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Urban renewal, or tax increment financing, is a tool used by cities to finance improvements and redevelopment in specific areas of a city by reinvesting the increase in the area’s property taxes. The program is aimed at helping communities improve specific areas that are unsafe or in need of improved conditions. Urban renewal is authorized by the State of Oregon and is used by many cities. An urban renewal governing body is established (the Agency) and a plan is created to demonstrate how this tool can help improve the area. The goal of urban renewal is to support economic development and community improvements by encouraging private development, like businesses and housing, and by financing needed public projects, like street improvements. Eugene has two urban renewal districts: 1) Downtown and 2) Riverfront.
Eugene has two urban renewal districts: the Downtown Urban Renewal District and the Riverfront Urban Renewal District, shown below. Click the map to see a larger version.
City Council, acting as the Agency Board, has used Downtown Urban Renewal to support significant downtown improvements, including:
In addition, the Downtown Revitalization Loan Program has provided almost $6 million in loans to support downtown redevelopment and leveraged over $26 million in private funds. The revolving loan program provides gap funds that are repaid and then loaned to other projects. The loan program has supported and enhanced our local businesses including places like the McDonald Theatre, the Jazz Station, Oregon Contemporary Theater, Davis Restaurant, Shoe-A-Holic, Harlequin Beads, the Barn Light, Sizzle Pie, First National Tap House, First on Broadway (apartments), Red Wagon Creamery, Party Downtown, Broadway Commerce Center (office building), Off the Waffle, Woolworth Building, Cowfish, and Brenner’s Furniture.
While urban renewal itself does not increase property tax rates, it does function on the increases in property tax revenues from year-to-year. An individual property tax- payer’s property taxes may increase for two reasons, one, the assessor can increase property values at a rate of 3% per year and does so in most cases, and, two, if a substantial renovation is completed on a property resulting in increased assessed valuation.
When an urban renewal area is created, the property tax revenue from that area is diverted into two revenue streams. The first stream is what is called “the frozen base”. The frozen base is the property tax revenue from the total assessed value of the urban renewal area from the year the urban renewal area was formed.
The frozen base revenue stream continues to go to the regular taxing jurisdictions, such as the city, the county, and the school district. The second revenue stream is any increase over the frozen base which is called “the increment”. The increment represents the basis for tax increment financing and is any increase in property tax revenues above the frozen base. The second revenue stream goes to the urban renewal agency for use on projects, programs, and administration throughout the life of the urban renewal area. The funds that are allocated to the Agency from the division of tases or tax increment financing are used on projects that encourage public and private development. In the chart in Question 8, you can see that Urban Renewal has a “frozen base” meaning the assessed value in the District when it was originally formed. Taxes off that goes to taxing districts and will for the length of the Urban Renewal Plan. Any taxes off growth within the District (“increment”) go to the Agency for projects in the District. Once the District is terminated, all tax revenue will go to the taxing districts according to their tax rate.
No. Urban renewal does not raise property taxes.
Instead, the allocation of revenues received from a property taxpayer’s payment is changed as a portion of that payment would go to the new urban renewal area. This is called “division of taxes” and is the administrative way that assessors must calculate the urban renewal revenue.
Because Eugene has two urban renewal districts, all property taxpayers see a line item on their property tax bills that shows a division of taxes for urban renewal. This is a result of the property tax limitations in Oregon. Again, this is not an increase in property taxes, merely a division of taxes already paid. If urban renewal districts were terminated in Eugene, the amount of taxes property owners pays would not decrease, they would simply be reallocated to the other taxing districts.
Urban renewal began in the 1940’a as a federal program to revitalize central cities. At that time, it was often a top-down effort characterized by large-scale clearance of land to provide what was then considered to be improved housing conditions. These efforts disproportionately impacted and displaced poor people and people of color. The federal urban renewal program was discontinued in the 1970s.
Today, many state and local governments are utilizing tax increment financing, also known as urban renewal, for redevelopment to revive downtown areas. Since the 2000s, urban renewal projects have evolved to become a more collaborative effort that aims to strengthen existing communities by relying on input from people in those communities.
The City’s Community Development Division, which leads administration of Eugene’s two urban renewal districts, intends to incorporate a racial equity and accessibility lens to the projects and programs proposed in the Urban Renewal amendment. More information about this process will be shared as staff begins implementation of the amended Plan.
Urban renewal is designed to benefit people within the urban renewal area, in surrounding neighborhoods and throughout the city. The urban renewal plan, which dictates spending of urban renewal dollars in the area, requires public input from residents and must be approved by the City Council. Everyone benefits from the results of urban renewal, which often include diversified housing choices, job and economic opportunities, better planning, more open space, more efficient traffic patterns, better transportation options, and more enjoyable amenities.
