This page contains a single entry from the blog posted on February 17, 2006 2:43 AM. The previous post in this blog was Ginny take a ride. The next post in this blog is More "clean money," comin' up. Many more can be found on the main index page or by looking through the archives.

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Friday, February 17, 2006

More bad news for school funding

Here's something they probably didn't talk about at the school funding summit in Portland yesterday: The Oregon Tax Court says that cities and counties can't levy property taxes to help schools if the schools have already hit their property tax limit under wicked old Measure 5.

It appears this could conceivably invalidate some of the Multnomah County children's levy.

Portland City Commissioner Dan Saltzman, a chief architect of the children's levy, said he has not read the decision, but "it sounds like a decision we better check into."
No kiddin', big guy.

Comments (27)

I've heard of screwball rulings from our courts, but what is the Oregon Tax Court doing, "throwing out the Eugene levy"?

Levy is terrific comedic actor whose briliant performance as Mitch in A Mighty Wind is plain out unforgettable. Doesn't everyone remember where they were when Mitch and Mickey exchanged the most important kiss in music history?

This ruling must be appealed - as high up as it takes - even to the U.S. Supreme Court. The Eugene Levy must not be thrown out.

Saltzman's Children's Investment Fund is precisely one of those "pet projects" that voters a getting sick of. In this case the City was going to raise taxes to provide services that the County and school districts are supposed to provide. Why? For the children. And so Saltzman could claim credit for something that didn't have to do with big ticket engineering projects.

In other news, I noticed that the Oregonian editors are suggesting that a "one-year" cell phone sales tax can help save our schools. (More on that at the wino's blog.)

Good going, Tax Court. I for one hope they repatriate that budget-busting Levy to Canada where he came from. Do not stop at Second City, do not collect $200.

I trust Bill Bradbury to find plenty of dupes on the initiative petitions Big Levy will no doubt circulate that would welcome him back to the U.S.

I love Eugene Levy, but I hate Measure 5. I'm sick of my tax dollars keeping those freeloaders in Eastern Oregon feeding at the government trough.

Better start going after the $4 billion in Urban Renewal property not being taxed for schools.

Urban Renewal is simple.

1) Portland now has 12,000 acres within 11 Urban Renewal districts.

2) The total assessed value for the property within these districts is $7.5 Billion.

3) Property taxes from $3.5 Billion go to basic services: Schools, Parks,
Libraries, Police & Fire.

4) Property taxes from the other $4 Billion, now $62 million per year,
DO NOT. Instead they go to pay, with interest, the debt incurred by
spending on light rail and private development.

5) Schools get $5.00 per every $1000.00 of property value.
$4 BILLION in property value is NOT supporting schools.

6) With 70 Urban Renewal districts around the State the common school
fund and other struggling local government services lose hundreds of
millions every year.

Thanks Steve for one of the clearest descrptions of the true impact of Urban Renewal run amok that I've seen.

Wow, look at the numbers from Steve Schopp. Eye popping. So while great amounts of emotion and newspaper ink is spent lamenting the state of schools, the answer stands as a silent sentinel before our eyes every time we look at South Water Front. Where was the true committment to schools as this Urban Renewal District went forward?

Steve Schopp's statistics on urban renewal districts are distortive and ultimately meaningless because they do not take into account increases in property tax revenue that result from urban renewal, which is one of the justifications for creating URDs. Steve is just tallying the short-term losses and completing disregarding the long-term gains. Perhaps the long-term gains don't justify the short-term losses--or perhaps the do. What we need is a complete analysis. If the state or the city or the PDC has not provided such an analysis, that's to their discredit. It's also to Steve Schopp's discredit that he presents his partial analysis as the full truth.

What are the long term gains of giving the money away? Don't hold your breath, you might pass out waiting for either the state, the city, or PDC to do a complete analysis of anything. Does the tram(rim shot)ring a bell?????

No, it's not. If it weren't for people like him, all we'd have are the gross distortions and evasions that come from our local government.

Oregon law requires cities like Portland to do a complete annual analysis of the tax impacts of urban renewal. Portland has never once complied with this law.

