Urban Renewal Tax Questions Answered

Does Urban Renewal Increase Property Taxes?
Answer: No, urban renewal does not increase property taxes; it simply allows for the reallocation of growth on taxes to the urban renewal agency rather than the overlapping taxing districts (City, County, Cemetery, etc.). Taxpayers in Dallas see Urban Renewal as a line item on their tax statements whether or not they own property inside of an urban renewal area. This line item can and does cause some confusion. The Urban Renewal line item does not represent an extra charge, or result in a larger tax bill than would otherwise occur; instead, it represents a division of tax dollars, collected from all properties in an amount that equals the growth on taxes inside the urban renewal district. If urban renewal was terminated in Dallas, general property taxes would not decrease; they would just be reallocated to all taxing jurisdictions.

Does urban renewal have a financial effect on the taxing jurisdictions?
Answer: Urban renewal will have a financial effect on local taxing jurisdictions, but the impact is different for schools than for other districts. An urban renewal area does not directly affect school districts. Other taxing districts may experience fiscal impacts that limit their total revenue capacity while the urban renewal area is in place. While the urban renewal area is active, a taxing jurisdiction’s revenue from that area will be frozen, and will not increase until revenue-sharing is triggered. So, while an urban renewal area is active, taxing jurisdictions will not receive as much money as they would otherwise have received. In essence, the taxing districts forego some revenue in exchange for a greater total property tax base and revenue capacity as a result of urban renewal investments. The goal of urban renewal is to spur development that would not have occurred but for urban renewal, so when the urban renewal area expires, taxing jurisdictions can expect to receive more tax revenues than they would have had the urban renewal area never existed at all.

In 2009, the Oregon legislature passed HB 3056, which enacted what is known as “revenue sharing”. Revenue sharing requires urban renewal agencies to share increment when certain thresholds are met. The thresholds are tied to the area’s “maximum indebtedness”, or the limit on the amount of debt that the agency can incur in an area. The revenue sharing legislation means that successful urban renewal investments begin creating returns for overlapping taxing districts in advance of an urban renewal area’s expiration.