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TIF districts can grow the tax base and revitalize parts of a City that are experiencing underinvestment. TIF is based on the diversion of tax revenue increases, but over time, the redevelopment is expected to result in a more robust tax base for the community. Those tax gains are due to increased value in the property around a new development in addition to the potential for job growth and sales tax revenue.
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Urban renewal is funded by tax increment revenue. The private investment attracted by public urban renewal investments results in increased property values within the district. These increased property values bring in greater property taxes within the district, which are then used to pay off bonds sold to finance the revitalization efforts. This unique funding mechanism is called tax increment financing (TIF).
Urban renewal is funded by tax increment financing (TIF). At the time an 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.
Taxes from that frozen base continue going to all of the taxing jurisdictions. Growth above the base is called the "increment". Taxes from the increment, called tax increment revenue, go to the urban renewal agency for projects within the urban renewal area.
Maximum indebtedness is the total amount of tax dollars that may be spent on the projects, programs, and administration in an urban renewal area.
Generally, urban renewal makes sense in areas that have physical and/or economic conditions that cause a reduction of, or lack of, proper utilization of that area. An urban renewal agency may determine that TIF is required to:
The activities eligible for urban renewal funding are determined by ORS 457 and sometimes change. Per ORS 457.170, eligible activities include:
Ineligible activities include all other activities not listed by ORS 457, such as non-capital improvements, temporary improvements, and grants or loans for operating expenses.
No, urban renewal simply allows for the reallocation of growth on taxes to the urban renewal agency rather than the overlapping taxing districts. Taxpayers within the city will see a line item on their property tax statements for urban renewal. The overall tax bill does not increase, but the allocation of revenues received from the payment is changed as a portion of that payment now goes to urban renewal. This is called “division of taxes” and is the administrative way that assessors must show the calculation of the tax increment revenue.
While the urban renewal area is active, a taxing jurisdiction’s revenue from that area is frozen (at the time of the urban renewal plan’s adoption) and will not increase until revenue-sharing is triggered. So, while an urban renewal area is active, taxing jurisdictions may not receive as much money as they would otherwise have received. In essence, the taxing districts forego some revenue in exchange for a greater total property tax base and revenue capacity as a result of urban renewal investments. The goal of urban renewal is to spur development that would not have occurred but for urban renewal, so when the urban renewal area expires, taxing jurisdictions can expect to receive more tax revenues than they would have had the urban renewal area never existed at all.
School districts are not directly affected by TIF. Under Oregon's school funding law, the Oregon Department of Education combines property tax revenues with State School Fund revenues to achieve per-student funding targets. Under this system, property taxes foregone due to the use of tax increment financing are replaced with State School Fund revenues, as determined by the state funding formula. While TIF statewide has an impact on the amount of funding in the State School Fund, the legislature can re-allocate other funding sources to the State School Fund.
In theory, a successful urban renewal area will result in more income taxes resulting from job creation and increased property taxes than might have occurred without urban renewal, resulting in more net tax dollars for school funding in the long term.
An urban renewal area is created through a process that includes community input, notice to impacted taxing jurisdictions, review by the City’s urban renewal agency, planning commission, and city council. The city council hearing notice must be sent to a specified group of citizens. The adoption of a plan must be with a non-emergency ordinance by the city council that does not go into effect for 30 days after adoption. The plan, together with an accompanying urban renewal report, identifies the goals of the urban renewal area and projects to be funded with TIF, describes how the area complies with statutory requirements for blight, projects tax increment revenues, and identifies a maximum amount of debt an urban renewal area can incur, among other topics.
The Urban Renewal Plan contains a section on how amendments are processed. Minor amendments may be approved by the Commission itself. Substantial amendments are those that increase the maximum indebtedness or add property that totals over 1% of the existing acreage.
Urban renewal can fund a range of activities, including capital projects and development assistance programs, and typically include:
In 2007, the Commission approved a substantial plan amendment for the Downtown Oregon City/North End Urban Renewal Plan. The amendment reflected changes in the scope of projects in the project area in response to the 2004 Oregon City Futures Report and increased the maximum indebtedness to complete the Plan. The amendment also addressed infrastructure deficiencies for The Rivers project and The Cove projects.
Typical urban renewal plans are designed for a 20-to-25-year period, but the time period is not a requirement. Plans can be closed out if all projects are completed earlier and the debt is repaid. The Downtown Urban Renewal District does not have a specific duration.
There are at least 76 cities and counties with active districts in Oregon, several with more than one active district. [Note: the consultant team will provide case study information following the Urban Renewal 101 FAQ and fact sheet]
Following the "Urban Renewal 101" information, the project team will document the following information about the Downtown Oregon City/North End Urban Renewal District:
For more information about this project, please email James Graham, Economic Development Manager or call 503-657-0891.