M5 may limit property taxes for schools to $5 per $1000 in assessed value but that is not end of the story.

M50 was referred by the legislature several years later (in an attempt to correct Sizemore's M47). M50 restricted increases in valuation of property values to 3% per year for an assessing district.

The result has been that as property values increase well above 3% per year, the tax revenues have not followed. This was a disconnect from the M5 covenant (a 1.5% property tax limit on market value) with taxpayers. It worked because several taxing districts responded to M5 by radically increasing assessed value giving Sizemore the horror stories needed to pass M47. (Interestingly, Don McIntire publicly opposed both M47 and M50 as violations of the M5 covenant - but no one ever credits him for that).

M50 also opened the door to urban renewal (tif financing and abatements) that claim taxable values (as Steve Schopp accurately points out) and diverts them away from schools and local government functions before they can be assessed.

The counterargument from Richard is distortive. He would have us believe that these tax abated properties would not have grown in value if it wasn't for urban renewal intervention. But it is clear that they would have grown at least 3% per year though, because assessed value under M5/M50 is always trying to catch up with market value.

The housing market in Oregon could lose 10% of its value overnight and we would still see increases (averaging 3%) in assessed value for years afterward as it tries to catch up with surging home values.

Looks as the Taxpayers are doing for the Out of Control Spending by some of the Public Schools, as is done for a Stampeding Elephant and that to cut off their Stampeder.

The City of Porkland is certainly next on the list.

"Porkland", snicker snicker....

Am I the only one who fears that the entire structure is soooo screwed up that it would best be blown up and started from ground zero? What a mess.

OK, just to play devils advocate here in response to Jack's comments above... Perhaps the PDC hasn't prepared an evaluation because the parameters outlined by others to measure ROI are actually based on short term effects, rather than a more telling long-term analysis? In other words, it may be too soon to evaluate the effectiveness of funds for certain projects... Rome wasn't built in a day, nor were our historic and charasmatic neighborhoods here in Portland. We can debate the design flaws in our current resurgence, but everything ok/good/great had to start from scratch at one point. The point is we're talking about evaluating ROI based on both hard numbers AND results not easily measured. Maybe the PDC fears the requisite short-term evaluation won't accurately reflect what's felt on the ground.

I ask that before you smirk n' chortle over this idea, you at least accept it's fairly likely. I'm definitely no apologist and I think they need more oversight, but come on, it's not always a conspiracy.

Pancho and Jack:

My point in my objection to Steve Schopp's analysis is that it fails to take account of the possible long-term revenue benefits of urban renewal district spending. You (Jack) and he may be correct that the city and PDC make unsupported and exaggerated claims for the revenue benefits of urban renewal, but Steve's analysis assumes that there is absolutely NO long-term revenue benefit. Not just that there is not a NET long-term benefit, but there is no benefit that even partially offsets the short-term revenue loss. That, in my opinion, is a distortion of the reality of the situation. Steve's contention may be a somewhat understandable angry response to the city's failure to provide its own revenue analysis, but it doesn't present the truth and therefore doesn't clarify the overall picture.

You make a valid argument, Poncho, in pointing out that limitations on property tax increases make urban renewal districts less potentially remunerative to the city coffers than they were prior to measure 50. But while it's true that the value of land and existing buildings can only increase at a maximum of 3 percent per year, entirely new structures and improvements can be added to the property tax rolls. To give a simple example, urban renewal investments might encourage a private developer to build a condo tower on what had been a surface parking lot. The value of that property is thereby increased astronomically, and the property taxes paid will increase in proportion. And those taxes will be collected for general city services once the URD debt is paid off.

You can argue that, in specific instances, public investment wasn't needed to spur the private development and generate the greater tax revenues. Or you could argue that the amount of the public investment in a certain case doesn't produce a sufficient tax-revenue pay-off. But it's not accurate to assume, as Steve Schopp does repeatedly, that all public money spent on URDs is simply money diverted from city services, never to be recovered.

"Porkland" indeed.

Richard if I were you I would be writing the PDC and demand they provide a complete set of numbers, for once.

