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Friday, May 21, 2010

How "urban renewal" kills off livability

A reader who shares our dim view of "urban renewal" and "tax excrement increment financing" has put together a pretty good representation of what we're complaining about. It shows quite clearly why diverting property taxes to pay for condo bunkers and other toys winds up breaking a city or nuking its quality of life:

Comments (31)

Very good description. Nice. Now let's just distribute this to every Portlander.

You highlight all the theoretical negatives and ignore the theoretical positives.

Urban renewal districts raise money by borrowing against future growth in property taxes. Cities then use the borrowed money to pay for capital improvements, which spur more development. The incremental increase the district's property taxes repays the loan. When the urban renewal district expires, a well-run project returns a higher property tax base to the tax rolls.

It is one tool that cities can use to attract and leverage private dollars to build up stagnant or depressed areas.

Urban renewal districts raise money by borrowing against future growth in property taxes.

*Theoretical* future growth. Nationwide, that growth in URAs fails to occur more often than it materializes.

Cities then use the borrowed money to pay for capital improvements, which spur more development.

See above. Also theoretical. It's been shown--repeatedly--that attempting to manipulate long-term growth by using URAs rarely works. What most often happens is this: not much.

The incremental increase the district's property taxes repays the loan.

Except when they don't, as is often the case in Portland. And if that's true, and everything else you've posited is true, why continue a URA beyond that time, like PDX often does?

When the urban renewal district expires, a well-run project returns a higher property tax base to the tax rolls.

See above. One of the key issues is--URAs in Portland are *rarely* allowed to expire. Why?

It is one tool that cities can use to attract and leverage private dollars to build up stagnant or depressed areas.

Then why is Alberta being considered a URA candidate? There's nothing "stagnant" or "depressed" about it.

The dirty little secret that the insiders laugh about quietly is that, with Measure 50 in place, the assessed value goes up every year with or without the public "investments" virtually guaranteeing the URA income stream.

If they were even sort of fair about this, the automatic 3% increases would be exempt from the URA scheme and the district would only receive the increase above that amount.

Joey, I think you're missing the point here. Sure, it can be argued that TIF borrowing for capital improvements spurs more development and that future development begets higher taxes in the future.

The problem is that this is at best a zero-sum game because Cities are borrowing against these projected future tax increases to pay for the capital improvements to begin with.

Because the City borrows against this "increment", the amount on the current tax rolls stays constant to pay for future services -- all while the costs of those services will surely increase, which creates an ongoing, ever increasing future deficit.

Psssst... rumor floating is that Block 49 project is back on!

Joey, unfortunately it is "one tool cities can use" which lasts 20 years or more, and tends to get extended over and over again as long as the city can get away with it.

With urban renewal, they tend to point to a few "successes" and ignore mixed results or negative results in most Urban Renewal areas, like on MLK, or Lents, or Gateway. And then the fact that Urban Renewal isn't accomplishing much there is used as an excuse to extend the district because "obviously it needs more time."

Nonsense. I'm one citizen who would prefer that this money goes to the schools and core city and county services where it always belonged.

I wonder if even the City commissioners understand what this chart represents. That pink area is lost revenues for services that they have to make up for somehow. Their tax base is frozen too. No wonder they squeeze water, sewer, and parking fees for all they're worth.

I don't object to URA in principle, provided that cities were willing to actually link the tax diversion to the improvements ...

Saw a suggestion recently that made a lot of sense: You deduct the general property value appreciation from the appreciation in the URA before diverting the taxes.

So, if the city as a whole experiences 5% property value increases, then the URA only diverts taxes if property values in the URA increase by more than 5%; if they appreciate 10%, then you take 5% off and divert the taxes on only that additional 5% appreciation.

In other words, the bonds aren't paid from general property tax appreciation -- they're only paid from the increased tax revenue that's at least plausibly the result of the URA investments.


Is that tired UR rhetoric supposed to be pursuasive?
It's not.

You are either misinformed about the actual implementation of TIF or you are deliberately attempting to obfuscate the issue back into the purposeful complexity enjoyed by UR proponents.

