The Real Price of Urban Renewal

What is Tax Increment Finiancing?

In theory, urban renewal is relatively simple. By incurring debt to pay for public improvements within a specific “plan area”, it is expected that property values will increase due to private investments that would not otherwise occur. This new value is called “increment” or “excess value”. The property taxes from this increase in value is then given to the urban renewal agency to pay off the debt. Revenue generated in this manner is referred to as “tax increment financing” (TIF) or “division of tax revenue”. If there is no increase in assessed value, the urban renewal agency does not collect any revenue. Local taxing districts, such as the county, city, school district, fire district and others, continue to receive the property taxes from the assessed value the district had before the urban renewal plan area plan was formed. This value is called the “frozen value”. (Bold added, from page 45 of the  2006-2007 TSCC report. )

Where Would the Money Have Gone?

Above chart composed from data on page 30 of PDC's  Annual Urban Renewal Report Covering Fiscal Years 2005-06 and 2006-07  (Intereestingly, Multnomah County lists the total PDC UR money at  $73.5 million, not $51.2 million, on page 47 of the 2006-2007 TSCC report : The total amount imposed for PDC, $73,547,737, represents more than 98.3% of the total urban renewal taxes imposed in Multnomah County for 2006-07.)

See Pages 45-54 of  the 2006-2007 Annual report of theTax Supervising & Conservation Commission

But We wouldn't have received that money if it wasn't for the PDC's investment!

1) Over the years property increases in value, but the "frozen value" does not change to reflect this, ALL of the normal increased value of existing property is given to the TIF.

2) The new buildings, and their residents, in the UR areas all consume services, but ALL of their taxes go to the TIF, not to pay for the city or county services used by the new buildings and their residents. The rest of the city's residents have to pay more, or get less services, to make up the difference. Only the raw land and old building taxes (without appreciation) still go the basic services.

3) An urban renewal district can last 25 years and issue 20 year bonds on its last day of existance, so it can take 45 years for all of the tax money to finally reach basic government services. (Just about in time for the area to become run down again and require a new cycle of urban renewal.)

4) For the first 20-45 years, the UR area may require more in services than it pays in taxes (especially if the area started out as vacent land). After 45 yeras the are should be paying more in taxes that it gets in services. This small tax surplus above the cost of services is the amount that should go to pay the deficet built up over the years of underpaying for services. The question is how many years, starting 45 years out, will it take to berak even? The answer: no one seems to have calculated it (or will admit to calculating it)!