Portland City Council scraps cap relating to transit-oriented development
Now projects such as Killingsworth Station and One:19 may qualify for tax abatements
Daily Journal of Commerce
POSTED: 04:00 AM PST Thursday, January 15, 2009
BY TYLER GRAF
The City Council on Wednesday passed an ordinance that eliminated a previous one that had capped, at $20 million, transit-oriented development projects seeking tax abatements.
The value of the land, however, will continue to be taxed. This will mitigate city concerns over a loss of tax revenue.
“(The cap) has been a bit problematic,” said Portland Planner Barbara Sack.
The problem has been in maintaining consistency. In some years, no developers applied for the abatement, and in other years, two developers applied. An annual cap doesn’t work, Sack said.
Furthermore, when the cap was instituted in 2006, most transit-oriented development was taking place within the corners of the city, such as the Gateway area in Southeast Portland. These developments, though denser than single-family homes, were not as dense as developments closer to the city center, and they didn’t cost as much to develop.
As developers put it, these were of the “woody walk-up” variety of multifamily projects.
This was at a time when the average cost of a transit-oriented development was $10 million, so the “arbitrary” cap, as Chief Planner Bob Clay called it, made sense.
Two projects changed that perception.
The 54-unit Killingsworth Station project, proposed at North Killingsworth Street and North Interstate Avenue by Winkler Development, hasn’t broken ground since it was announced in 2005, and it’s now expected to exceed the abatement cap.
And One:19, a 117-unit development at Northeast 119th Avenue and East Burnside Street, is planned to go up in two phases, at an overall cost of $20 million.
“If both of these projects came this tax year (with the cap), they’d cost too much to move forward with an abatement,” Sack said. “That would become increasingly more common.”
What hasn’t changed is that developments seeking the tax abatement will still have to go through an approval process, essentially showing that the proposed project would have trouble moving forward without the abatement.
The city had worried about the potential tax revenue it would give up as a result of the new ordinance.
But Clay said the reasoning behind offering tax abatements for transit-oriented development was simple: “It’s akin to any theory of urban renewal,” he said.
Eventually, the developments pay off.
A vacant or under-utilized plot of land is developed or redeveloped next to public transit, and the developer can apply for the abatement by proving to the city that the project wouldn’t move forward without assistance.
The abatement offsets volatile construction costs, at presumably a smaller return, that are involved in developing affordable housing near public transportation, Sack said.
Developers said the new ordinance will help make denser, costlier projects a reality.
“The reason (the cap) has become an issue is because it makes planning for a development really difficult,” said Gordon Jones, who’s working to develop the One:19 project. “There’s so much uncertainty … that you don’t dare move forward unless you know you have that density.”
And developer Andy Kelly said that due to the previous ordinance, and the uncertainty it generated, he’s had to contemplate turning a 90-unit project from a stone-and-steel structure into a cheaper “woody walk-up.”
Jones said his project applied for its abatement two years ago, but due to the abatement cap there “was a state of confusion” about whether the project would qualify. With the cap gone, he feels confident the project will be able to move ahead.
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