The negatives are not "theoretical".
They are absolute. As certain and realized as every UR district in the state draining away from the State common school fund. Now at $68 MILLION per year. That's enough for 800 teachers.
Public safety and every other basic service budgets are diminished as well. That is not "theoretical." It's math and the truth.

I wonder how all of our public education champions will feel when they learn that State school money is paying for the Tram and SoWa debackle?
And it's getting worse as you read this.

Urban renewal districts do not "raise money". They borrow against future general fund operating revenue by diverting all of the routine yearly tax increases which would otherwise be going to help offset the continuous rising cost of basic services.
The UR districts themselves are always large areas sweeping up countless acres of existing development in order to enable greater borrowing from diverting greater amounts from basic services.

Cities mislead the public as they borrow huge sums then take millions from basic services for debt service. With millions more needed for interest.

Even more disingenuous and offensive is the use of those borrowed millions on shady schemes such as SoWa and the Tram/biotech folly. That's just one example.
The list of reckless misappropriations is long with each and every one of them requiring the taxpayers to then replace for basic services what is taken.
Just like the graph shows. UR requires higher or new fees and taxes to replace the diverted revenue.

That is never "highlighted" in any Urban Renewal Presentation.

Like all of the UR pitch, your rhetoric about UR improvements "spurring more development" is nothing but "theoretical". Essentially NO such spurring has been realized at all.

In FACT just the opposite has occurred with the only thing spurred is more good tax money following the bad forever pursuing what is stuck in theory.

It's an addictive municipal ponzi scheme that neither functions as or arrives where you falsely claim.

Cities most often extend, expand, and add new UR districts resulting the perpetual increasing of losses to basic service revenue.

The theory of greater revenue due to UR investment is what many would call the fraud of TIF.

When an urban renewal district does ever expire, it's not because of a "well-run project". That PR verbiage is laughable.
The return of a higher property tax base to the tax rolls is not even a retirement of the harm done. It takes many years more to make up for the lost revenue with the actual UR attributed growth in revenue always embellished and co-mingled with natural growth which would have occurred anyway.
Quite often the city itself obstructs the private sector growth in the same area they identify as needing UR subsidy.
As example, SoWa and Cascade Station were both obstructed by restrictive city plans costing years of property tax revenue never occur.

But while the UR proponents pitch their ponzi scheme "theories" they never mention that either.

The real secret of TIF is it's use to attract, leverage and enable endless public subsidies while "theoretically" attempting to build up stagnant or depressed areas.
Examples of this perpetual chase with tax dollars has been witnessed all around the region, the state and country. Everywhere TIF is used.
And everywhere one looks millions of tax dollars ended up enriching the private part of the those public-private partnerships UR pays for.

Urban Renewal-Tax Increment Financing is a scam, pure and simple.
I'm glad this graph and public awareness is shutting it down.
Before 100s of millions in basic service revenue gets diverted to pay for Milwaukie Light Rail.

If any of these phony pitch men for UR think their plans are so worthy, let the public vote on a new tax to pay for the "investment".

That way the public can call BS on the "theoretical" arguments and leave our tax dollars funding the important government services we actually want.

Of course Joey may be out of a job. I'll cry me a theoretical river.

Note to Mary, or Jessie, or any other city candidate: Put Ben on your staff as senior advisor!

I appreciate that people don't like how TIF has been used in Portland, but I stand by my description of the tool.

It would seem a separate discussion to argue whether holding tax revenue flat from from a defined (typically small) portion of a City necessitates running budgets in the red. If other parts of the city are seeing gains, then that's not necessarily the case.

Ben - I'm sorry that a simple definition of the term "tax increment financing" can incite you to be acerbic. How do you ever have constructive conversation with people who you disagree with?

The chart is right on.

Even if you look at the urban renewal area alone, the cost of basic services continues to rise, sometimes steeply, and the revenue available to pay for those services remains flat because huge chunks of principal and interest must go out to Bank of America, Goldman Sachs, etc.

and the revenue available to pay for those services remains flat because huge chunks of principal and interest must go out to Bank of America, Goldman Sachs, etc. to pay for all the goodies given to the condo weasels. New streets, toy trains, 12' wide sidewalks with scrawny trees, bike lanes, new water & sewer lines new (concrete) city parks and narrow streets for those foolish enough to want to get somewhere conveniently, cheaply and fast by car.



