City Council, March 25th - Tax Incentives for 260 State

Council meets on Monday and for our interests here it's a light agenda.

260 State Street birds eye view
(Marion Car Park on left, and Scott's Cycle in middle)

The most significant item is an application to participate in the City's Multiple Unit Housing Tax Incentive Program, a ten year property tax abatement, for the development at 260 State Street on the corner of Commercial and State Streets. (See previous notes here.)

From the Staff Report:

The Program provides for a tax exemption only for the City’s tax levy, estimated to be $41,267 in the first full year....if the District’s Board consents to the tax exemption for a project under the Program, the project will be exempt from all local property taxes for the period authorized, estimated to be $165,069 in the first full year. The project is within the Riverfront-Downtown Urban Renewal Area, and all tax revenue generated by the project above the current assessed value would go to the Urban Renewal Area, and would not go to the City and other taxing districts.

Since 1976, six properties have been approved by Council for this Program.

Since the site has been vacant for so long, without any new development actually breaking ground, it is not implausible to argue that this kind of subsidy is in fact necessary to make the project happen. The Staff Report does not, however, attempt to make that positive case, to argue that the incentive is necessary. Instead, the Staff Report takes the program as it is, and merely argues that the project meets the requirements technically and administratively.

It would be nice to have from the City a more robust analysis about how effective this program has been. If only six developments have been approved in nearly 50 years, maybe the incentive actually is not big enough or is not configured right. If we want more new housing downtown, maybe we need to think about a different way of inducing it. (Strong Towns has lately been talking more about a land value tax, for example. See Henry George for the history of the idea.) [Late add: Remember the Opportunity Zones also, so in addition to this property tax abatement, there will be a break on capital gains!]

This is evidence that our inducements are not configured properly

And we should also think about the way in popular argument the incentives become opportunities to demonize developers. If we want new housing, who's going to build new housing if not developers? Since whatever combination of things we've tried hasn't generated the amount of new housing we want downtown, maybe these incentives aren't ridiculous give-aways. Because if they were ridiculous give-aways, if it was easy money and municipal graft, surely more projects would have participated in the con. The small number of projects is evidence that this particular program is not yet excessive.

Still, as the City weighs "sustainable services" and new revenue sources, the citizenry deserves a closer audit of these incentives to figure out what is effective and what is not.

Turning to the some of the specifics of the project, it is a sad comment on the current state of our housing market that rents on the dinky apartments at the moment project this way:

Monthly Rental rates for different types of units range from $850 - $1,200

People will cry out "But this is not affordable housing! We need affordable housing, not overpriced downtown cubicles."

But someone who rents one of these will no longer be competing to rent someplace else, and there is a cascading, filtering effect on the total housing supply. Increasing supply of this kind of housing has indirect affects on other kinds of housing, and is still a total benefit for the city. We should not lose sight of this.

Other objections are likely to be on the amount of car storage the project supplies, and on this the City should develop a stronger narrative about the self-negating action of parking for a city. Free parking and mandated off-street parking are popular, but they're bad!

From NEN's letter to the City on the Division St Trees

Other Matters

There's a weird transaction for some affordable housing. About a year ago the City as Urban Renewal Agency purchased a building 80% complete for $1.5 million, and is selling it at a loss for $0.5 million. But the City is selling it to itself via a shell company:

The Salem Housing Authority authorized the formation of Redwood Crossings LLC, an Oregon limited liability company, of which the SHA serves as the sole member and manager, to serve as owner of the property. The Salem Housing Authority, as sole member and manager, authorized Redwood Crossings, LLC to acquire the real property located at 4075 and 4107 Fisher Road NE. [link added to SHA agenda item]

So I guess this is a way to inject a subsidy for $1 million in URA funds? Once SHA has it, they'll finish the project:

SHA plans to complete the finish work and convert the building to 38 single-room occupancy units with one restroom for every two units.

SHA has received $1,500,000 in Oregon Housing and Community Services Department Local Innovation and Fast Track (LIFT) grant funding. SHA plans to commence renovation of the Property in summer 2019.

Maybe this is the best way to accomplish the goal for housing, but it's sure a complicated set of real estate transactions.

Before Candalaria was developed this great pair
of non-native Oaks must have lined the carriage way
for the Calaba House across the street near Pioneer Cemetery

There will probably be a lot of attention to the tree report. Other have remarked already on some of the inventory's findings - we have too many Maples, not enough young trees as a proportion of the total, and for the first time we have a swag at an estimated annual benefit of our trees, nearly $7 million. (As others comment on this, we'll update the post if necessary. At some point, too, we'll revisit those big Oaks. We have a "heritage tree" program, but we don't have a history of trees as they relate to development patterns. There must be other trees around the city that mark old roads and driveways that newer lot lines and public rights-of-way have erased.)

"Plant more trees!" at the top of the recommendations

The City looks to adopt the final decision on the apartment complex out on Wiltsey Road, with a set of modifications to retain more trees.

As we talk about trees and development, we should put parking into the conversation. Our mania for parking lots and car storage is an important ingredient in tree-cutting for new housing. If we reduced our parking requirements, it would be easier for developers to deploy blocks of housing around larger, existing trees. Parking has so many costs.

The Legislative positions are always interesting, but there doesn't appear to be anything of interest new in them this week.