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Developers can delay paying traffic tax

Clarification of city code allows for builders to pay transportation fee over 10 years

Businesses and developers thinking of building in Forest Grove got a bit of good news last week when city councilors signed off on a plan to allow financing of some big county fees.

Three years ago, voters overwhelmingly approved a new transportation development tax to replace a traffic impact fee (known as the TIF) which no longer comported with state law.

The new tax, based on the size and use of the new buildings, is designed to recoup only about 28 percent of the costs associated with new development. But the fees are still steep, in some cases reaching up to $300,000.

In an effort to soften that financial blow, the language of the new tax included an option for developers to pay the cost over the course of up to 10 years. In return, the jurisdiction in which the developer is building, either Washington County or a city, attaches a lien to the property and collects interest.

Rule in place throughout county

Since the passage of the law, the delayed payments - known as Bancrofting - have been used by developers throughout the county to build today and manage their cash flow, said Steven Roberts, a spokesman for the county's land use and transportation department.

'We have a fairly significant proportion of people who are going to buy and hold a property, if they're building and they intend to own the building long term, then Bancrofting is a pretty beneficial option for them to manage cashflow over a certain amount of time,' Roberts said.

But no developers have asked to utilize the financing option in Forest Grove. Until last week, the city didn't have any language on the books to clearly enable it. Now it does.

While the payment options will be available to any new development in Forest Grove - residential, commercial and industrial - it is of most important to commercial projects, which get hit hardest by the new tax.

City not out money

Jeff King, the city's economic development director, explained that because the taxes are collected by the city and kept here for transportation projects, the city isn't out any money. And, he said, the city is able to get first in line for repayment should a development not pan out.

Stevens said multiple developers have utilized the payment plan in Washington County, both under the new TDT and under the old TIF. And the county hasn't seen a massive impact in its finances because of it, even during the economic downturn.

'Really the default risk is very low,' Stevens said.

The lien on the property puts the county or city near the top of the list for collection during a bankruptcy. And during foreclosure proceedings any bank that repossesses the property with a lien will take the lien on as well.

Councilor Elena Uhing commended King for bringing the proposal forward. 'This is a good opportunity for us to open the city up to larger businesses,' she said.