There's a heated battle going on around here as people get wise to the ongoing shenanigans behind the severe fiscal mess we are in.

I've seen the same misrepresentation of UR/TIF used to get approval of many UR schemes. I've followed many of them in many locales.

And it isn't simply that some people don't like it as you suggest.

Your description of the "tool" is false.

Not because YOU disagree with ME. But because you are misrepresenting how UR/TIF works and what it does.

Sure, you're echoing what TIF is 'said to do' by those seeking approval. Your parroting is spot on.
But it's a deceitful presentation that gives people a false impression.

You also attempt to diminish the severity of the abuse of TIF and the enormous problem it represents.

Your "holding tax revenue flat from from a defined (typically small) portion of a City" is more misrepresentation.

It is always the case that UR draws from budgets and diminishes the routine yearly revenue gains. Gains that are needed to help keep pace with rising costs of basic services.
Unfortunately those normal 4-5% yearly up ticks in property tax revenue often fall short of the yearly increasing costs. That triggers that familiar scramble and battle to fill budget holes.

You said "Typically small portion of the city" ?????

When that normal yearly 4-5% increase is diverted, for decades, from the 12,000 acres of the City of Portland now in UR districts the holes get BIG.

Is 12,000 acres small?

The diverted "Increment" from that 12,000 acres is over $6 Billion in assessed property value with all of it's property tax revenue diverted to retire UR debt. Along with many millions in interest.

I do want this to be "constructive conversation".

More and more people are sick of the lies and massive misappropriations.

When they discover so much of it came from the services they thought their taxes were going for they get pretty darned acerbic.

This is the work of that consulting company, right? Who did they prepare this for? Is there actually a gathering mainstream opposition to this madness? Now that would be a welcome development!

The other half of the tax-increment financing equation that no one seems to have mentioned much yet is that the projects Portland other cities build with the money obtained from tax-financed bonds are extremely high risk in almost all cases. Condo towers, mixed-use mid-rise apartments, streetcars; almost all of the projects have little or no market demand (or are experiencing deflating bubble e.g. the condo market). So in many cases the "future growth" is non-existent or inflated value that will simply burst sooner or later (often very soon). Presumably those that promote these kinds of developments are hopeful that the demand will quickly grow, but I think Portland (and many other places) are starting to learn the cold hard truth that it will not, at least not enough to even come close to repaying the massive amounts of debt.

I'm suspicious. So I wonder if you are a PDC or other benefactor of Urban Renewal seeking to identify the opposition that is crashing the Urban Renewal Party.
Is this "the work of that consulting company"?
I don't know of any consulting companies who seek to end the use of Tax Increment Financing.
Quite the contrary they all seek to make money off of it.
Who was this prepared for?
It was prepared for taxpayers, voters, providers of basic government services and the millions of people who rely upon them.
There is certainly a gathering mainstream opposition to this madness? Wanna join?

Joey do you work for PDC, or do you just drink the Kool-aid in you spare time?
TIF is one of the biggest rip off scams ever!

The problem with Urban Renewal isn't the tool itself, it is the people that use the tool improperly. URAs should expire and future tax growth projections should remain conservative. The borrowing against future earnings should be a smaller portion of the resources, and actual TIF collected should be a higher portion of the resources (that means smaller URA budgets). City Council should not look to TIF as a replacement for basic services. A percentage of the increment each year should be diverted to basic services (i.e. maybe up to 5%) and the rest left for traditional URA investments. City Council should not view TIF as their little slush fund for special projects, PDC should have more focused investments, and OMF should rein in the projections and bonding authority. The tool can be a good one...it can even be a great one. But, it will suck as long as idiots are in control of it.

Ben: "You also attempt to diminish the severity of the abuse of TIF and the enormous problem it represents."

