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Plan would scrap project around PSU championed by his predecessor.

Mayor Charlie Hales is proposing an overhaul of the city’s urban renewal districts, sending more property taxes to Portland schools and Multnomah County, while enabling more redevelopment near OMSI and the South Waterfront. Hales also wants to pull the plug on the new urban renewal district around Portland State University that was championed by his predecessor Sam Adams.

Hales’ draft plan would eliminate two urban renewal districts, shrink two others so some land goes back on the property tax rolls, and expand two others where the mayor sees ripe development potential.

“I think it’s kind of updating the structure of our urban renewal areas to fit the opportunities that we see in front of us to pursue,” says Patrick Quinton, executive director of the Portland Development Commission, the city urban renewal agency.

Hales has made rethinking the city’s approach to urban renewal one of his top priorities since taking office last year, and that means rethinking PDC’s role.

Now it appears that Hales’ review is done, and it’s amounting to more of a “fine tuning” of urban renewal, says Ed McNamara, the mayor’s policy aide spearheading the effort.

McNamara cautioned that Hales’ proposal is still under negotiation with other parties, such as PSU, and requires City Council approval. But Hales and his staff have already briefed PSU, county and school officials who are heavily affected, McNamara says.

Hales has been prodding PDC to make more progress in its neighborhood-focused urban renewal districts in East Portland, specifically in Lents and Gateway, where economic growth has been anemic.

Now he’s moving to PDC’s central city urban renewal areas, which have served as engines of the city’s recent growth.

Here’s a summary of his proposals:

Scrapping Education Urban Renewal Area

This effort has barely gotten off the ground, and would have taken many years to generate serious urban renewal funds, McNamara says. That’s because the PDC relies on tax increment financing, which freezes property values in urban renewal districts and siphons off taxes from rising property values to use for redevelopment. Much of the district is owned by PSU, which is property tax-exempt, limiting the available revenues to tap.

Dumping the district would mean less city aid for the university district in the south side of downtown, and $46 million less for subsidized housing near PSU.

The original urban renewal plan pushed by then-Mayor Adams called for improvements to some PSU buildings. But a subsequent tax ruling makes such projects “look a lot more questionable today,” McNamara says. That’s because any property taxes spent on PSU buildings must meet Oregon’s property tax limitation for education — causing a corresponding drop in property taxes for public schools. Hales sees the limitations of the PSU urban renewal area and “from a legal perspective, sees it as an imperfect tool,” McNamara says.

“We’d be more cautious ourselves about spending money on campus-related projects, just because of the increased scrutiny on it,” Quinton says.

As an alternative, Hales has suggested the city could expand the North Macadam urban renewal area and have its boundaries include PSU’s eastern flank. That would enable PDC to collect some urban renewal money for infrastructure improvements near PSU, and the money could be raised much more quickly than under the old plan, McNamara says.

PSU President Wim Wiewel and Hales are still discussing the idea, “and we’re confident that the city and PDC are still supportive of PSU’s growth,” says PSU spokesman Scott Gallagher. “Urban renewal was a tool to do that but not the only tool,” Gallagher says.

Scrapping the district near PSU also would nix plans for PDC to pay $19 million towards a new Multnomah County office building of some sort.

But that was seen as a way of repaying the county for the lost property taxes from the district. “With the urban renewal area not going forward, the county recognizes that there’s no loss to make up for,” Quinton says.

Expanding North Macadam

Hales proposes to add about 35 acres to this district, which encompasses the South Waterfront area, and extending the life of the district another five years.

PDC sees ripe opportunities now to assist redevelopment of the Zidell barge site on the waterfront, McNamara says, as well as the Knight Cancer Institute that would be on Oregon Health & Science University’s adjoining property.

Expanding that district and extending its life could yield about $60 million additional funding for PDC and about $24.5 million for low-income housing projects, says Kimberly Branam, PDC deputy director.

It’s possible that some PDC support could help meet the $500 million match required under Phil Knight’s challenge grant to expand the cancer institute.

Expanding Central Eastside

Hales earlier talked about the potential of new development near the new MAX line to Milwaukie and new light rail stops next to OMSI and Clinton Street. Now he’s proposing to add acreage to the urban renewal there, and extending the life of that district by five years. That could yield an additional $21 million to spend, including $3.6 million for subsidized housing.

By adding acreage to the North Macadam and Central Eastside urban renewal areas, PDC is effectively capturing more future property taxes that would otherwise go to schools, the county and other local governments.

But Hales is proposing to put much more acreage back on the tax rolls than he takes off.

Shrinking the River District

This urban renewal project, which has made the Pearl District a national success story for economic development, has been viewed as ripe for returning property back to the tax rolls.

But Hales also wants to devote more money into redeveloping Old Town and Chinatown, which are part of the urban renewal area.

As a compromise, Hales proposes to put about 15 percent of the district’s property value back on the tax rolls. That was the “sweet spot,” McNamara says.

Though it’s only about 12 acres, it includes $291 million worth of property — enough to send $15.7 million in property taxes over the ensuing five years to schools, the county and the city general fund.

Shrinking Airport Way

This is another success story for PDC, and development is largely finished there.

City financial analysts found they could put 40 percent of this district back on the tax rolls, or about 900 acres of land, and still raise enough tax increment to pay off bonds used to fund past improvements there.

Scrapping Willamette

This urban renewal area would be eliminated, putting 755 acres back on the tax rolls. The district was originally created to support an expansion by Wacker Siltronic that never occurred, so it has been somewhat of a shell project.

About $3.5 million left in the kitty might be proposed for business loans to harbor companies, McNamara says.

The net changes in urban renewal areas would add about 1,700 acres of property back on the tax rolls, Branam says. That still means that roughly 12.5 percent of Portland’s land base is tied up in urban renewal areas, down from the current 14.2 percent.

But the city currently close to the 15 percent cap set by state law, which hampers its ability to create new urban renewal areas where opportunities arise.

There are no discussions about creating any new urban renewal areas right now, Quinton says. But Hales’ proposal “gives you a little more room for it, if the City Council wants to do that.”

Steve Law can reached at 503-546-5139 or This email address is being protected from spambots. You need JavaScript enabled to view it..

Twitter: @SteveLawTrib

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