Item A: Downtown Development Financial Tools

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C. Tax Exemptions Tax exemptions differ from other types of financial tools because they do not represent a direct expenditure by the City to another party for a development purpose. Instead, they represent foregone tax revenue. The theory behind the tax exemption is that the development would not have occurred “but for” the granting of the exemption. If the project would not have occurred without the exemption, then the tax revenue would not have ever been received. Multi-Unit Property Tax Exemption (MUPTE): MUPTE Summary 10 year property tax exemption on core-area housing investment in 5 or more units Council approves each exemption MUPTE is enabled under state law for the purposes of stimulating the construction of multi-unit housing in the core area, and to ensure use of the core area as a place where citizens have the opportunity to live as well as work. The MUPTE program offers tax exemptions for the construction, addition, or conversion of rental or ownership multi-unit housing within the MUPTE boundary (see Attachment B “MUPTE Boundary”). The exemption is granted on the new investment for a maximum of 10 years. (Land and non-housing value of the project is not included in the exemption). Projects must include a minimum of five new housing units. Tax exemption requests are reviewed and approved by council. Example: The Tate Condominiums The Tate Condominiums received a MUPTE in 2004 for new construction of 47 units. The annual tax exemption (to be granted to condo owners) in 2006 is estimated at $285,000, and is estimated to total $3.2 million over the ten year period. Downtown Eugene Vertical Housing Development Zone: Vertical Housing Development Zone Summary Mixed-Use (ground level commercial and 1 or more levels of housing) 20% tax exemption per housing floor; 80% maximum 10 year property tax exemption Established under state law in 2001, vertical housing development zones encourage dense "mixed-use" development and redevelopment in urban cores. Specifically, an eligible project consists of ground-level commercial with one or more upper floors of residential housing that has been newly constructed, reconstructed or rehabilitated. The Downtown Eugene Vertical Housing Development Zone was established in 2003 and matches the Downtown Plan boundary (see Attachment C “Vertical Housing Development Zone Boundary”). The program offers a 10-year property tax exemption on the new structure, or incremental change in the property value of the building that comprises the project. The program grants a tax exemption of 20% for each floor of housing that is incorporated above ground floor commercial, with a maximum tax exemption of 80% for any single project. Tax exemption requests are reviewed and approved by the State of Oregon. To date, there have been no projects approved in Eugene’s zone. The exemption is effective upon initial occupancy or re-occupancy and does not require council approval. Example:A $25 million 3-story building, with 2-levels of housing would receive a 40% property tax exemption (20% for each floor of housing). Overall, the total annual property tax exemption would be approximately $100,000 and be $1 million over the 10 year period Page 6 of 13