The John Day City Council unanimously approved an ordinance at the June 12 meeting that creates a housing incentives plan, with the goal of seeing 100 new homes built in the 20-year life of the program.
City Manager Nick Green said city staff have worked on the plan for 18 months. The plan was reviewed by community and technical advisory committees and the city’s planning commission.
To encourage new home construction within boundaries established for the plan, the city will waive system development charges for water and sewer service and provide property owners a 7-percent rebate on the increase in the property’s assessed value.
The plan also proposes an incentive for home remodeling that includes a 15-percent rebate on the increase in the property’s assessed value, with a $10,000 minimum increase required.
The city will recoup the cost of the incentives through tax-increment financing. Taxes on properties within the plan’s boundaries will be frozen this year at their current levels, and any future increases will go toward paying back the city for the incentives. Rebates will not be paid until a property’s new assessed value is on the tax rolls.
Green estimated incentives will be paid back in full in seven years, at which time the full tax revenue on improved properties would be made available to all taxing jurisdictions. Many tax-increment financing plans don’t return the full tax revenue to taxing jurisdictions for 20 years, Green noted.
“In year eight, the other tax jurisdictions begin benefiting financially from the increased tax revenue that would not have occurred but for this program,” Green said in his report to the council.
Grant County Assessor David Thunell told the council that he has received numerous questions about the plan but none from representatives of the affected taxing jurisdictions. He also expressed concerns about the administrative costs for the plan, which Green said could be high.
Former councilor Louis Provencher, who said he opposed the plan from the very beginning, provided the council with numerous concerns and two recommendations. For one, the plan benefits a limited number of people and basically redistributes tax revenue, he said.
He was also concerned about the effective date of the plan and asked about properties where home construction on lots inside the plan’s boundaries was already underway. Providing benefits to those property owners would “defeat the purpose” of the plan, which is to encourage new home building, he said.
Provencher also wanted the city to focus instead on financing a new sewer treatment plant, which might require a bond. The city has too many projects and needs to slow down and work out the costs of these projects, he said.
He recommended that the city not adopt the housing incentive plan until financing for the sewer treatment plant was finalized and to present the housing plan to the city’s voters for approval.
Councilor Brandon Smith disagreed with Provencher that the plan was a redistribution of tax revenue. Taxes from each improved property will be used to repay the city for the incentives, not taxes from the city as a whole, he said.
Councilor Shannon Adair said the city needs to take on several projects at a time in order to promote economic development and halt the decline in population and business activity. The city’s projects work together to achieve this goal, she said.
Green said the best way to finance a new sewer plant was by increasing customers and widening the revenue base, not by issuing a bond. Many undeveloped lots in the city already have water and sewer mains nearby, so revenue from new homes on those lots would help the city recover the costs to install that infrastructure. More homes and residents would also provide indirect benefits to the local economy, he added.
Elaine Howard, the consultant who helped the city draft the urban renewal plan, explained that property owners will not see incentive payments until after the next fiscal year starts in 2019. The county assessor will certify the tax bill in October based on what occurred in the prior year, she said.
“There’s always a long lag,” she told the council by phone.
Green said the first rebates wouldn’t be issued until October 2019. He also noted that property owners don’t apply to the city to benefit from the program. What matters is the change in the assessed value after the tax base is frozen under the ordinance, he said.