Note to builders: Local school districts want their share

Local school districts will welcome the new year with construction excise taxes

The day has come for builders to pay for their effect on local schools. But with residential development slowing down to a crawl, how much money can local school districts really expect to gain from a construction excise tax?

Beginning next year, residential and commercial builders will see a healthy hike in their building fees.

Senate Bill 1036, approved by legislators in May, gave school districts the go-ahead to impose a tax of up to $1 per square foot on new home construction and 50 cents per square foot of commercial or industrial construction with a cap of $25,000.

So local school districts are jumping into the new year with a vision of builders finally paying for their impact on schools. Already four school districts - Tigard-Tualatin, Sherwood, Lake Oswego and West Linn-Wilsonville - have approached the city of Tualatin with Intergovernmental agreements for the construction excise taxes. The IGAs, approved by the Tualatin City Council last week, ask that the city take on the responsibility of charging the tax to builders when they apply for building permits within the city.

In Tigard, city officials are working with the Beaverton School District to iron out details on how the tax would be collected and how much the district would be charged in order to help cover credit card transaction fees.

But just when things started to look up for school districts struggling to find capital funding, the forecast for local residential development began dwindling.

The new construction excise taxes were expected to generate about $60 million for school districts statewide. Broken up among the districts, the number actually seems pretty low.

For the Tigard-Tualatin School District, which expects to gain about $800,000 from the tax, the amount of money would barely put a dent in the cost of buying property for a new school.

But Tigard-Tualatin's estimates were based on about 400 single-family or multiple-family building permits in one year for the cities of Tigard, Tualatin, Durham and King City and Washington County.

But from January to October of this year, the jurisdictions have only handed out about 270 permits in those areas.

And according to local building officials, the numbers are expected to get even smaller next year.

'There's just not much in residential,' said Tualatin Building Official John Stelzenmueller. 'There's a few little builders still plugging away at things. But as of right now, (Tualatin) only has five new homes being built and two to three remodels… There's a lot of houses sitting on the market, and it has left its effect.'

In 2006, Tualatin issued 101 single-family building permits. As of October, the city has only issued 46 single-family building permits.

But commercial development is predicted to soar this year. While no big projects are being proposed in Tigard, officials there are gearing up for what is expected to be a good year for large commercial contracts.

In Tualatin, big names like the animation studio Laika Inc., Providence Bridgeport Health Center and Trammel Crow Residential's proposed 550-unit multifamily, mixed-use structure near Bridgeport Village are almost promising a big hike in commercial development in Tualatin next year.

Nevertheless, building officials statewide have been a little concerned about the new excise taxes on builders. Tigard Building Official Brian Blalock noted that SB 1036 didn't provide a lot of rules around the new tax.

'Building divisions have been scrambling to do it right,' Blalock said.

Proceeds raised by construction excise taxes for school districts can be used for facility construction, reconstruction or improvements, acquiring or installing equipment, funding for services needed to acquire, install or construct capital improvements, and capital project debt service and issuance costs.

The Tigard-Tualatin School District is following three steps in order to implement the construction excise tax. On Thursday, the School Board approved a long-term facility plan. The district has approached six government agencies, including Tigard, Tualatin, Durham, King City and Washington and Clackamas counties, with intergovernmental agreements.

The last step is for the board to adopt a resolution imposing the tax. Superintendent Rob Saxton could not give a timeline for the implementation of the new tax.