Council may revisit old tax break.

Byline: ED RUSSO The Register-Guard

Eugene officials are thinking about dusting off an old tool to help create new housing downtown.

The city staff is asking the City Council to reinstate property tax breaks for developers who build apartments in and around downtown. The city granted the 10-year tax breaks until 1996, but then shelved the program.

The breaks were granted to the Seattle-based developers of Broadway Place at the west end of Broadway; to Guard Publishing Co., which developed High Street Terrace; and to several other downtown residential projects.

The item is on the agenda for the council's meeting on Monday.

The push to revive the breaks comes amid the city's fresh emphasis on attracting more people and development downtown. City officials see housing as a key way to revitalize the area.

Other big steps include the opening of Broadway to auto traffic and developing the area near the Willamette River where the new federal courthouse will go, they say.

The relatively high cost of downtown land and of building in the city's core means that developers typically build offices there because they can command higher rents than apartments.

However, if an apartment developer does not have to pay property taxes for a decade, an apartment building can make financial sense, Eugene real estate appraiser John Brown said.

"I think it might rekindle the interest of some developers to possibly financially pencil in the feasibility of some projects," Brown said. "I don't know of anybody who would do multifamily housing units downtown now. It's just not feasible."

David Davini, spokesman for the G Group - an arm of the local Giustina family that owns many properties in the city center - said some developers are looking to build residential projects downtown.

"Whether the property tax incentive is right or wrong, I don't know," Davini said. "But there has to be some incentive to help the developer meet that social goal" of creating more housing.

The tax breaks helped spur a number of new buildings and renovations during the 1980s and 1990s in the downtown area and near the University of Oregon.

To get the incentive, a developer had to show the City Council that the project could not make a profit without it. Also, if at least half of the project's housing units were not set aside at low rents for low-income tenants, the developer had to pay a special fee to the city starting in the third year and continuing through the rest of the exemption period.

By 1996, however, the City Council became concerned that the tax breaks were not prompting construction of enough housing for low-income renters, so they halted the program and wrote new rules.

Under the new system, developers were to pay special fees for the privilege of receiving the tax breaks. The fees were to be used to support low-rent housing for low-income tenants.

But the fees would be reduced to reward developers who created high-density projects, or ones that provided greater proportions of low-rent apartments for low-income tenants, and handicapped accessible units. Developers also were to be rewarded with reduced fee requirements if they built in the downtown core, though projects in the wider city-center area also were to be eligible for the tax breaks.

But before the council approved the new tax-break system, voters statewide approved Measure 47, which slashed property taxes. Rather than lose any more property tax revenue, the City Council discontinued the new system.

However, city officials now keenly want to get more people to live downtown, said Richie Weinman, the city's housing development manager. Weinman said he expects the council to reinstitute the tax breaks with the new rules.

Hugh Prichard, co-developer of Broadway Place, said he could not have done that project without the tax breaks.

Besides the cost of the land, which is two to three times higher than a suburban site, he said, the expense of providing parking also makes downtown projects difficult to finance.

If the council reinstates the incentive, Prichard said, he would be interested in tackling another project.

"It would lead me to believe that the political system is thinking about doing things rationally by trying to level the downtown playing field" with other areas of town, he said. "And I think other developers would be interested. Right now, people are pretty discouraged."