Really? That's just silly. Where have I said anything about the actual use of TIF, by Portland or any other jurisdiction? The repeated "accusations" makes you sound obsessed and paranoid, in addition to acerbic.

If you'd bothered to ask my opinion of how TIF has been used in Portland, I'd say it's been grossly misappropriated. I think the SoWhat and Tram that folks are so obsessed, were huge wastes of taxpayer money. If the projects were economically viable, far less public money could've/should've been used to leverage private funds.

All the accusations about drinking "kool aid" and "parroting" are par for the course around here, so I guess I shouldn't be surprised that different ideas aren't welcome.

Ben, what ideas and policies do you offer for urban economic development? Lower taxes and less regulation? More subsidized parking?

I've checked on this blog a few times per week for 6-7 years. I rarely comment anymore. It's disappointing to see the comments become more and more an echo chamber for a reactionary, Tea-Partyesque mentaility, where demonizing planners and city workers is encouraged and saying NO angrily is a good substitute for ideas and policy.

No Tea-Party person am I, but after what I have witnessed on the national and local scene, we need more "involvement" by the citizens. Very handy for some then to throw those who object to plans into a tea party category.

Why shouldn't those of us who follow what is going on here question the planning that lessons our quality of life? Why shouldn't we object to the city that works us over?

When a citizen does try to participate, one gets shot down pretty quickly or cannot even get into a discussion of options in a "controlled workshop" arena or at a city council hearing.

The process is quite well "set" here, almost like cement, and it is hard to wiggle around in cement with options. Many citizens who experience the "cement setting and outcome" will not want to participate again. I can understand why some would be relieved to get out and reluctant to set their foot in it again. That leads to what we just had here, voter apathy.

Those of us who can see the "set up" and "speak out" about it should not automatically be thrown into a tea party category.


I specifically quoted you and responded to your misrepresentations.

They need no further explanations.

If you want to continue pitching UR as useful tool have at it.

The PDC staff put together the North Macadam (SoWa-Tram) plan with severely low balled project estimates, inflated revenue projections and many misrepresented promises of a biotech cluster, affordable & low income housing and even what it would look like.

They reported to the Commission and Council that the plan was "feasible" and recommended approval.

Every single red flag and fatal flaw by critics has come to fruition.

That pattern has been repeated over and over again.

So when you come here to parrot the PDC "theoretical" vision of how UR works you shouldn't be surprised that isn't received well.

Or that you are soundly debunked.

Your minor admission of "SoWhat and Tram-were huge wastes of taxpayer money" fails to make up for your earlier obfuscation.

Any of your "different ideas" producing additional suggestions about how UR can theoretically be "economically viable" and "leverage private funds" will not accomplish anything.

UR/TIF should be abolished entirely. It is a ponzi scheme that relies upon public deceit, does not perform as "theorized", demands taxpayers fund the replacement revenue and uses the massive debt to fund unworthy projects voters would never approve paying for.

Much of the activity and expense involved in UR should not even be the job of government, period.

The worst of it is motivated by political agendas seeking to shape our communities towards a vision which devours huge sums under false pretenses and remains stuck as nothing but a perpetual pursuit.

The notion of "urban economic development" is now a process of spending on chaos.

And no matter how horrific the outcomes, (e.g. WES, SoWa, The Round, Cascade Station) no one ever faces any consequences.

Joey, your final deflecting thoughts about

"an echo chamber for a reactionary, Tea-Partyesque mentaility, where demonizing planners and city workers is encouraged and saying NO angrily is a good substitute for ideas and policy"

is just too rich.

That's quite a productive rebuttal. I guess UR/TIF is swell after all.

Joey comments: . . It is one tool that cities can use to attract and leverage private dollars to build up stagnant or depressed areas. .

Around the country UR is no longer just used for building up stagnant or depressed areas, but is being used for redevelopment.

