Plan won't increase taxes, city claims.

Byline: Edward Russo The Register-Guard

Eugene's $40 million plan to finance downtown redevelopment will not impose new taxes, city attorney Glenn Klein argued in court Tuesday.

Klein, disputing a challenge to the city's Nov. 6 downtown ballot measure, said the financing plan would shift property tax revenue to the urban renewal district, and away from other local governments, but it would not result in tax increases for any taxpayers.

"The property taxes paid by taxpayers would be the same no matter if there was an urban renewal district or not," Klein told Lane County Circuit Court Judge Lauren Holland.

Bike shop owner and former city councilor Paul Nicholson triggered the legal battle by challenging the city's downtown redevelopment financing plan, for which the city is seeking voter approval in a ballot measure in November. Nicholson last week submitted his own ballot measure wording for the judge to consider putting before voters, in place of the city's language.

Holland, who promised to rule by Thursday, will play a key role by deciding how the ballot measure will be worded. The ballot measure will be composed of a question and summary to voters.

In the election, Eugene voters will be asked to approve a $40 million increase in downtown urban renewal district spending, plus to give permission to extend the life of the district by six years, from 2024 to 2030.

The wording of the ballot measure could prove crucial, as it would likely influence whether voters approve or kill the city's downtown redevelopment plan.

Nicholson, who opposes the City Council's tentative plans for redeveloping West Broadway in the city center, contends that the city's ballot wording was misleading because it says the proposed financing method "does not impose new taxes."

Nicholson's attorney, Meg Kieran, told Holland that taxpayers would ultimately pay more if the measure is approved. That's because schools, Lane County and other local governments that forgo property taxes to urban renewal districts try to make up for the lost revenue by asking voters to approve bond measures and local option levies, she said.

"That fact is the voters pay," Kieran said.

But in an interview Tuesday, Lane County Assessor Anette Spickard said the city's proposal to spend up to $40 million during the life of the urban renewal plan will not impose new taxes on property owners.

Eugene property owners' tax bills show how urban renewal financing works, Klein told Holland.

Each property owner makes a payment to the downtown and riverfront urban renewal districts, Klein said. But the taxes that go to other governments on the tax bill are reduced by the same amount, Klein said.

If voters approve spending up to $40 million downtown, Eugene property owners would pay the same total amount of property taxes that they would if the urban renewal district did not exist, Klein said. By approving the $40 million plan, the city would in effect be dedicating that amount of taxes to the downtown, over more than two decades.

Klein wrote the city's ballot question and summary.

Holland hinted that she preferred Nicholson's proposed ballot question to Klein's, as long as Nicholson's phrase that the city would be "borrowing" $40 million for the project was replaced by the phrase that the city would be "spending" $40 million on the project.

Holland asked Klein if the ballot question would be acceptable with the change.

" I agree that would be an accurate statement," Klein replied.

Holland also asked Klein why his summary didn't explain how the change to the downtown urban renewal district would cause other local governments to forgo property tax revenue.

Klein's summary says the financing method, called tax increment financing, "reallocates" property tax dollars from other governments to the urban renewal district.

Klein responded that it is too difficult to provide a detailed explanation in 175 words or less, the allowed length of ballot summaries. "It's how much you can fit into 175 words," he said.

The case will be another test for the city's law firm, Harrang Long Gary Rudnick, which has lost two high profile city cases this year.

Lane County Circuit Court Judge Karsten Rasmussen sided with the Eugene 4J School District, not the city, over a difference of opinion about the possible future use of Civic Stadium. Last month, Circuit Court Judge Gregory Foote ruled against the city by deciding that gas station owners had collected enough voter signatures to place a referendum on the city's latest gas tax increase before voters.

DOWNTOWN REDEVELOPMENT FINANCING

Eugene and several other local governments in Oregon rely on tax-increment financing to pay for public improvements in urban renewal districts.

How it works: When the downtown district was formed in Eugene in 1969, the district's real estate had a total assessed value of $31.4 million on which owners paid property taxes. Today, it has a total assessed value of $152 million on which owners pay property taxes. The difference in assessed value - $121 million - generates property taxes and can be used to pay off loans related to public improvements within district boundaries.

Critics complain: The tax revenue generated by the difference between the old so-called "frozen" assessed value and the current assessed value only can be used within the district on district-approved purposes. Such revenue is not shared with the city's general fund, Eugene School District, Lane County, Lane Community College and other local governments that otherwise would share that tax revenue if the urban renewal district did not exist.

Total assessed value of real estate in all Eugene: About $10.25 billion.