Tualatin's bid to expand urban renewal will test new Oregon law

By Brad Schmidt, The Oregonian

February 28, 2010, 6:00PM

View full sizeBRENT WOJAHN/The Oregonian/2007A manmade lake is the centerpiece of Tualatin Commons, built with urban renewal funding. The city wants to extends its urban renewal district with another $120 million worth of improvements.After 35 years of urban renewal, Tualatin leaders say they aren't done building yet. But for the first time, they are scrambling to gain support from local school, fire and other service providers who, under a new Oregon law, have the ability to kill the city's expanded multi-million-dollar wish list.

House Bill 3056 gives taxing districts a deciding voice when urban renewal agencies want to significantly increase debt to pay for more projects. Tualatin, eyeing a $120 million expansion, serves as the test case.

"Clearly the smaller taxing districts have a much greater say than before ... and that's how it should be," said House Speaker Dave Hunt, D-Gladstone, who sponsored the bill. "Now we'll get to see a first-hand look at how the law will operate."

Urban renewal funding has been divisive, especially in Portland, where last year Multnomah County leaders fought a plan to use it to help pay for a sports stadium. Last summer, lawmakers unanimously passed a reform bill that does three things:

•  It caps the amount of money urban renewal agencies can borrow.
•  It ensures successful districts share money earlier.
•  It requires agreement among government partners who make up 75 percent of the funding. That agreement applies only to expanded urban renewal plans and is not required when creating new districts.

As a result, school districts hold more power over urban renewal expansion. That's because school taxes generally make up a large portion of urban renewal funding.

"Essentially, the school districts hold the veto card here in almost every instance," said David Williams, a lobbyist for the Oregon School Boards Association.

That's the case in Tualatin, where school leaders and officials from eight other taxing districts have been asked to support another 25 years of urban renewal. Already, Tualatin Valley Fire & Rescue officials have said 'no,'  with other districts making decisions soon.

City leaders say they need to approve their plan in three weeks -- but first they must find out if Tigard-Tualatin School District officials will derail their efforts.

How urban renewal works

Urban renewal is a funding strategy that governments use to improve and redevelop "blighted areas."

Property values are frozen for a specific time within a designated "urban renewal" zone. Essentially, service providers in the area receive the same amount in taxes each year despite increasing property values.

As property values jump, the tax difference between the frozen base and the higher amount goes toward an urban renewal fund. Projects are built and expenses are repaid from that fund.

When an urban renewal district ends, the tax base is unfrozen. Service providers begin collecting taxes based on new property values, which, in theory, are far higher because of urban renewal efforts.

In Tualatin, city officials froze the tax base in 1975 at $14 million. Since then, they've spent $27.7 million on urban renewal projects, much of it focused on Tualatin Commons.

Today, 328 acres  within the Central Urban Renewal District are worth $194 million, and that new value is supposed to hit tax rolls July 1.

But city leaders say they aren't finished with redevelopment.

They want to keep the tax base frozen at 1975 levels for another 25 years to pay for another $120 million in projects. According to the draft plan, projects most likely to be built include river trails, new roads, parking garages and a controversial Tualatin Road extension and bridge.

Tualatin Mayor Lou Ogden said the city has a good plan that should be supported, although he stressed that priorities will probably shift based on future needs.

"You don't know what those projects are going to be 25 years out with specificity," he said. "The question isn't, in my opinion: What projects are you going to build? The question is: What kinds of projects do you need to build?"

The new law requires agreement from service districts only when an urban renewal agency wants to increase its debt by more than 20 percent over the old limit, as is the case in Tualatin.

Not everyone has to agree. But the urban renewal agency -- members of the Tualatin City Council serving as the Tualatin Development Commission -- must receive official support from tax districts that account for three-quarters of the funding.

City leaders in recent weeks have been making the rounds, answering questions and pitching their vision.

"I think we'd be having those conversations anyway," said Sherilyn Lombos, Tualatin city manager. "There's just something at stake, which makes it a little more exciting."

Tualatin Valley Fire & Rescue isn't excited about Tualatin's plans.

Officials for Oregon's second-largest fire department want to begin collecting tax dollars now, not in 2035. Because of urban renewal, the district forgoes about $1.7 million in taxes -- about $275,000 of that is in Tualatin's central zone.

"We've been planning on this money," said Bob Wyffels,  board president. "It's going to help our taxpayers. We don't see any reason to put it off for what eventually would be a total of 60 years."

Schools have a say

Tigard-Tualatin is the first school district in the state to have a defining voice in local urban renewal.

Experts say that about 35 percent of the taxes within an urban renewal district would normally go to schools. That high percentage means school officials who say "no" could virtually end urban renewal expansion. The same is true of some combination of smaller taxing agencies -- such as fire or water districts -- that could band together to halt a proposed increase.

The law puts the Tigard-Tualatin School District into new territory. Board members, who help shape district policies and procedures, are being asked not only to consider an urban renewal extension, but also the merits of proposed projects.

It's a hat they shouldn't wear, Chairwoman Jill Zurschmeide said.

"I think it puts all school boards in a very peculiar position," she said. "The school board shouldn't be in the business of city planning."

The board will hear from Tualatin officials on Thursday and make a decision by March 18, four days before city leaders are expected to vote on their plan.

"This is uncharted territory for a school board, this is a new area for them to have to contemplate," said Williams, the state schools' lobbyist.

"That has its pros and cons. The pro is that it's forcing the conversation to happen -- a conversation that never happened before, but probably should have."

 -- Brad Schmidt
-- Melissa Navas