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City weighs new property tax.

Byline: Edward Russo The Register-Guard

The Eugene City Council is moving toward imposing a tax on certain property owners in order to raise money to pay Measure 37 claims.

A divided council last week asked staff members to develop final details for a special tax on land that increases in value because of city zoning decisions. Tentatively set at 25 percent, the tax has the potential to raise several hundred thousand dollars a year for city coffers, giving the City Council a way to pay Measure 37 claims rather than waive land use rules.

The tax would be levied only on the increased value of property caused by certain zoning actions, not on a property's overall value.

Mayor Kitty Piercy broke a 4-4 tie to advance the idea after a council debate. Voting to draft a tax ordinance were Councilors Betty Taylor, David Kelly, Bonny Bettman and Andrea Ortiz. Voting against it were Councilors Gary Pape, George Poling, Jennifer Solomon and Chris Pryor.

The tax is intended to raise money to pay property owners who file claims under the state law known as Measure 37.

The law, passed by state voters in 2004, requires governments to pay property owners if their land values have been reduced by zoning and other land use rules while they owned it. Or, instead of paying, governments can waive the rules. Statewide, most governments have opted to waive the land use rules when owners file Measure 37 claims. Most governments say they don't have the money to pay the property owners.

Eugene so far faces only a single Measure 37 claim, from the owners of the former Lane Plywood Cooperative factory in west Eugene.

Eugene's proposed tax apparently would be unique in the state.

The council's debate last Monday featured councilors who were uncomfortable with the tax and those who said the levy was needed to raise money to pay Measure 37 claims so the city doesn't have to waive its land use rules.

"We need to do something in this (money raising) arena" or else "we won't be able to do land use planning," Kelly said.

What city decisions could increase the value of property and trigger the special one-time tax?

A rezoning that allows more houses or businesses to be built on a property than what would be permitted by the previous zoning generally would increase the value of land. So would a Eugene-Springfield Metropolitan Area General Plan change that brought farmland into the city's urban growth boundary, because that would mean the land could be developed.

A current example could be the pending rezoning of the site for the proposed McKenzie-Willamette hospital on Delta Highway North. The land is now zoned for single-family homes, and the hospital wants to change that to commercial. Commercial land is typically more valuable than residential, so under the tax plan, a tax might be due.

While Eugene is exploring the tax, the most intense Measure 37 action locally is taking place in unincorporated Lane County. Since the law took effect, owners have filed 82 claims with the county.

Lane County has not paid any landowner for the loss of market value because of land use rules. In 20 of the cases, the county has waived land use rules, often allowing property owners to subdivide their land for development.

Yet the county is not considering a tax to pay claims. That's because zoning changes that increase the value of land rarely occur in the county, said Kent Howe, Lane County's planning director.

So-called upzonings can include changing the redesignation of land from farm to residential use, or from rules that allow a low number of homes per acre to more homes per acre.

Upzonings are more common in and around cities because that is where most growth and development occurs, Howe said.

"It's an interesting irony in that you have few claims in the city but they (Eugene) have come up with this proposal to fund compensation for Measure 37 claims," Howe said. "But in the rural areas, where you have the claims, there isn't a good, logical mechanism to come up with the funding."

Eugene's tax would apply to property owners who sought zoning or metro plan changes, said city attorney Glenn Klein. It also would apply in cases where the city initiated a zoning or metro plan change at the request of a property owner.

That was contemplated in 2004, when the city considered bringing land into the urban growth boundary north of Santa Clara as part of a land swap with developers Melvin and Norman McDougal. City councilors ultimately killed the proposal.

Property owners who do not request a zone or plan change but benefit anyway, such as farmers whose properties are brought into the city's urban growth boundary as part of a large boundary expansion, would not have to pay the tax until they sought to take advantage of the new rules, such as applying for a building permit, Klein said.

Each year, there are about 25 property owner-initiated rezoning or metro plan changes, city staff estimate.

Last year, the changes added $2.25 million of market value to the affected properties, city staff said.

A 25 percent tax on the increased value would have generated $565,000 for the city.

The property rights group that put Measure 37 on the ballot is warily watching Eugene's proposal.

David Hunnicutt, president of Oregonians In Action, said he's worried about the city's ability to fairly figure the increases in property value.

"What concerns me is that they correctly calculate the impact of the increases caused by the zoning decisions," he said. "The devil is in the details."
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Title Annotation:Government; The proposal would fund Measure 37 claims by imposing a 25 percent tax on the increased value of rezoned land
Publication:The Register-Guard (Eugene, OR)
Date:May 28, 2006
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