August 6, 2012

Our View: Portland should set steady tax break policy

The city and developers would benefit from a fair and consistent property tax system.

Two developers are asking Portland for tax breaks and they are probably going to get them.

Both plan developments in the India Street neighborhood, an under-used part of town. By agreeing to forgo some of the tax collected from The Bayhouse project, on the site of the former Villiage Cafe, and Opechee Construction's planned mixed-use development on the site of the former Jordan's Meats plant, there will be increased economic activity where there are now just empty lots.

Portland officials will be using Tax Increment Financing, which is practically the only tool they have to promote and direct development under state law. And in both cases, the developers make a case that's hard to argue with -- a smaller slice of a valuable development is better than the whole tax bill from no development.

The only problem with that argument is there is no development for which it would not apply, and if every new project got a break, why should existing properties pay more?

Under the current system, every TIF request is a game of chicken, and woe to the elected official who says "no" to a project that doesn't get built. Part of something is better than all of nothing, right?

But there is a better way. Rather than give tax breaks to developers on a case-by-case basis, the city could dedicate tax revenue from neighborhoods where development is desired to make infrastructure improvements that would lower the development costs there. This is already being done on the waterfront, in Bayside and the arts district, and it makes much more sense than a system where every taxpayer pays a different rate, based on how credible they were when they went before the council and threatened to walk away.

Parking garages, sidewalks and buried utilities lines add to the value of development and provide the developers with incentive to build. The City Council can focus on spending tax money for the public good, and let developers design their projects. It would be a more predictable process and more fair.

The city is reportedly working on a strategy for future TIFs. Hopefully it will be in place before the next series of tax break requests.


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