Basically, a portion of everyone’s property tax payment is set aside to pay for projects within the urban renewal district. The amount that’s set aside is based on the “tax increment” value within the district. The reason it’s called “tax increment” is because it is the incremental amount of tax value that has grown since the district started.
When the district is created, the assessed value of property within the district is set (or “frozen”) and those taxes continue to go to the government (city, county, and school districts through the State). Any property value increase above that frozen amount is called the “increment.” The amount of taxes on the increased value (or “increment”) is what is collected across the city for the urban renewal district to use for redevelopment projects.
While an urban renewal district is in effect, the city, county, and school districts continue to receive taxes based on the property value in the district when it was created. Any tax revenue on growth in property values above that “frozen base” is redirected to projects within the urban renewal district. For instance, in the Downtown District, this “frozen base” is about $31 million, and the City receives about $200,000 of taxes each year on the frozen base.
If the Downtown Urban Renewal District stopped its collection of tax increment revenue in 2023, the City’s General Fund would receive approximately 50% of what the Downtown District collects ($1.3 million per year as of FY22). Lane County would receive approximately 9% ($235,000 per year as of FY22). Approximately 34% ($880,000 per year as of FY22) would be collected on behalf of School District 4J, although it is important to note that the impact to 4J’s overall budget would be negative. This is due to State funding mechanisms for education and local properties that are in ‘compression’ related to State laws regarding property tax limits. If the Downtown Urban Renewal District ceases to collect tax increment revenue, the net impact to School District 4J would be an estimated decrease of $150,000 per year as of FY22.
Schools get their funds on a “per pupil basis” from the State School Fund. Because of the ways funds are given to schools, urban renewal will not result in the school district getting less funds over the course of the Urban Renewal Plan. There is a positive benefit to the Eugene School District 4J local option levy as a result of having urban renewal in the community. Chapter 9 of the Report accompanying the Plan contains additional technical information regarding the estimated financial impact to 4J.
The State of Oregon created the legislation that allows for urban renewal; districts are created by local municipalities. In Eugene, the Mayor and City Councilors act as the Urban Renewal Agency Board and can create or modify urban renewal districts and plans. The Urban Renewal Agency Board makes project and budget decisions.
Since the 2010 Plan Amendment, the Expenditure Review Panel does an annual review of the use of tax increment funds. The five member panel is selected by City Council and includes community members who will represent a variety of community perspectives, neighborhoods, and population demographics.
The City of Eugene’s Budget Committee reviews the Urban Renewal Agency’s proposed budget and provides recommendations to the City Council. The City Council, acting as the Agency Board, adopts the Urban Renewal Agency budget and reviews and approves any supplemental budgets during the year.
The City amended the Downtown Urban Renewal District Plan to add projects and to increase the spending limit in the Plan. The project types included in the Plan amendment are aimed at providing assistance to increase the supply of housing in the downtown core, encouraging private investment in downtown, and creating a safe and accessible downtown neighborhood where people want to live, work, visit, and play. The Agency Board has indicated they expect to direct a majority of the funds included in the new spending limit to support the creation of new housing in the downtown core. The actual project funding allocations will depend on future Agency Board budgetary action and project implementation.
Money will be spent on projects identified in the Urban Renewal Plan Amendment including:
The Agency Board has indicated they expect to direct a majority of the funds included in the new spending limit to support the creation of new housing in the downtown core. The actual project funding allocations will depend on future Agency Board budgetary action and project implementation.
Urban renewal districts must have a spending limit, also known as the “maximum indebtedness” amount. The Downtown District currently has a spending limit of $66 million. The Agency has nearly reached this limit, with the bulk of that funding spent on development of the Downtown Eugene Library, Lane Community College’s Downtown Campus on 10th Avenue, the Farmers Market Pavilion and Plaza, the downtown fiber network, and physical improvements to enhance downtown public safety.
The approved amendment includes a $50 million increase to the spending limit. Now that the Plan is amended, the Agency will continue to collect tax increment revenue within the Downtown Urban Renewal District. The amendment will not reduce the amount of tax revenue the overlapping taxing districts (such as the City, County, and Eugene 4J School District) are currently receiving from within the Downtown District boundary. Based on current financial projections, a $50 million spending limit increase would extend the life of District by an estimated 19 years. The 2023 Plan amendment does not include any boundary changes to the Downtown District.
The Agency Board voted to amend the Downtown Urban Renewal Plan on June 12, 2023. Staff is now working on developing implementation work plans for each of the elements included in the Plan amendment.
In addition to the Urban Renewal amendment, several City departments have been working to address the downtown priorities identified through public outreach in the fall of 2022:
In addition, the City completed its purchase of the former EWEB headquarters building in order to establish a new City Hall. Visit https://www.eugene-or.gov/2919/City-Hall for up to date information on the transition planning process.