Those weren't "my statistics on urban renewal" I posted. They are the county tax assessors statistics. There is no distortion and they mean everything.
The increase in value and taxes due to UR is a mega distortion by the PDC and others which fails to consider development which would have occurred without massive public subsidies.

Take SoWa for example.
Much of that prime riverfront property would have been developed and producing far property tax revenue 15 years ago had the city itself not stopped it from happening.
The ultimate density would have been less but the debt, interest and loss to basic services for decades would not have occurred.
Furthermore the development would be more compatible to the area as prior planners knew when they required declining building heights as the river was approached.

Of course the PDC while they spend massive amounts of property taxes are claiming it's a good investment but they do no accounting to back it up. Heck $40 million plus in property taxes is going to Interstate Max over the next 25 years.
School money for light rail?

The "justifications for creating URDs" have been so concocted and abused it's like credit card abuse.
The real numbers the PDC hides indicates the break even period could be as much as 50 years down the road. Or more.
Is that short term?
""""Perhaps the long-term gains don't justify the short-term losses--or perhaps the do. What we need is a complete analysis.""""""""

The only reason we don't have that now is the PDC knows the numbers.

State law requires the PDC to provide yearly reports. They do not.

It is pure folly to assume the many indications of misrepresentation, lack of reports and porkland spending is a solid plan which someday pans out.

We have decades of UR under our belts and the writing is on the Cascade Station wall.

SoWa will be worse and there is more to come.

Steve: I'm in total agreement. The City is willing to count their wins, and ignore their losses.

The above record of UR property tax revenue "lost" by PDC fiat is clear and (in Steve I trust, everybody else should provide footnotes) accurate.

To suggest that similar development would not have happened (on WATERFRONT PROPERTY!) without PDC subsidy is like saying that Disneyland wouldn't have been developed without the visionary bureaucrats at the City of Anaheim. Uh-huh.

Another thing to remember is that the present value of $1 of property tax, to be collected 30 years from now, is 23 cents. A dollar of property tax that would otherwise be collected this year has a present value of $1.

Excellent point Jack.

Also I have seen a few people refer to the tax abatements as if Urban Renewal and tax abatements are one in the same.

They are not.
UR is diverting large amounts of property taxes from large swaths of property and using it to pay back borrowed spending on free infrastructure, buildings and/or land for private development under the notion that nothing would happen without it. Interest is incurred and decades needed to pay it off.

Although the PDC and others distort the truth by claiming "UR does not use general fund dollars"
it is worse. It takes property taxes before they get to general funds and take more to pay the interest.

Tax Abatements
The new development taxes are supposed to pay back the UR borrowing but along comes tax abatements and all of a sudden some of the new development doesn't start helping to pay back the borrowed money for 10 to 15 years.
Talk about double dipping.
The developer gets millions in free infrastructure, waved fees, property nearly given to them in some cases then is granted a tax exemption (abatement) for ten years.
Sweet deal.
Just not for the public or basic services.

The abatements prolong the time it takes to pay back the UR debt.

Thus we have the City name "Porkland!"

I, too, agree with Steve. However, on the subject of long-term payback...

About 20 years ago I did an analysis of rate of growth of total property values of all major Oregon cities with urban renewal districts compared to an equal number of cities without such districts over a five and ten year period. To my complete lack of surprise, the cities WITH urban renewal districts did not increase in property value as rapidly as the cities WITHOUT.

I would bet that comparison would look the same today - maybe worse.

What PDC and other apologists for UR don't tell you is that UR actually DESTROYS property value in neighboring areas. That is how they can get away with continually creating new UR districts - there is actual blight, caused by vacant lots and massive construction projects in UR districts, that spreads like a gooey blob of slime. The newly-renovated UR district is all bright and shiny, but it is often bordered by slime.

Other cities large and small suffer from this mess - Portland is just worse.

