Nine months into the city of John Day’s strategy for growth, only one key piece has not been addressed: housing.
To combat population decline — and the resulting negative impacts on schools, businesses and taxing districts — City Manager Nick Green proposed a new approach in January to make strategic investments to spur growth.
To attract digital commuters, active retirees and young, working families, the city focused on rebranding and improving recreational amenities and broadband service as well as housing and community development.
Green, in his first year on the job, was awarded $437,000 in outside grant funding for projects including Main Street revitalization, transportation planning, a sidewalk extension and a bike park. He persuaded the state legislature to award $2.2 million for a new fiber optic line and funding to keep the dispatch center open — both providing benefits throughout the county.
“Our message is resonating with people,” he said. “They get it, they understand it and they think it’s worth investing in.”
Green is now taking his progressive approach to the housing problem.
And he believes he may have a solution.
Only three site-built homes and two manufactured homes have been constructed in John Day city limits in the last decade, Green said.
Blue Mountain Hospital District CEO Derek Daly said well qualified employees have turned down job offers here because they were unable to find suitable housing.
From January 2016 to April 2017, 29 homes within city limits were sold — 4.7 percent of the city’s residential housing market of 615 single-family homes — averaging 1,676 square feet at 58 years old with a sale price of $141,407, Green said.
A similar-sized new home would sell for an estimated $254,000, he said, which equates to about $1,800 in additional property tax revenue per home for local taxing districts.
While the benefit to the city of new homes on the tax rolls is clear, convincing a potential homeowner to spend $112,000 more to build a new home rather than purchasing a 58-year-old home is not always as easy.
Green said the actual cost to construct the home may even exceed the estimated selling price, making it difficult for a homebuilder to sell a spec home in the city. Further, he said, the potential homeowner is expected to pay additional system development charges to connect to water and sewer services as well as other building fees.
To overcome this gap to make it easier for builders to build and buyers to buy new homes, Green proposes providing incentives.
Instead of charging $7,500 per home in system development charges, he said the city could front the cost to encourage people to add property to the tax rolls.
As an even greater incentive, Green said the city could offer a 7 percent rebate of the purchase price to homebuyers.
And he believes it can be done with no cost to the city or taxpayers.
To cover the cost of the $18,000 rebate for a $254,000 home, Green said the city could rely on the additional property tax revenue generated by the more valuable home, reimbursed to the city through a housing district.
With $1,800 in additional tax revenue each year, the $18,000 rebate could be paid off in 10 years. After the rebate is repaid, the additional tax revenue would benefit all of the properties’ taxing districts.
Currently, Oregon law allows cities to develop urban renewal districts to address blight. Green said most of John Day meets that description.
Once the district has been designated, property taxes are frozen at current property value levels for all other taxing districts, such as the hospital and school, so those districts would continue to receive the same amount in property taxes each year. As property values in the district increase over time, the resulting increase in property tax revenue would be distributed back to the district alone. Through the program, cities can reinvest to reduce blight.
Green said that utilizing the program as a housing district, the city could maintain the additional tax revenue until it covered the full cost of the rebate, and then the additional amount would be split among the taxing districts, each benefiting from the incentive as soon as it was repaid.
One problem with the renewal district program, Green said, is that renewal district areas are currently limited to 25 percent of a city’s acreage or assessed value. Unlike cities dealing with downtown blight, Green intends to reinvigorate the housing market throughout the city.
He said the state legislature may consider an exemption, waiver or flexibility with the definition on the 25 percent limit. He said he is working with Rep. Cliff Bentz and is hopeful legislative action may be taken in 2018. Gov. Kate Brown is also accepting proposals for development programs, he said, and this idea may be a great fit for its ability to be applied anywhere.
With an improved housing market, along with improved broadband services and recreational amenities, Green believes the city will be able to attract new residents, turning the tide of population and economic decline into a new era of growth.
“This is going to reinvent Eastern Oregon if we are successful,” Green said.