Scott Bullock is a Senior Attorney with the Institute for Justice, a civil-liberties law firm. Interview:
. . MJ.com: How has the use of eminent domain changed over the years?
SB: It was clearly designed originally to be used for true public works projects -- if you had property that was going to be owned or used by the public, like a courthouse, or a road where you needed a long strip of property, and one or two people wouldn’t sell. That was largely how the power was used from the time of the founding up until the 1800s. There was a slight expansion of eminent domain in the 1800s to include things like railroads and utility lines and things like that whereby the property was going to be owned by a private [entity] like a railroad or a utility company, but they were really the equivalent of public types of facilities. In the 20th century the power was expanded even further to include the condemnation of so-called blighted areas and urban renewal projects.

Today, eminent domain is being used, like in the New London, Connecticut case we have before the Supreme Court, purely for the generation of more tax revenue -- purely for economic development and for private business development. This is an incredible expansion of eminent domain power. What we are asking the Supreme Court to do is impose clear limits on eminent domain authority and to recognize that mere business development cannot be considered a public use under the constitution because of the supposed trickle-down effects in the form of jobs and taxes that those businesses might create. . .

I do not know how much eminent domain has been used in our area, but have noted that those who want to develop can call almost anything blight.

Excellent graphic. I am continually surprised that most people do not understand urban renewal financing. The developers not Portlanders benefit financially.

Joey: It's disappointing to see the comments become more and more an echo chamber for a reactionary, Tea-Partyesque mentaility, where demonizing planners and city workers is encouraged
JK: Yea, the planners have done a good job of driving out family wage jobs, pricing out low income people and making housing un affordable. Most of all they have done a stellar job of shoveling millions of tax dollars to big political campaign donors.

Joey: and saying NO angrily is a good substitute for ideas and policy.
JK: Do you have a problem with saying no to government waste on things like the streetcar, Pearl redevelopment, tax abated million dollar condos, SoWhat tax payed millionaire towers and (rim shot) light rail that carries mostly upper income people while cutting buses that serve mostly lower income, tranist dependent, people?

JK: What do you call 50 un-employed city planners?
A good start!

BTW, Joey, which government agency, developer or consulting company do you work for?


Joey writes:
...where demonizing planners and city workers is encouraged and saying NO angrily is a good substitute for ideas and policy.

You're not listening. Commenters (and Jack, perhaps) are saying URAs and TIFs are not a good substitute for policy. This blog isn't alone in that sentiment; both "tools" have been roundly criticized across the country and in the UK, by planners and government offcials themselves.

And, if you're the friend of urban planning you obviously appear to be, you'd know that--and that both "tools" are very controversial.

You'd also know that both "tools" have made several local folks fairly wealthy--but have rarely done much for the long-term benefit of the local economic base. In fact, man say they've done the opposite, by robbing the future to claim a present "benefit" that never seems to really benefit the larger community.

Joey; The "tools" you describe force people out of their homes, take away their jobs, flatten their houses and totally destroy vibrant neighborhoods, for the financial gain of mega developers. In the process the tax base that supported city services for the entire city are virtually eliminated for 20 or more years!
And that is "planning" ???? NOT!

Joey started off up thread with the ridiculous idea that this graph should include some of the TIF proponent theories.

Joey said, "You highlight all the theoretical negatives and ignore the theoretical positives".

How funny and hypocritical that is, since not a single presentation by any Urban Renewal planner has ever included what my graph does.
Which is precisely what triggered this graph being created in the first place.
It was the realization that every Urban Renewal plan, as presented, excluded the rising cost of basic services and how services would be funded while TIF diverted millions over decades.

The reason planners and city officials don't include what my graph presents is because these negatives are not "theoretical negatives". They are very real problems.

So now we have the shoe on the other foot.
The TIF charlatans struggling to inject their bogus theories into our graphs of reality instead of us trying to force planners to include real impacts into their theoretical graphs.

Thank you for the graph.

The remarkable growth and scope of UR activity in California is worth investigating, as it long ago became the poster child for UR efforts adopted in other states. I am providing 2 links to an excellent analysis of UR and especially TIF -- the first a summary, the second the whole enchilada for those interested. Proposed reforms mentioned deserve close attention.



The power of the urban renewal "industrial complex" is great. Serious efforts were made to bury this report. These, thankfully, failed.

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