Iím going to step back from the technical analysis of the finances, and describe my belief that the citizens of Portland are being mistreated here in terms of personal motivation. I believe weíre all chasing our own individual rush Ė that intoxicating thing which gives us the glow when weíre done working. The publicís interests are best served by politicians who enjoy governing Ė in making the best use of the available funds to maximize the payoff for citizens. Often the results are barely newsworthy because the money is used for mundane things that truly need to be done. If you have leaders that get high on governing well, your city is in good shape.
We donít have that type of leadership here. Clearly the Portland City Council is mainly interested in the flashy, Trump-Jr. deals between private developers and government. That is the high they seek.
Where I think the brilliant analysts who frequent this site, go wrong, is that they assume this is just a competing vision of Portland that they disagree with. I think the best way to understand what is really happening is to assume every flashy wild project possible had already been built in Portland.
There would be nothing left but potholes to fix and schools to fund. I believe this group would be miserable because they are chasing a rush that they would no longer be able to get: The Trump Jr, wheeler-dealer image. If all that was left to them was good government, they would probably resign. So this isnít competing visions for a future Portland. That is all just talk. Stopping these people from their latest flashy project is best seen in terms of an intervention.

"""""Stopping these people from their latest flashy project is best seen in terms of an intervention.""""""

The Transit Mall better be stopped.

Soon after construction begins, this will very quickly become evident, to nearly everyone, what a monumental mistake it is.

At which point the "it's too late to turn back" card will be played again.

At the other end Clackamas is using I-205 light rail to justify borrowing and spending $23 million in UR to help expand Clackamas Town Center shopping Mall.

Insanity reigns supreme.

I have a news flash for the electeds.

We can no longer afford this insanity.

As the fiscal brick wall approaches brakes should be applied, not acceleration.

Wow, nice to be quoted by the great Steve Schopp. These are glory days in blogging. Iíd say the Transit Mall might be a huge mistake for the citizens and for Portland but not for the council. Neither was PGE Park. PGE Park was a great success for them because on the day they voted for it they felt a tremendous rush: ďMy God, Iím happening! Iím putting together deals with baseball stadiums!Ē You donít get that kind of high from repaving 39th.
The only thing wrong with the Transit Mall plan is that the buzz they got from dreaming it up doesnít last. The high never lasts. So theyíre out there right now trying to score their next big spending fix, chasing the rush of another wild project.

"""Wow, nice to be quoted by the great Steve Schopp"""

Steady there friend. I am but a nat, gadfly naysaying, "boo bird" of little or no significance.

The most troubling and egregious dynamic right now is TriMet's Fred Hansen using his agency to slam this illegitimate project through, in the face of broad opposition and a forest of red flags and fatal flaws.

NOT A SINGLE ELECTED should be finding any comfort or cover while this happens. They all know full well this has tremendous pitfalls.

If any board or commission OKs this fiscal suicide at this juncture it's membership should be well tainted by all who are watching.

The other aspect of what Jack wrote that today's dollar is worth 23 cents in the future, is the growing liablity that the city is incurring by diverting money from maintenance of its infrastructure to building more new infrastructure that starts to deperciate incurring more liability. This can be found on the City Website as required by laws that went into effect a couple of years ago.

It shows for example that Parks are depreciating at $4.7 million a year, what this translates to in real life is that the wading pools in the neighborhood parks are not being renewed yet Parks built two very expensive water features in teh Pearl. Our favorite WW reporter NJ, reported the Jamison Square water feature was $880,000 and the "recycling filtration system" on the artificial wetland in the probably comparable. How many wading pools in the neighborhoods for kids could we have upgraded to make the city more "family friendly" The overall picture is even worse. The City CFAR report on page 61 lists the city's total infrastructure assests and shows them about 1/2 way depreciated to the tune of a couple billion dollars in unmaintained liability. That is an unofficial lein on all the property owners of Portland to repair what is worn out someday that when things start to fail.

If you folks don't like urban renewal, you have the power to stop it. With the requisite number of petition signatures, you can refer revenue bonds to the ballot. Without the bonds to finance the freebies for developers, urban renewal would be dead. They can only use the heisted property tax dollars to make debt payments - that's the law. Without the ability to borrow, they'd have to terminate the urban renewal district early and let the property tax dollars flow back to the other taxing districts to pay for cops, teachers and jails. What a shame that would be.

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