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Relationship between Foothills, LO School District is complicated

Development in Foothills could mean money in the Lake Oswego School District's coffers in a few different ways.

Any new development would be required to pay the local option levy, as well as a construction excise tax that the school district adopted in 2010.

Brant Williams, the city economic and capital development director, attended Monday's school board meeting along with representatives from two of the city's contracted firms, which have been involved with initial planning for Foothills, and explained the economic impact the development of Foothills could have on the school district.

'Foothills can have short-term, medium-term and long-term benefits for the district,' said Williams.

Opponents to Foothills have worried that the formation of an urban renewal district in the northern part of Foothills will negatively impact the school district. A criticism of urban renewal is that it freezes the permanent tax rate for school districts and other districts and diverts it to development.

But the revenue has less impact on the local school district anyway because the state sets the amount that it will spend on K-12 education and disburses the money equally to school districts across the state. But, of course, if one urban renewal district is formed it still will have a small impact on the state budget.

To address those concerns the Legislature has created limits on urban renewal. First, urban renewal districts must give back to other taxing districts once its tax revenue reaches 10 percent of its indebtedness, said Nick Popenuk, an analyst from ECONorthwest.

Also, urban renewal districts all have a deadline that they must work within before the tax revenue they earn is returned back to the original taxing districts.

In the case of Foothills, the value in the north blocks is so low, that the school district earns very little in tax revenue from it, so when that money is diverted to the urban renewal area it will only have a small negative impact.

'The overall impact is slightly negative for the first 10-15 years and then it becomes positive,' said Popenuk.

Once the terms of the urban renewal area expire in 25 or 30 years, the state schools fund would likely get a big bump of millions of dollar, he said. The property value in Foothills is projected to grow from $11.2 million to $587.9 million over 30 years.

Additionally, within a few years, that initial loss would be offset by other gains, said Stuart Ketzler, the Lake Oswego School District financial director.

The local option levy is not frozen along with the permanent tax rate, so the school district would realize some immediate benefits once development occurs, which the plan guesses could be during the 2015-2016 fiscal year.

Additionally, the LOSD would earn money from its construction excise tax, which levies the tax based on square footage of new development. The Foothills financial feasibility study estimates that the school district would earn at least $129,000 per block of residential development and $2,650 for commercial, though an exact amount is dependant on any tax increases or the actual square footage of new buildings.

School districts gained the right to implement the tax during the 2007 legislative session and they can spend it on capital improvement, such as furniture, textbooks, tech and tools needed to teach.

School board members and administrators are also looking at Foothills as a potential home for new, young families that would help to boost lagging enrollment. New students would add revenue to the school district, as well. Currently, the state funds K-12 education at roughly $6,000 per student.

The district had taught 7,000 students from 1995-2001 but has been around 6,700 for the last few years. The loss of those students represents a revenue loss to the district of about $2.7 million over 10 years.

The Foothills Framework Plan currently estimates that the north end of the district could house 2,170 more residents at an average of 2.48 residents per household, so it is reasonable to expect a growth in student enrollment.

'We're planning to build the kind of housing that will attract those families,' said Christe White, a developer from Williams Dame and White.

The vision is to have a vibrant mixed-use community that passes the 'popsicle test.'

'The idea is that a kid could walk out and pick up a popsicle and get back home before it melts,' said White.

Foothills framework on hold

The Lake Oswego City Council is holding off adopting the Foothills framework plan until it has updated information about a proposed streetcar line, expected in early 2012. But members of citizen groups that helped craft the plan recently urged councilors to approve it.

It took more than a year for consultants from Williams, Dame and White, a citizen advisory group and oversight committee to finish the framework, considered a financially feasible plan for redeveloping Foothills as Lake Oswego's next neighborhood, with a mix of housing, retail and transit options.

The plan addresses infrastructure, floodplain and traffic problems, among other issues associated with building in the district. The document, in draft form, is still evolving as the public weighs in.

While consultants had to find a way to redevelop the district that was profitable for developers and landowners, citizen advisers were charged with addressing concerns of the entire community, committee member Maria Meneghin told the council Nov. 8

Now, she said, 'It is up to the city council to evaluate financial assumptions on their own merit and to put this project in context with other needs and desires that impact this community.'

Committee member Paden Prichard would still like to see a few aspects of the plan change, such as adjusting maximum building heights in part of the district, but he expressed confidence in the overall framework and in an associated financial feasibility study.

'Even though I have some reservations, I think it's extremely important for Lake Oswego to redevelop the Foothills area … and to partner with other agencies to bring the streetcar to Lake Oswego and eventually beyond,' he said.

Asked by councilor Jeff Gudman whether the committee would recommend the plan even if the financial analysis is reviewed and turns out to be negative, committee members said yes.

'I would say there are certain aspects like some zoning and code work that could go forward to prepare the ground for a scenario of less public and more private investment,' Meneghin said.

'I don't see how there could be a huge change,' Prichard said. 'This is such a tremendous opportunity for Lake Oswego, to shape our downtown and our neighborhoods for the future, that a few dollars one way or the other shouldn't be the deciding factor.'

Oversight committee member John Stirek of Trammell Crow spoke about the plan's viability from a developer's perspective.

'A developer has a bias as being pro-development, but for once I don't have any skin in this game,' he said. 'It's kind of a treat.'

He said Foothills is underutilized even though it's 'surrounded by the best demographics within the state, it's adjacent to the city core and part of the best school district in the state, and it's got a river venue.'

But it presents obstacles with topography, access, a power substation and a sewage treatment plant, not to mention a difficult political climate.

The difference between the Foothills plan and 'one-off projects' is certainty, Stirek said.

'You need an unappealable development plan that is supported by the politics within the city,' he said. 'If you have that, you will get institutional capital.'

He noted the streetcar - and anticipated outside funding - is essential for the city to pay for infrastructure needed to draw private investment for the area's redevelopment.

- Kara Hansen Murphey