Eugene Weekly : News : 9.1.11

Developer Subsidy
Tax break out for UO area, but may expand elsewhere
by Alan Pittman

The city may end a controversial tax break for developers in the West University area that has cost millions of dollars, but expand the break to a large part of the rest of Eugene.

The city spends more than a million dollars a year to give tax breaks to apartment developers in the booming university area under a controversial Multiple-Unit Property Tax Exemption (MUPTE) program. 

Amid criticism that MUPTE was given to apartments that would be built anyway in the high-demand UO area, the council voted unanimously last month to allow the MUPTE zone to sunset this year in the university area but to continue the break downtown and pursue expanding the zone to a wide range of development areas across the city.  

But at least two councilors said July 20 that they’d also like to push to continue the 10-year tax break on new apartment buildings in the UO area during planned council meetings on MUPTE this fall.

Councilor Mike Clark argued that MUPTE is needed in the UO area to encourage higher quality housing. Without the tax break, “we’re still going to build things, but we’re simply deciding to build slums.”

Councilor George Poling agreed that the tax breaks are needed to avoid “eyesores.”

But Councilor Alan Zelenka said many good quality new apartments have gone up near the UO just outside the zone without the tax breaks. “You’d be hard pressed to tell which one is within MUPTE and which is without.” Some of the new apartments without the break are higher quality than those with the break, Zelenka added.

Councilor George Brown pointed out that developers without tax breaks still have to comply with city building codes for quality development. “People are doing that all over town without MUPTE.”

Clark also argued that MUPTE near the UO had encouraged developers to build on more expensive land that they wouldn’t have built on otherwise. He said when the city put a moratorium on the breaks amid budget cuts in the 1990s, the number of developments decreased. “I think the MUPTE absolutely really does affect these things.”

But Mayor Kitty Piercy said student apartment demand was lower during the moratorium. “Times have changed since the 1990s, so you’ve got apples and oranges,” she said. 

Zelenka said apartment development near the UO but outside the zone without tax breaks has “far outstripped” development inside the break zone in recent years. “It’s at least 2-1, if not 5-1,” he said of the ratio of outside to inside MUPTE development. 

Councilor Betty Taylor said developers could build projects near the UO even without the city’s big handouts. “Sure they’d like to get the tax exemption, but people can build,” she said.

But councilors offered unanimous support for continuing the tax break downtown. City planner Nan Laurence said the city anticipates giving developers tax breaks for new apartment projects at the old Taco Time building at Broadway and Willamette and for apartments near City Hall at 858 Pearl Street. 

With the LCC and Beam redevelopment projects under way nearby, “it’s important to continue the momentum,” Laurence said.

City staff also said they would recommend expanding the MUPTE tax breaks to “transit-oriented” nodes throughout the city as part of the Envision Eugene strategy to increase density to avoid urban sprawl. 

The tax break “has and will continue to move our city toward its goal of compact urban development,” city Planning Director Lisa Gardner told the council. “We don’t have a lot of tools available to us, but MUPTE is one we have.”

But Councilor Brown said the budget cutting city should also consider the cost of the forgone revenue for the breaks. “We need to think about the city’s financial situation.”

Laurence said the city had no accounting of how much the breaks cost the city. But a recent City Club study estimated a cost of about $1.3 million every year. That estimate was before the council approved a $150,000-a-year break for a developer at 17th and Pearl this summer. 

About 40 percent of the property tax break comes from city coffers, 10 percent from the county and 50 percent from state school funding.

It’s also unclear how the city would define “transit-oriented” areas to comply with the state law authorizing the tax break. Many of the sprawling, supposedly “transit-oriented” nodes previously identified by the city in fact were designed almost entirely for cars and have few actual transit users.  

It’s also unclear how much demand there is for apartments distant from the UO. The city has offered the MUPTE tax break in the Trainsong neighborhood out Highway 99 for years, but nothing has been built. 

The UO has also changed its policy to start building dorms again for its big jump in enrollment, competing with private developers. Zelenka said 300 new dorm rooms are now under construction.