Item 3: Ordinance on Downtown Urban Renewal Amendment

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Attachment C School District 4j Financial Analysis On March 8, the URA Board requested the City Manager complete an analysis of the financial impact on School District 4j from the Downtown District continuing to collect property tax revenue and, should there be a financial impact, to come back with ways to keep 4j whole, either through the exchange of services or through financial help. The analysis was conducted by City finance staff and the Lane County Assessor, and was reviewed and confirmed by 4j School District finance staff. The analysis concludes that 4j is better off financially if the Downtown District continues to collect tax increment funds than it would be if tax increment financing were terminated. The net benefit to 4j is about $117,000 annually from having the Downtown District in place. Alternatively, 4j would lose about $117,000 annually and gain a one-time payment of $30,000, if the Downtown Urban Renewal District were terminated. An explanation of the three impacts to 4j from Downtown Urban Renewal District tax increment collections are: 1.On-going Operating Funds = on-going gain of <$20,000 if the Downtown District were terminated: The State determines operating budgets for each school district based on the number of pupils. If the money is not available from local property taxes, the State will make up the difference. In FY10, the Downtown District diverted $550,000 of local property taxes that would have gone to 4j. The State made up the difference. If the Downtown District had not diverted those funds, the State would have had the additional $550,000 to allocate as it chose. Had the State chosen to keep the money in education, $20,000 would have returned to 4j to be used for educational purposes based on the applicable statewide school funding formula. The rest would have gone to other school districts around the state. 2.Collection Capability of the Local Option Levy = on-going loss of $137,000 if the Downtown District were terminated: The County Assessor analyzed what would happen if the Downtown District stopped collecting property tax revenue. The County Assessor’s estimate is that 4j would lose about $137,000 of local option levy proceeds annually if the Downtown District were to no longer collect tax increment funds. Local option levy proceeds are extra dollars that 4j can put towards educational purposes that are not offset under the state funding formula. The loss occurs because taxes that are currently counted under the “general government” category for Measure 5 tax rate limitations (i.e., the “school property tax dollars” that now go to urban renewal) would move into the “schools” category. When that happens, the schools category of taxes must be reduced for a number of individual properties within the City because schools are already collecting as much as they can under Measure 5 limits for those properties. State law says that local option levy proceeds are the first to be reduced in the event of compression. 3.Availability of One-Time Funds = one-time gain of $30,000: If the Downtown District were to stop collecting tax increment, there would also be a return of any excess tax increment funds collected by the Downtown District to the overlapping taxing districts. The estimated gross amount to be returned to 4j would be about $1 million. Staff have confirmed with the