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Don't Fall for Urban Renewal 

Deschutes County Commissioners recently voted not to approve the City of Bend's request to form an urban renewal district to fund development at the Bend

Deschutes County Commissioners recently voted not to approve the City of Bend's request to form an urban renewal district to fund development at the Bend Airport. The primary reason was that it would rob other governmental agencies, like the sheriff's department and 911, of much needed revenues.

Unlike the county's considered approach, the present City Council of the City of Bend is now promoting Urban Renewal Districts (URD's) with abandon. They ignore the problems created by URD's. The major problems with URD's are threefold. First, they are authorized to borrow large sums of money, without a vote of the people. Second, they divert taxes from other governmental taxing authorities to be spent solely on city URD projects. And third, if the new taxes in the URD are insufficient to repay the loans, they must then be repaid from the city general fund (property tax) revenues.

The City Council in August 2005 formed the Juniper Ridge URD to include the 500 acres of Juniper Ridge that was in the city and zoned for industrial uses. It also included a second area, of 200 acres west of Highway 97, and not connected to Juniper Ridge. That area includes Lowes, the Wall Mart site and neighboring properties. These were included solely to increase the tax base for the district, as they clearly have no connection to Juniper Ridge and obviously no need for assistance.

The City Council in August 2008 started the process of forming the Murphy Crossing URD. This area of 240 acres is along south Third Street roughly from Powers Road south to the intersection with the Parkway.

The city also plans to form a URD to finance its Central Area Plan. This area is along north Third Street roughly from Bob Thomas Chevrolet to Robberson Ford and including the area between Third Street and downtown.

The City Council in 2005 authorized itself to borrow over $40,000,000 for the Juniper Ridge URD. They also recently authorized themselves to borrow over $50,000,000for the Murphy Crossing URD. The Central Area Plan, not yet authorized as a URD, will likely have a comparable authorization. Authorizing, and actually borrowing, is solely the prerogative of the majority of the City Council. (Some cities in Oregon require voter approval). To put this $150,000,000 potential borrowing into perspective, the current general fund debt, excluding the urban renewal districts borrowings, is $50,000,000. (City general fund debt has almost tripled in less than 10 years.) Thus the Juniper Ridge, Murphy Crossing and planned Central Area URD's could borrow three times as much - just to promote development in these small areas. They collectively represent approximately six per cent of the area of the city.

Proponents say URD's do not increase property taxes to residents. Technically this is correct, but what they do is take funds from other taxing districts to fund development activities in their very limited areas. For example, the downtown district has taken $9,000,000 to date and continues to take about $900,000 annually from other agencies (It still has $12,000,000 in debt). The official projection for the planned 20 year life of the Juniper Ridge URD (which can be extended by the Council), is that it will take from other agencies the following sums:

From Parks & Recreation $2,600,000; from Deschutes County $2,200,000; from the County Sheriff $1,600,000; from 911 $287,000; from COCC $1,100,000; and from the school fund $8,000,000. The URD will even take from the city's general fund, primarily its police and fire departments, $5,000,000. The official city projections for the Murphy Road URD shows taking those sums plus 25% more from each of these agencies.

Based on preliminary studies and discussions, it is reasonable to assume the anticipated Central Area Plan URD will have similar numbers. Then the possible total for these three districts is truly staggering: Parks & Recreation could lose $9,000,000 or approximately $450,000 every year; Deschutes County could lose $ 8,000,000 or $400,000 every year; the Sheriff's office could lose $6,000,000 or $300,000 annually; 911 could lose $1,000,000 or $50,000 annually; COCC could lose $4,000,000 or $200,000, Bend police and fire could lose $16,000,000 or $800,000 annually. And schools could lose over $25,000,000. It is hard to believe that taking these sums from these other agencies won't cause them some serious difficulties.

The justification for this "taking" is the determination by the city council that economic development in these limited areas is so important that they can take these moneys from other agencies. They obviously also conclude that spending in this manner is more important than additional money to their own police and fire departments. This position also presumes that proper development of these areas will not occur without this taxpayer assistance - a very difficult assumption anywhere in our fast growing town - especially in the case of the highly sought after land in Juniper Ridge and along north Highway 97. South highway development is also progressing with the new Gottshalks department store, and the purchase of land for a large WinCo grocery store. These programs will clearly give an economic advantage within the districts relative to other areas throughout the city, by providing improvements with urban renewal funding that might otherwise fall on the private sector.

Now here's the real problem Urban Renewal District's create. Assume the districts develop as projected. All the new taxes would go to repay the development bonds, or for other improvements, within the district. The city would then have to provide police and fire protection to the area with no corresponding increase in revenue. The attendant development would of course put increased pressure on the county, parks and recreation, the sheriff, COCC, and 911. However these other agencies would receive no additional taxes, for at least 20-25 years. The cost of providing these services to new residents and businesses in the URD's, would fall to property tax payers throughout the county.

Here's the other side of the real problem. Assume the money is borrowed and spent, but development does not occur as projected. Something that could easily happen. Just three years ago the official city projection for the Juniper Ridge URD was that there would be $28,000,000 in new developments by 2008. The actual total was less than $12,000,000- mostly Lowes and the Schwab and American Tire Stores west of Highway 97 - not in Juniper Ridge. The projection of $80,000,000 within the next three years looks like a fantasy. The Murphy Crossing URD is projected to have $33,000,000 in new investment within two years from now. If it does, it will be because of projects initiated before the URD was formed, not because of it.

If however, the new development is insufficient to service the loans, clearly the most likely event, debt payments would have to be made from the city general fund. If the city were to fund these URD's to the potential $150,000,000, the debt service (interest and principal) would approximate $13,000,000 annually. Thus just repaying the potential urban renewal bonds will nearly match this year's entire police department budget of $17,500,000.

What happens then? How will the other agencies make up the funds taken for development? Will the city council just issue even more bonds to provide the necessary equipment for the police and fire departments, or will they ask voters to increase taxes for more money for police and fire to replace that diverted to fund development projects?

The writer is a former Bend mayor.


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