"Urban renewal" money scheme starting to unravel
"Tax increment financing" is the basic premise on which all of Portland's "urban renewal" gyrations rest. Wonderful developments like SoWhat and the Pearl are supposed to cause property tax collections to rise, and after the mega-bonds that the city uses to pay for these projects are paid off, the rest of us taxpayers are supposed to enjoy the benefit. If the taxes don't roll in, the taxpayers get burned first, and then maybe the banks (depending on the terms of the bonds).
While the huge debts are outstanding, tax revenues from the "urban renewal" districts apparently also pay for the staff and other overhead at the Portland Development Commission, and some of the taxes apparently even make their way to the city's public housing system.
Well, folks, it appears that things are not going so well in "tax increment" land these days. On Friday, staffers at the city's housing bureau got this e-mail message from their director:
All ~Our friend Bill McDonald long ago rechristened this program as "tax excrement financing," and that label may be particularly apropos now. The bursting of the TIF bubble will no doubt have repercussions well beyond what's happening in the public housing operation. One wonders how the ratings on those hundreds of millions of dollars of bonds are going to hold up.As the budget process continues to unfold, I want to make you aware of
a reduction I have agreed to with respect to the tax increment funds
(TIF) portion of our FY 2010 – 11 budget. In concert with PDC
leadership, and in consultation with the PHB executive team, we will
reduce the amount of TIF we spend on direct and indirect staff costs
by $427,000, which is 10% of the amount of TIF we had budgeted for
those costs in the coming fiscal year. The steep decline in TIF that
PHB is facing in the coming few years tells me that a reduction
commensurate with that being taken by PDC is prudent and appropriate.Please note that no decisions have been made about how these
reductions will be achieved. Our budget team is hard at work
identifying a series of options that will include not filling existing
vacancies, reallocating staff to our non-TIF funds sources, and
realignment of certain functions. The executive team is open to
suggestions you may have about cost saving or realignment measures as
this analysis proceeds. I expect to actively follow the analysis of
options and be prepared to communicate some decisions about our
direction before April 30 when we are required to provide our next
budget submission to OMF and Council.
Meanwhile, of course, the spendthrifts on the City Council are getting ready to create another massive "urban renewal" district, sucking up a lot of Northwest Portland, Goose Hollow, and the Portland State environs. The whole program loses money on every block, but they're going to make it up in volume. And Williams, Edlen, Hoffman, Walsh, and their ilk will keep themselves busy building some more awful apartment bunkers that nobody wants to live in.
Insanity, they name is Portland.
Posted at 10:09 AM
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Comments (9)
What are worried about?
We'll just raise water rates another 18% to pay for PDC shortfalls.
Posted by Steve | March 8, 2010 1:10 PM
The study recommending the new district is authored by Abe Farkas, who negotiated the So What while working for PDC.
Posted by Bigswede | March 8, 2010 1:27 PM
As I've reported many times before,
in just one 5 year budget cycle for SoWa
the PDC took drew out $18 million borrowed TIF dollars for themselves under "Administration" and "Management" line items.
The PDC is corrupt, pure and simple.
The PDC hierarchy lives large by paying themselves large sums from borrowed money that requires property tax general fund revenue to then pay off over decades.
That's why they need to keep coming up with new ponzie schemes.
IMO the Port of Portland operates similarly.
This
http://www.youtube.com/watch?v=GMnY5FAKhl4
is why Portland is this
http://images.businessweek.com/ss/09/02/0226_miserable_cities/2.htm
Posted by Ben | March 8, 2010 1:56 PM
Too bad no one responsible will ever be held accountable, nor will any admission of error be made. It will get buried under all the feel-good bike and street car propaganda. It will be business as usual.
Posted by Brian | March 8, 2010 3:18 PM
The beauty of the TIF deal is that Measure 50 guarantees a 3% increase in assessed value every year. Problem is, nobody ever thought we would hit what we are seeing now. Market value is dropping below assessed value for thousands of properties and if savvy owners appeal tax collections will fall.
Posted by John | March 8, 2010 3:21 PM
At the last SoWhat URAC meeting the PDC staff gave a glowing picture of the TIF revenues projected to be coming in the next few years. The URAC just sat there with a smile on their faces knowing the real truth.
But then some of them may believe it. Maybe they really believe Sam when he still promises 10,000 biotech jobs are coming soon and Vestas Headquarters will soon rise from the ground in SoWhat.
After the PDC staff gave their rosy TIF picture, then four individuals spoke of how SoWhat's $5 Million of TIF dollars in the next three year budget as seed money for biotech makes since. There was not one "What????".
The problem with Portland begins right at the ground level of citizen committees and works it way up through the bureaucracy.
Posted by Lee | March 8, 2010 5:23 PM
I want to clarify that the "four individuals" that spoke were from biotech industry trade groups.
Posted by Lee | March 8, 2010 5:26 PM
When you know you are headed for bankruptcy, one strategy is to accumulate debt, as suggested in a unanimous SCOTUS decision today, described in the NYT:
"In a decision Monday, the court interpreted a 2005 bankruptcy law narrowly to avoid a First Amendment challenge. The law forbids some professionals from advising their clients 'to incur more debt in contemplation of' a bankruptcy filing.
The first issue in the case was whether the law applied to lawyers, and the court, in an opinion by Justice Sonia Sotomayor, said it did. The second, harder question was whether the law violated the First Amendment in forbidding lawyers from giving some kinds of advice.
No one disputed that lawyers could be forbidden from counseling their clients to abuse the bankruptcy system by piling on debt right before filing. But there are also sensible reasons to take on additional debt in the face of possible bankruptcy.
Justice Sotomayor wrote that the law, properly read, prohibited lawyers 'only from advising a debtor to incur more debt because the debtor is filing for bankruptcy, rather than for a valid purpose.'
Advice about refinancing a mortgage, buying a reliable car to get to work and paying medical bills are all outside the scope of the law, Justice Sotomayor said.
The ruling in the case, Milavetz, Gallop & Milavetz v. United States, No. 08-1119, was unanimous, though Justices Antonin Scalia and Clarence Thomas did not join in all of Justice Sotomayor’s reasoning."
Can anyone doubt that the PDC's urban renewal projects do not have a "valid purpose?"
Posted by Gardiner Menefree | March 8, 2010 6:28 PM
Randall O'Toole from the ever-contentious CATO institute wrote an amazing poilcy analysis for 2007. At the crux, his take in TIFs and the light-rail mafia. If you haven't read this do, he's an entertaining rider, and massively well researched.
Here is a link to a .PDF I maintain, but I'm sure you can find it anywhere:
http://sites.google.com/site/policyanalysisotoole/
Posted by Vance Longwell | March 9, 2010 6:34 AM