HomeMy WebLinkAboutItem 01 Housing Diversity Tax Exemption for Downtown AGENDA ITEM SUMMARY Meeting Date: 3/9/2020
Meeting Type: Work Session
Staff Contact/Dept.: Sandy Belson, DPW
Staff Phone No: 541-736-7135
Estimated Time: 20 Minutes
S P R I N G F I E L D
C I T Y C O U N C I L
Council Goals: Promote and Enhance
our Hometown Feel
while Focusing on
Livability and
Environmental Quality
ITEM TITLE: HOUSING DIVERSITY TAX EXEMPTION FOR DOWNTOWN
ACTION
REQUESTED:
Provide direction to staff as to whether or not to include any part of Downtown
when establishing a housing diversity tax exemption.
ISSUE
STATEMENT:
Despite the city’s growing economy, the City recognizes there is a lack of housing
within the community and is working to address the problem. The findings point to
a severe shortage of housing and the expense of housing relative to household
incomes. Rental vacancy rates are very low and it is a seller’s market with a few
homes for sale. Three market rate multi-unit housing projects have recently been
constructed in the Q Street area, but the City would benefit from additional multi-
unit housing to address the decade-long deficit.
ATTACHMENTS: Attachment 1: Council Briefing Memo
Attachment 2: Tax Exemption for Housing Diversity: Downtown Springfield
Attachment 3: Vertical Housing Development Zone
Attachment 4: Combined Map for Tax Exemption for Housing Diversity
DISCUSSION/
FINANCIAL
IMPACT:
The purpose of a tax exemption for housing diversity is to encourage development
of multi-unit housing that would not otherwise be built. By exempting property
taxes on the improvements for a number of years, the developer may be able to
balance the income and expense (particularly debt service) earlier in the life of the
project. In the long term, the City benefits from the property taxes collected over
the life of the development that may not otherwise have been built.
The financial analysis becomes more complex when the exemption is provided
within an urban renewal district. Not only would the City not collect property taxes
on the improvements during the period of the exemption, but neither would the
Springfield Economic Development Agency.
M E M O R A N D U M City of Springfield
Date: 2/20/2020
To: Mary Bridget Smith COUNCIL
From: Tom Boyatt, Community Development Director
Sandy Belson, Comprehensive Planning Manager
BRIEFING
Subject: Housing Diversity Tax Exemption for Downtown MEMORANDUM
ISSUE:
Despite the city’s growing economy, the City recognizes there is a lack of housing within the
community and is working to address the problem. The findings point to a severe shortage of
housing and the expense of housing relative to household incomes. Rental vacancy rates are
very low and it is a seller’s market with a few homes for sale. Three market rate multi-unit
housing projects have recently been constructed in the Q Street area, but the City would benefit
from additional multi-unit housing to address the decade-long deficit.
COUNCIL GOALS/
MANDATE:
Promote and Enhance our Hometown Feel While Focusing on Livability and Environmental
Quality
BACKGROUND:
The Mayor and Council are working to encourage the creation of housing across the housing
continuum to both increase the supply of housing and the accessibility of housing to meet the
needs for all people in every phase of life. A property tax exemption for multi-unit housing is
one strategy identified by Council that has the potential to spur market-rate construction and
promote housing of diverse types.
Council met in work session on November 6, 2017 to explore setting up a property tax
exemption as allowed under Oregon Revised Statutes 307.600-637. At that time, Council gave
direction to move forward with more analysis. In work session on February 2, 2018, Council
reviewed potential geographic areas to be considered and decided to include areas around:
Q Street, Mohawk, and along Main Street between 38th Street and Bob Straub Parkway.
In 2018, AARP’s national leadership entered into a technical assistance contract with LOCUS:
Responsible Real Estate Developments and Investors to analyze the barriers to multi-unit
housing development in Springfield and to determine whether or not a tax exemption would help
stimulate the multi-unit housing market. Staff presented the findings and LOCUS
recommendations to Council in work session on February 4, 2019 and Council agreed to
continue exploring the use of this tool.
Initially Council did not consider areas within the Downtown and Glenwood Urban Renewal
Districts as potential areas for a tax exemption given that Urban Renewal Districts rely on the
tax increment gained through redevelopment to finance improvements and revitalization of
business in blighted areas. That increment would not be collected if the property taxes are
exempted from payment. However, Council had questions about establishing a tax exemption in
an urban renewal area, particularly Downtown where this new tax exemption would replace the
Vertical Housing Tax Exemption that had been put in place by the State and turned over to local
jurisdictions to administer. (In previous Council work sessions in 2017, Council had determined
Attachment 1, Page 1 of 3
MEMORANDUM 3/4/2020 Page 2
that it preferred the multi-unit property tax exemption under ORS 307.600-637 rather than the
vertical housing tax exemption under ORS 307-841-867.) Therefore, the Mayor requested that
staff schedule a work session focused on consideration of including an area of Downtown as one
of the areas considered for a housing diversity tax exemption.
ANALYSIS RELATED TO THE URBAN RENEWAL DISTRICT:
The attached map shows the area within the Downtown vicinity that is both planned and zoned
to allow multi-unit housing (see Attachment 2). Some of that area (shown in blue) is within the
Downtown Urban Renewal District and some of it is north of the Urban Renewal District. Staff
seeks Council direction as to what portion of Downtown, if any, should be included when
creating a Tax Exemption for Housing Diversity.
Under the tax exemption program, assuming all taxing districts are included in the exemption1,
neither the City nor the Springfield Economic Development Agency (SEDA) would collect any
property tax on any new improvements (improvements include the entire building and parking,
even if it the building contains commercial uses). If there is an expansion of the building, then
only the additional improvement value will be tax exempt. Per ORS 307.606 (3), the City
Council would only grant a tax exemption on a project that would not be feasible but for the tax
exemption.
