Economist on the Core Area Plan for Bend: It Makes Fiscal Sense
The vision for a vibrant, healthy, and inclusive mixed-use neighborhood in the Bend Central District with safe connections between east and west Bend depends on the Core Area Plan to be funded through Tax Increment Financing (TIF). Steve Porter, an economist who served on the Urban Renewal Advisory Board, explains why TIF is the right tool to use from an economic perspective. This Guest Column was in The Bulletin on July 31st, 2020. For more on TIF, see our Frequently Asked Questions.
Guest Column: Bend core area plan makes fiscal sense
by Steve Porter
A recent Bulletin editorial asks whether Bend should undertake an urban renewal effort in Bend’s Core Area. The column explains some elements of the proposed urban renewal/tax increment financing plan and raises thoughtful questions about its implementation.
However, the piece also suggests that urban renewal somehow costs tax overlay districts (like schools, parks, libraries, and so on) funding. It does not. Urban renewal is analogous to an investment that tax overlay districts make. They temporarily set aside some tax collections now in order to obtain greater funding levels in the future. It works like this:
• Urban renewal freezes the Core Area’s property tax payments to overlay districts during the urban renewal project period. Any growth in Core Area property taxes during that time is reinvested in the Core Area to induce development.
• Reinvestment is directed at things such as transportation infrastructure, utilities, streetscape improvements, and small business assistance. Public funding enhances the area’s attractiveness for private investment, giving investors and developers confidence to put private dollars to work there. This causes property values to rise more quickly than they otherwise would. And the Core Area’s underdevelopment is remedied and blight erased.
• Once the project period ends, all this reinvestment and improved property value causes property tax collections from the area to be much greater than they would have been but-for urban renewal. Tax overlay districts therefore obtain higher funding levels. Urban renewal does not generate a loss of funding to the tax overlay districts but constitutes an investment: overlay districts’ tax collections are temporarily held constant (instead of rising each year) in exchange for much greater future tax revenue.
Tax overlay districts are effectively putting some money in the bank now in order to spend greater sums—reflecting greater economic prosperity—in the future.
The Bulletin also asks why the Core Area should not forgo assistance and simply “develop as other parts of Bend develop?” One answer: Because, even as the rest of Bend has developed rapidly over the last several years, the Core Area has not. Why would that trend change in the future without public intervention? If anything, there is reason to believe the developmental shortfall would worsen in the absence of public investment since the Core Area has fallen increasingly behind in the types of infrastructure that support high-value development.
In order to become a competitive area for private investment dollars—and in order to support Bend’s critical needs in workforce and “missing middle” housing as well as local business development—the Core Area requires some publicly funded remediation. This is exactly what Bend’s Core Area urban renewal plan is designed to do.
Importantly, this plan was developed through a robust one-and-a-half-year public process led by the Urban Renewal Advisory Board citizen committee. It also involved city staff, outside consultants specializing in the economics and application of urban renewal plans, several public open houses, and dozens of public comments submitted in writing and as spoken testimony at public meetings. Representatives from key tax overlay districts sat on the Urban Renewal Advisory Board as ex-officio members, providing input in the urban renewal plan design to ensure it became an investment they were comfortable making.
The Core Area urban renewal plan is an investment in the future—both for the Core Area itself and for the tax overlay districts.