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Urban renewal is getting a bad rap

Several candidates for mayor and city council have criticized the use of urban renewal funding in the Foothills area, saying that it would divert a significant amount of money away from the school district, and therefore should be done entirely with private money. A close look at the city’s Financial Feasibility Report and updated figures from the assistant city manager show that an urban renewal district in Foothills would not have a negative impact on either the Lake Oswego School District or the statewide school fund, and would actually be financially beneficial to LOSD.

Urban renewal works like this: When the city creates an urban renewal district (URD), the assessed value is “frozen” and the tax revenue based on that value continues to flow to the city, county and state, and from the state back to the school district. Bonds are sold to finance site preparation and basic infrastructure. Any increased tax revenues generated by new development within the URD go to pay off the bonds, rather than to the taxing districts.

Some candidates have said that if the district were developed entirely from private money, these additional taxes would go to the taxing districts, including LOSD. This is true, but developers can rarely afford to either acquire property or provide basic infrastructure. The city can sell bonds to do that, and pay them back with revenues from the development, in order to make the private investment worthwhile.

LOSD does benefit by the local option revenue generated in the Foothills development, which would not go to the state fund or to the URD. One hundred percent of local option funds would go straight to the school district. In addition, construction excise taxes paid by developers for capital improvements for schools are expected to amount to $1 million and would start flowing to LOSD as soon as construction begins.

But the biggest benefit for the school district is from additional students. More housing choices encourage movement in real estate, especially for seniors vacating family-sized homes that young families can move into. Young families are increasingly looking for smaller homes in close-in neighborhoods and may choose to live in Foothills, as they have in the Pearl District. Any new students provide LOSD with $6,000 each in state funds. For this reason, the school board has encouraged the city to pursue residential development in Foothills.

Urban renewal is an extremely valuable tool when used to leverage private capital to make significant improvements to a revenue generating area. The amount of private investment in Foothills is estimated to be $465 million, while the amount of public investment would be $50 million. So every public dollar leverages $9 in private money. Public money (the bond payments) is generated by the URD, which in essence pays for itself and buys basic infrastructure that private money usually can’t provide.

As an illustration of how much value a URD can create, the block which houses Lakeview Village has a real market value of $27.6 million, while the Wizer’s block next to it has a RMV of only $4.3 million.

When used appropriately, urban renewal can be a huge benefit to the entire city, including the school district.

Chris Ramey is a resident of Lake Oswego.