Who pays for renewal?

Byline: The Register-Guard

Former City Councilor Paul Nicholson raised plausible objections in his legal challenge to the city of Eugene's wording of a ballot measure to finance downtown redevelopment. Unless voters understand how tax increment financing works, the wording might lead them to conclude that the measure will conjure $40 million from thin air. Yet the city's position is technically accurate: The measure won't raise anyone's property taxes. Though Nicholson did not prevail, if his challenge clarified these murky matters for anyone it will have served a useful purpose.

Within a renewal district such as the one in downtown Eugene, the city borrows money to finance improvements. These improvements are intended to stimulate the construction of housing, offices and businesses. The property taxes generated by this new development are used to pay off the city's loans. The measure on the November ballot would allow $40 million of such borrowing, and extend the life of the renewal district to 2030.

Nicholson argued that higher property taxes are a consequence of such arrangements. It's true that other taxing districts - the Eugene School District, Lane County and others - obtain no additional property taxes as a result of development within the renewal district. This result should be noted in the official summary of the ballot measure, Lane County Circuit Judge Lauren Holland ruled Thursday. But it's not really a tax increase - it's a "reallocation," Holland said.

Redevelopment is supposed to generate enough taxes to pay for itself. And the taxes would not flow unless redevelopment occurs. In this sense, urban renewal finances itself without increased taxes. But the reallocation affects all taxing districts and the taxpayers who support them - a subtle but important point that voters should understand.