When an Oregon City consultant recommended finding a good use for the “free money” in the city’s urban-renewal program, an angry citizen interrupted the meeting, waiving his tax bill in the air saying, “Hey, it’s not ‘free money,’ because I can show you the line item on my taxes right here.”

A few years later, that citizen was elected mayor, and now he’s back in the public sphere as a chief petitioner for a ballot measure that, if passed, would suffocate the city’s remaining urban-renewal district.

As mayor, John Williams advocated for the closure of the city’s first Hilltop Urban Renewal District, which eventually was shut in 2005. After leaving office, he supported a ballot measure that now requires public votes on the city’s urban-renewal projects.

Williams and his fellow petitioners began collecting signatures last month on a proposed city-charter amendment that would prohibit the use of tax-increment financing for purchasing land and for the development of privately owned land through public urban-renewal funds. If voters pass the measure, Oregon City would have to use any revenue from tax-increment finances only to retire the urban renewal agency’s existing debt. They plan to collect the required signatures in time for the November ballot.

“We are not carping about paying taxes to improve Oregon City,” Williams said. “We are talking about spending an inordinate amount of money on 10 percent of the city to the detriment of the other 90 percent. Instead of imposing more fees on the taxpayers, close urban renewal, and return the millions of dollars expended in the last 33 years to parks, fire, police, roads, schools, the places where we thought our tax money was supposed to go.”

However, the League of Oregon Cities in July called urban renewal “an invaluable tool for helping create economic vitality” in municipalities across the state. By upgrading blighted properties in a targeted area, the funding aims to encourage growth and private investment throughout the entire jurisdiction.

How urban renewal works

Current Mayor Dan Holladay, who served with Williams on the city commission between 1999 and 2002, was disappointed that the petitioners only are discussing the costs of urban renewal without discussing its potential benefits. Urban renewal funding works by “freezing” the tax levels for police, schools, etc., at the rate they had been receiving them from the urban-renewal area’s properties.

“That line item on the tax bill has to be there, because you have to account for it, but it doesn’t change the amount of taxes that anyone pays,” Holladay said. “Fighting urban renewal is, for Mr. Williams, sort of like a religion, because you can’t convince someone like that with facts.”

From the time the area is designated, any tax increases in that area go to the urban renewal fund for projects to decrease blight there. (In Oregon, everyone’s property taxes increase at a mostly fixed rate of 3 percent a year, barring approved levies or a major recession.) Oregon law gives urban-renewal agencies a wide latitude in dealing with areas that are considered blighted, because of “deterioration, faulty planning, inadequate or improper facilities, deleterious land use, or the existence of unsafe structures, or any combination of these factors, as detrimental to the safety, health or welfare of the community.”

Urban renewal funds can be used, according to the broadly written state law, for “acquisition, conservation, rehabilitation, redevelopment, clearance, replanning and preparation for rebuilding of these areas.” When an urban-renewal zone is closed, the excess tax amounts that were previously withheld from police, schools, etc., immediately start going to those agencies.

“The great majority of the urban-renewal money that we’ve spent has been in the Hilltop area that is now closed, and now Mr. Williams is essentially complaining about those greatly increased tax amounts going to schools and everything else,” Holladay said. “Who’s the largest employer in Oregon City? Benchmade Knife, and that wouldn’t have happened without urban renewal on the Hilltop. Easily, if you look at what those places are valued at now, there’s no question that urban renewal worked there.”

This newspaper asked the city for some hard numbers that might signal a worthwhile return on taxpayers’ urban-renewal investment. Oregon City Economic Development Manager Eric Underwood found that the Hilltop Urban Renewal District has increased property values by 1,100 percent over the life of the district from 1989 to 2005, and an estimated 500 jobs were created there.

What is the theory behind urban renewal? Urban-renewal activities signal to potential businesses and developers that Oregon City is ready to welcome their investments, Underwood said. In the case of Hilltop, those activities included extending Fir Street to link industrial areas with job-creating potential, addressing Beavercreek Road infrastructure with an eye to safety/congestion concerns, connecting previously hodgepodged properties through acquisition, and upgrading inadequate sewer facilities.

Underwood said that urban renewal on the Hilltop sent the message to local entrepreneurs that the area was open for business.

“The Downtown/North End district is on the way to achieving a similar economic revitalization in the historic center of Oregon City,” Underwood said.

Urban renewal is making Oregon City a more livable and sustainable place, Underwood said, by funding the Municipal Elevator’s holographic photos dedicated to the history of Oregon City, the McLoughlin Promenade’s restoration, planting nearly 700 new trees, and building bike routes and walking trails. Underwood sees various infrastructure improvements funded by urban renewal as having a direct impact on attracting businesses.

“Small business owners can be confident their employees and customers can access their location on high-quality roadways complete with the bike lanes, sidewalks and transit service they expect from a modern, multimodal city,” he said.

If developers take on the challenge of a historic building downtown, Underwood said they should consider partnering with the urban-renewal agency to give storefronts a facelift or adapt the building to “a higher or better use.” For example, Nebbiolo Wine Bar located downtown where Busch Furniture once was, received an urban renewal grant to adapt and restore an underused corner of the furniture store.

“Rehabilitating these aging buildings would not be cost-effective without urban renewal assistance,” Underwood said.

Uses and misuses

Urban renewal tactics like property acquisition can backfire. The city does not pay property taxes that it used to get when it purchases private property for urban renewal.

“Oregon City has lost tax income when buying property and buildings and remodeling one into a new City Hall,” Williams said.

Holladay agreed that the City Hall remodel was a poor use of urban renewal funds.

“Urban renewal is nothing more than a baseball bat or a .9mm and can be used for good or horrible harm, depending on who’s using them,” Holladay said. “With this measure, we’re going to consider killing any possibility of using this tool for good.”

If the City Commission proposes a major use of urban renewal, voters will get their say on the idea through a specific measure, following the 2012 success of Measure 3-407 to require votes on urban-renewal projects. Holladay wants to give voters an opportunity to have their say on a Rossman Landfill project they could lose if Williams’ proposal passes. Williams, however, sees the entire $40 million collected over 33 years of urban renewal as a “waste” of local taxes.

“All money was expended in the downtown/North End UR area, with no significant projects completed that would increase the taxable property values more than the ‘for certain’ 3 percent,” Williams said.

There’s a reason there’s truth in Williams’ assertions. Once improvements are made, Underwood said, it takes three years for the new value assessments to be recorded.

“Most of the activity in the (Downtown) Urban Renewal District began about three years ago once the programs were refined and fully functional,” he said. “I would suspect that we will see a greater increase in assessed values within the district once the new assessments are recorded. For instance, one property downtown that took advantage of both of our urban renewal programs (adaptive reuse and storefront) three years ago, has seen a 28 percent increase in property value.”

Holladay says the other reason taxable property values haven’t increased is because the main project is yet to be completed: Building a shopping area on what is now Rossman Landfill. Given its location next to Highway 213 and Interstate 205, Holladay argues it could be the most desirable retail location in Oregon, if the city funded the pilings that are necessary to build on the site.

“Doesn’t it make sense that we should all enjoy doing something else at that site?” Holladay asked. “From an environmental standpoint alone, we should cap it to prevent water from filtering down there. Once it’s developed, it’s probably going to be worth $300 million, and that’ll mean a pretty big number in tax revenues for schools and police for an area that’s worth basically nothing now.”

Williams says that if Rossman is worth developing, developers will find ways to fund building on the site without public assistance.

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