2016

8 HB 4084 Property Tax Relief Authority Bill HB 4084 enables Local Governments to Adopt Ordinance relating to Brownfields for Special Property Tax Assessment On Real Property, and Property Tax Exemption On Improvements And Personal Property Including partial exemptions Tax Relief Bill enables Local Government to provide firect financial relief to potential developers of Brownfields similar to tax relief in Enterprise Zones

9 How Does The Tax Relief Authority Work? Local program created by resolution or ordinance; Requires agreement of at least 75% of Taxing Districts; Must include certain Eligibility Requirements: property owner/applicant must: sign affidavit that the "owner has not, by any acts, or omissions where there is a duty to act, caused, contributed to or exacerbated the release of hazardous substances at the brownfield, perform "all appropriate inquiry, and Perform any required response actions in compliance with Order, Agreement, or Program authorized by DEQ

10 Expenditures Eligible for Tax Relief Expansive categories Costs Expended in the Brownfields development process qualify as "eligible costs" for Tax Relief: Remedial Action Costs Per ORS ; Demolition Costs; Costs of correcting release of hazardous substances within existing improvements at Brownfield; Costs of new improvements "for the purposes of containing hazardous substances or limiting exposure to the release of hazardous substances"; Costs of managing, handling, removing, treating and disposing of solid waste and building materials containing hazardous substances; In sum: essentially All Dollars Expended Addressing Hazardous Substances while redeveloping Brownfields are potentially eligible for tax relief benefit.

11 Other Important Features Ineligible sites: NPL Sites State Appraised Industrial Properties Compares very favorably to existing system

12 Comparison to Enterprise Zone Relief Local governments may set up Enterprise Zones For local investment by locating or expanding in designated enterprise zone, eligible businesses (e.g., industrial facilities) receive total exemption from property taxes normally assessed on new plant and equipment. Benefits include: Construction-in-Process Enterprise Zone Exemption For up to two years before qualified property is placed in service, it can be exempt from local taxes (a broader exemption than otherwise available) 3 to 5 consecutive years of full relief from property taxes on new plant & equipment Other local incentives also may be available.

13 Comparison to Enterprise Zone Relief Business Oregon determines if local government may establish EZ: local economic hardship criteria: (1) Household median income is 80% or less of state median income, or (2) current unemployment rate is 2% or more higher than state unemployment rate, or alternative but equally severe threshold criteria (see administrative rule) Incentives/Enterprise-Zones/

14 HB 4084 Tax Relief v. ORS 285C EZ Land, improvements, equipment Only improvements & equipment 10 (+ 5 years) relief 3 to 5 years relief Cleanup related costs Value of new investment (above) Brownfields Economic hardship area Not Superfund sites Includes Superfund sites Party incurring cleanup Investor in new business

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16 Conclusion HB 4084 enables local governments to provide direct financial benefits to Brownfields developers; Potential to increase pace of Brownfield redevelopment, improving health of area residents, increasing jobs, long term tax proceeds, and local property values Preferable to existing approach May be more targeted than Enterprise Zones