Currently, the SEDA incurs an IOU to the city for system development charges (SDCs) on
behalf of qualifying developments. The SEDA Board may reconsider this practice for SDCs if it
would not be able to collect the property taxes on the increased improvement value during the
period of the tax exemption. Thus, instituting a tax exemption may be detrimental to SEDA’s
finances if it continues to take responsibility for the SDCs for qualifying projects. Or if SEDA
stops incurring the obligation to pay SDCs, the City may end up limiting future developments
since developers consistently state that what would help them the most is reduction or
elimination of the SDCs. Developers most appreciate the reduction of upfront development
costs. Reducing property taxes does nothing to reduce the cost to develop the property, but does
help balance the cash flow once it is built. The City and SEDA should consider which incentive
is most effective of if they should offer both incentive programs. This consideration should
include input and guidance from the Finance Department.
VERTICAL HOUSING TAX EXEMPTION:
Council passed Resolution 04-36 in 2004 authorizing an application to the State of Oregon for
the designation of a Vertical Housing Development Zone for the purpose of creating affordable
housing in the Downtown (see Attachment 3). After establishment of the Vertical Housing Tax
Exemption in Springfield, the only building to receive an exemption is the Royal Building
developed by St. Vincent de Paul. In 2017, the legislature passed a bill providing for local
control of the vertical housing development program. In 2017, when comparing the multi-unit
property tax exemption with the vertical housing tax exemption, Council preferred the multi-unit
property tax exemption due to its focus on housing, its exemption of the entire improvement
value of new construction, and the ability to tailor the program to local needs. (Vertical housing
requires ground floor commercial, only exempts between 20% and 80% of equalized floors 2
1Once approved by the City, the City would request support from the governing boards of the other taxing
districts who levy taxes within the exemption areas. If there is support from the taxing districts for whom
the combined rate of taxation equals at least 51 percent (including the city), the exemption will apply to all
taxing districts. If there is not sufficient support from the other taxing districts, the exemption could apply
only to the city levied property tax. However, the effectiveness of this tax exemption would be limited and
likely not worth the effort involved.
2 Equalized floor refers to the quotient that results from the division of the total square footage of the project by
the number of actual floors of the project that are at least 500 square feet.
Attachment 1, Page 2 of 3
MEMORANDUM 3/4/2020 Page 3
unless rents are below-market, and has limited flexibility.) Given that the City recently
reauthorized the low-income property tax exemption, a project like the Royal Building would
likely take advantage of that exemption rather than rely on the vertical housing tax exemption.
All but three of the eligible properties in the Vertical Housing Development Zone are within the
Downtown Urban Renewal District.
OPTIONS FOR COUNCIL:
Attachment 4 shows the Downton Urban Renewal District, the Vertical Housing Development
Zone eligible properties, and the Potential Area for the Housing Diversity Tax Exemption. This
map may be useful when considering the following options:
1 – Include the entire Downtown area that allows multi-unit housing in the creation of a Tax
Exemption for Housing Diversity and thereby replace the Vertical Housing Tax Exemption.
2 – Include only the area outside the Downtown Urban Renewal District in the creation of the
Tax Exemption for Housing Diversity.
A – Leave in place the Vertical Housing Tax Exemption
B – Remove the Vertical Housing Tax Exemption
3 – Replace the Vertical Housing Development in the creation of a Tax Exemption for Housing
Diversity for the same area.
4 – Do not include anything in the Downtown area in the creation of the Tax Exemption for
Housing Diversity.
A – Leave in place the Vertical Housing Tax Exemption
B – Remove the Vertical Housing Tax Exemption
NEXT STEPS: If Council wants to proceed, staff would bring back a program proposal at a
future work session.
RECOMMENDED ACTION: Provide direction to staff as to whether or not to include any
part of Downtown when establishing a housing diversity tax exemption.
Attachment 1, Page 3 of 3
Downtown Urban Renewal District
Potential Area for Housing Diversity Tax Exemption
Taxlots
There are no waranties that accompany this product.Users assume all responsibility for any loss or damagearising from any error, omission, or positional inaccuracyof this product.I
0 0.25 0.50.125 Miles 2/26/2020
Tax Exemption for Housing Diversity
Downtown Springfield
Main StreetPionee
r
Pa
rkway
Eas
t
10th Street5th Street14th StreetSouth A Street 21st StreetF Street
Attachment 2, Page 1 of 1
Vertical Housing Eligible Properties Taxlots
There are no waranties that accompany this product.Users assume all responsibility for any loss or damagearising from any error, omission, or positional inaccuracyof this product.I
0 0.25 0.50.125 Miles 2/27/2020
Vertical Housing Eligible Properties
Downtown Springfield
Main StreetPionee
r
Pa
rkway
Eas
t
10th Street5th Street14th StreetSouth A Street 21st StreetF Street
Attachment 3, Page 1 of 1
Downtown Urban Renewal District
Potential Area for Housing Diversity Tax Exemption
Vertical Housing Development Zone
Taxlots
There are no waranties that accompany this product.Users assume all responsibility for any loss or damagearising from any error, omission, or positional inaccuracyof this product.I
0 0.25 0.50.125 Miles 2/26/2020
Tax Exemption for Housing Diversity
Downtown Springfield
Main StreetPionee
r
Pa
rkway
Eas
t
10th Street5th Street14th StreetSouth A Street 21st StreetF Street
Attachment 4, Page 1 of 1