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Two councilors voted against the measure due to concerns that provisions regarding deconstruction could impact the parks maintenance budget.

Despite concerns from some councilors about uncertainty within the economy that may impact housing development — and a cascading impact on parks maintenance revenue — the Lake Oswego City Council approved an ordinance to remove the sunset for the city's demolition tax, among a suite of other measures, on a close 3-2 vote during a meeting Tuesday, Nov. 15.

Along with removing the sunset — which means the $15,000 demolition tax will be in effect for the foreseeable future unless a future council decides otherwise — the ordinance included making deconstruction (as opposed to demolition) mandatory for homes built before 1940. Further, while the previous policy for deconstruction provided a tax incentive, the new one allots a tax exemption.

The ordinance did not include an exemption for units deemed to be middle housing, such as duplexes, triplexes and duplexes. The council had previously rejected that idea.

Earlier this year, the city changed the definition of demolitions to prevent developers from keeping a sliver of a home and calling it a remodel, and therefore avoiding the tax.

The primary purpose of implementing the tax was to fortify the parks maintenance budget (around 15% of parks maintenance revenue comes from the tax). However, the city staff report indicated that the exemption for homes built before 1940 could reduce tax revenue (currently $400,000 per year) by as much as 30%.

Council President John Wendland and Councilor Jackie Manz worried about the likely decreased revenue, particularly in a time of economic uncertainty. This is why both voted against the ordinance.

"While I think it's a good program and has all kinds of benefits I worry about a third of the revenue for parks … how are we going to make that up?" Wendland said.

Manz said the city should instead revisit the deconstruction component next year or the next biennium.

"Or (we) have to have a serious talk about what is not going to happen. We can't have it all right now," she said.

Councilor Rachel Verdick said she struggled with the decision because she wanted to incentivize the more sustainable housing alternative — deconstruction — but also recognized the need for the parks budget to be fortified. She ended up voting for the ordinance.

Council also agreed to revisit the issue in a year to assess possible impacts.

"With the change in the definition of demolition, we don't really know what that impact is — and with some of the market uncertainties right now I am concerned about the decrease in parks funding. I definitely want to come back and look at the deconstruction mandate aspect of this," Verdick said.

The city staff report noted that the demolition tax disproportionately impacts lower-value properties because it's a flat fee. However, affordable housing developments are exempt from the tax.

Councilor Aaron Rapf joined the meeting following the vote, while Councilor Daniel Nguyen was absent.


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