Laserfiche WebLink
Attachment A <br />Potential Financial Incentives for ADUs February 2020 City of Eugene 1 February 12, 2020, Work Session – Item 1 <br />Potential Financial Incentives for Accessory Dwelling Units <br /> <br />Description Legal Issues Administrative <br />Requirements <br />Estimated Cost Reduction <br />to Property Owner <br />Fiscal Impact to City of <br />Eugene <br />A. Property Tax Exemption <br />Property taxes reflect the value of <br />a property, and an improvement <br />as significant as an ADU will affect <br />a property’s assessed value (AV) <br />and increase property taxes. <br />Exempting the increase in taxes <br />associated with constructing an <br />ADU would lower costs for <br />property owners for the exemption <br />period. <br /> <br />An exemption program exists in <br />Eugene for multi-unit properties <br />(MUPTE); its purpose is to <br />encourage the development of <br />multi-unit housing in the <br />downtown. <br />Oregon state law allows cities to <br />create a program that allows a <br />property tax exemption for new <br />multi-unit housing, where the <br />exemption can be for as long as <br />10 years. Its purpose is to <br />promote private investment in <br />transit-supportive multiple-unit <br />housing in transit-oriented areas. <br /> <br />The state law allows the local <br />government to determine the <br />minimum number of dwelling units <br />that are eligible for the exemption. <br /> <br />It is not clear that lowering the <br />minimum number of units to 2 <br />would meet the legislature’s intent <br />for this tax exemption. <br /> <br />Application of the MUPTE to <br />ADUs city-wide would certainly <br />require city code amendments <br />and may require statutory <br />amendments as well. <br /> <br />Affected taxing districts (whose <br />combined rate of taxation equals <br />at least 51% of the total rate of <br />taxation levied on the property) <br />would need to concur with the tax <br />exemption program. <br />Eugene’s MUPTE program <br />requires a proposed <br />development to meet a <br />number of public benefit <br />criteria to be eligible for an <br />exemption: <br /> Documentation showing <br />energy efficiency; <br /> Financial feasibility analysis <br />to show project need; <br /> A plan to show efforts to use <br />local contractors; <br /> Project design; <br /> A $2,400 application fee. <br /> <br />The application is reviewed by <br />a panel of citizens who make a <br />recommendation to City <br />Council. City Council approves <br />an application before an <br />exemption is granted. <br /> <br />Current program requires <br />extensive staff time. Two <br />applications in calendar year <br />2019 used over 500 hours of <br />staff time. The application <br />process takes about 3 months <br />to complete. <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br />About $2,000 per year, over <br />exemption period. <br /> <br />Based on an assumed <br />construction value of $150,000. <br /> <br />Actual assessed values of new <br />ADUs vary widely. ADUs <br />permitted since 2015 have seen <br />property tax increases from <br />$320 to 2,200. <br /> <br /> <br /> <br /> <br /> <br />The City and other taxing districts <br />would not generate property tax <br />revenue during the exemption <br />period. The avoided revenue to <br />the City’s General Fund would be <br />about 40% of the total exemption.