AMENDED Agenda Packet 4-8-19 Meeting

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April 8, 2019, Meeting – Item 3 ix. During the first two years (July 2019 – June 30, 2021), designate City funds, equivalent to the reduction in SDCs, to the appropriate SDC fund. x. Designate $500,000 per year of City funds to the Affordable Housing Fund. xi. Council review of program every two years beginning in 2021. On February 19, 2019, council held a public hearing on an ordinance containing the eleven items listed above. To more accurately reflect the intent that the CET would be entirely offset during the first two years of the CET’s implementation, Section 2 of the February 19 ordinance has been revised as follows: “If the amount of the construction excise tax the person paid pursuant to Section 3.732 exceeds the total amount of City-imposed SDCs owed, the person will not be refunded the excess construction excise tax paid the excess construction excise tax paid will be subtracted from a permit fee the person owes.” Also, to be consistent with how SDC funds are proposed to be kept whole, Section 3 of the February 19 ordinance has been revised to add a second sentence that states: “Similarly, if any amount is subtracted from a permit fee, the City intends to make the permit fund whole by paying with other City funds the permit fee not paid pursuant to Section 2 of this Ordinance.” The ordinance attached as Attachment A to this AIS reflects these two changes to the February 19 ordinance. Regarding implementation of Sections 2 and 3 of the ordinance, it is anticipated that the system development charge for each system (i.e., parks, stormwater, transportation and wastewater, excluding the regional portion of wastewater SDC) will be reduced by a pro-rata share of the CET. For example, if the CET paid by a person amounts to 80 percent of the total city-imposed SDCs owed by that person, for the period of July 1, 2019, through June 30, 2021, the SDC owed for each system will be reduced by 80 percent. BACKGROUND In 2016, the State of Oregon passed SB 1533, which enabled local jurisdictions to adopt a CET to support the development of affordable housing (see Attachment B). A CET is a one-time tax imposed on new construction, where an established tax rate (percentage) is multiplied by the permit valuation of the construction permit. The CET is assessed at the time building permits are issued. SB 1533 allows up to a 1 percent tax for residential construction but sets no limit on a tax rate for commercial construction. To date, at least nine jurisdictions in Oregon have adopted a CET ranging from .33 percent (Bend and Medford) to 1.5 percent (Corvallis, commercial only). A CET would apply to the costs of improvements to residential property that result in a new residential structure or a remodel that adds living space and on improvements to commercial and industrial real property that results in a new structure or additional square footage. Based on Eugene residential and commercial construction activity over the two year period from April 2016-2018, it was estimated that a 0.33 percent CET would generate almost $1.0 million per year, a 0.5 percent CET would generate roughly $1.5 million per year, and a 1 percent CET nearly $3 million per year.