Killing the Initiative

Time to change the tax break

“We did not lock in the design of the building… We didn’t know that what [Capstone] proposed would be so different from what they built. There was no one in the city who was watching over the illustrative image on the building permit set and then what was actually built.”

— Eugene Senior City Planner Nan Laurence, 2016

It is past time to kill the Multi-Unit Property Tax Exemption (MUPTE), which exempts some multi unit housing projects from property taxes for ten years. Or at the very least put some enforceable clawbacks in place for non-compliance. And make it non-transferable. Developers should not be able to include it in the selling price. 

Out of state real estate developers know a good thing when they see it. We give away the property taxes, they build and then sell for huge profits and the new owners continue to pay no property taxes.  Meanwhile, while the city gives away millions of dollars to out of state developers, it proposes taxing workers to pay for public services.

How many more massive student housing and upscale luxury hotel/apartment projects do we want to exempt from paying property taxes? The Capstone project (13th and Olive) should, in itself, have put an end to the MUPTE, but then along came Brian Obie’s boutique hotel, apartments and shops at Fifth Street Market. 

Enough is enough. 

I was never invested in either side in the battle over getting a city auditor. I did not support it, mostly because I thought it was too expensive, but I was impressed by the dedication and dogged determination of the petition gatherers. Unlike paid petition people, they believed in what they were doing. They made good points about accountability, and they deserved a fair up or down vote. They did not get one. 

The City Council put its measure on the ballot to defeat the citizen initiative. It was a tactical decision to kill a legitimate citizen’s ballot measure. And it sets a precedent that jeopardizes the citizen initiative process. Why work for a year or more, organize hundreds of volunteers, spend months gathering signatures and then, when it makes it to the ballot, have the City Council just kill it? So why did they do it. What was the council afraid of?

The Capstone project is a poster child MUPTE example. The developer promised an attractive, vibrant street scene. We ended up with a Soviet-era housing project on Willamette, Eugene’s “Main Street.” 

And, being student housing, it did nothing to address Eugene’s affordable housing problem. And then after two years, the (out of state) developers sold it, making millions on the deal. And the new (out of state) owners continue to pay no property taxes. 

I suspect there are other projects the city would just as soon not see audited. The City Hall teardown/rebuild/public square/farmers market debacle might be one. The ongoing riverfront, full employment for consultants, project might be another. And I suspect there are a lot of skeletons in the Urban Renewal District’s closet. But my money’s on the MUPTE.  

Is anybody else sick and tired of hearing that a project does not “pencil out” if they have to pay property taxes? 

Maybe what they really mean is, if they have to pay property taxes, they will have to settle for a more modest return on their investment. The investors would make money at a slower pace.

I’m thinking if the project does not “pencil out” while paying taxes, maybe it should not be built at all. There is a public benefit to those taxes, like funding public safety. I wonder if the projects “pencil out” for the public without them? For one, I would rather tax real estate developers than minimum wage workers. 

Of course, I could be way off base here, and I hope that I am. I would like to learn the MUPTE has been great for our community and that the benefits outweigh the costs. That it has created affordable housing, and jobs, and increased commercial investment. That it spurred development in our downtown that would not have happened without it. That it was not just a huge waste of public money and a windfall for developers. 

That would be great. 

One way to prove it would be with an audit — a fair, impartial and independent audit. How much money did we give away, and what did we get for it? And was it worth it? That is something the city could do, but I’m betting they won’t. Maybe they don’t want to know. Maybe they fear an audit would show the MUPTE as nothing but a costly boondoggle, wasting tens, or even hundreds, of millions of taxpayer dollars and getting little or nothing in return for it. We know developers love the MUPTE, it “pencils out” nicely for them. 

It would be nice to know if it “pencils out” for the rest of us as well. 

Bob Warren retired in 2012 as the regional business development officer for Business Oregon for Lane, Lincoln, Linn and Benton counties.

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