Eugene Weekly : News : 3.11.10

City Defies Voters
Council moves tax diversion defeated in 2007
by Alan Pittman 

The Eugene City Council voted 6-2 March 8 to move forward with a tax diversion scheme that is so complicated that almost no one fully understands it, that citizens overwhelmingly voted against two years ago and that will increase city revenues by diverting $22 million from already strapped local and state school funding and the county. 

“I think it’s a win-win on every level,” said Mayor Kitty Piercy, calling the tax diversion “as close to ideal as we can get.”  

Councilor George Brown said citizens would force a public vote again and defeat the city’s tax diversion plan. “You’ve decided to be undemocratic and force us to get signatures, but we can do that,” Brown said. “We’re on this path to do the same thing we did two years ago.”  

The council voted to move the Downtown Urban Renewal District extension plan to a legally required public hearing even before knowing exactly where the money for the plan would come from. “We’re still trying to understand,” City Manager Jon Ruiz told councilors about where the money comes from. After 40 years of Eugene urban renewal tax diversion and months of studying increasing that diversion, Ruiz told the council, “We don’t really know the answer yet.”

The city estimates the urban renewal plan would divert about $6 million of 4J School District tax revenue in the next nine years plus $1 million in one-time funding. The city believes the state will refund most of the $6 million by reducing school funding statewide. But the city isn’t sure about the one-time, $1 million in school funds the city plans to divert. 

Lane County commissioners struggling to fund the jail and social services have expressed concern that the city is taking its limited tax revenue while they are in a budget crisis. The county would lose an estimated $280,000 in one-time funds plus $1.6 million over nine years. 

But City Councilor Andrea Ortiz reacted to the county concerns with hostility. Ortiz made an implied threat to cut off the city’s funding of services for the homeless if the county complained about the city taking its revenue. “Not that I would ever say tit for tat, but, you know.”

Councilor Mike Clark opposed refunding the county any of the revenue the city was taking so the county could keep the jail and other services operating. “We’re going to end up limiting our proposed [general fund] savings,” Clark said.

“Don’t we care about the schools in the entire state? Don’t we care about the county?” asked Councilor Betty Taylor, a retired school teacher. “When you talk about urban renewal, it’s like it’s money falling from the sky,” she said. “That’s not true.” 

Taylor predicted the county may eventually have to increase its taxes to make up for revenue taken by the city. “The county needs money desperately,” she said. “We’ll still be paying.”

The urban renewal plan will also increase taxes directly by a total of about $1.5 million over nine years, the city estimates.

The city says it needs the urban renewal money to give LCC $8 million for a new downtown center in the library pit. 

But if the city ends urban renewal, the city will get $1.5 million in one-time funds plus $8.9 million over the next nine years by ending the tax diversion, according to city estimates. “We’ve got plenty of money, we don’t need to get in a big animosity fight and divide the community,” Brown said.

Councilor Taylor moved to fund LCC immediately with existing funds from ending urban renewal. But the council defeated the motion 6-2.

Councilors said funding LCC by ending urban renewal wouldn’t provide the boost to city revenues from diverted taxes that they wanted. The city’s urban renewal plan includes diverting $6.3 million into the city’s general fund and $1.5 million for city “administration” costs. 

During past dire budget cuts, city staff have said it is illegal for the city to divert urban renewal funds to its general fund. But new City Manager Jon Ruiz now claims he can launder the money of that state legal restriction by passing it through the city’s parking fund. 

Ruiz said he’s recommending the city end its urban renewal plan in nine years and limit its spending. But once passed, a simple council majority vote can lengthen the end date or increase the proposed $22 million in spending without restriction. A charter amendment could set real limits to the city’s use of urban renewal, but no councilor has moved to refer one to voters. 

The city plans a public hearing on the tax diversion plan for April 19 followed by final council passage of the plan May 24.