AMENDED Agenda Packet 7-24-19 Work Session

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July 24, 2019, Work Session – Item 2 EUGENE CITY COUNCIL AGENDA ITEM SUMMARY Work Session: Implementation of Construction Excise Tax and Use of Affordable Housing Trust Funds Meeting Date: July 24, 2019 Agenda Item Number: 2 Department: Planning and Development Staff Contact: Stephanie Jennings www.eugene-or.gov Contact Telephone Number: 541-682-5529 ISSUE STATEMENT Eugene City Council and State Legislature both recognize traditional funding sources for affordable housing—especially federal sources—have declined over time. The reduction in resources available for affordable housing has challenged our community’s ability to meet the housing needs of Eugene residents with limited incomes. To help address this issue Eugene City Council passed Ordinance No. 20609 (Attachment A) in April 2019 implementing a local construction excise tax that will contribute to an Affordable Housing Trust Fund. The ordinance went into effect on July 1, 2019. During this work session, staff will provide an update on CET implementation as well as a proposed timeline, advisory committee structure, and priorities for the Affordable Housing Trust Fund. The work session provides an opportunity for council input on desired outcomes for use of the funds. BACKGROUND In 2016, Oregon Legislature passed Senate Bill 1533 authorizing Oregon cities and counties to establish a construction excise tax. The law authorizes a city or county to tax new residential and commercial buildings, additions, and alterations. 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. On April 8, 2019, City Council passed an ordinance establishing a local CET. From July 1, 2019, through June 30, 2020, residential and commercial projects will be taxed at .33 percent of the permitted value of eligible improvements. Beginning July 1, 2020, and thereafter, the tax increases to .50 percent. The revenue generated through the CET will accrue in the City’s Affordable Housing Trust Fund to support programs, incentives, and services related to the housing of households earning 100 percent of area medium income and below. In addition, the City intends to designate $500,000 per year of City funds to the Affordable Housing Trust Fund. The first allocation of City funds will occur during the Supplemental Budget process in December 2019.