Loading...
HomeMy WebLinkAboutItem C: Ordinance Concerning Real Property Value-Added Charge ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Work Session: An Ordinance Establishing a Real Property Value-Added Charge; Adding Sections 2.100, 2.105, 2.110 and 2.115 to the Eugene Code, 1971; Amending Section 8.005 of that Code; and Adopting a Severability Clause Meeting Date: December 11, 2006 Agenda Item Number: C Department: Planning and Development/City Attorney Staff Contact: Susan Muir/Glenn Klein www.eugene-or.gov Contact Telephone Number: 682-6077/682-5080 ISSUE STATEMENT Under Ballot Measure 37, governments must pay compensation or waive regulations when certain regulations restrict the use of property and reduce its value. The measure did not provide any funding with which to pay those Measure 37 claims. The proposed ordinance would establish a real property value-added charge to be paid when certain regulations increase the value of the property. Such a charge would allow the City to create a fund with which to pay valid Measure 37 compensation claims. BACKGROUND The council’s first work session was held on January 25, 2006, at which it reviewed and discussed four separate options for a possible fee or tax to fund payment of Measure 37 claims. Following additional work sessions, the council directed the City Manager to bring back to the council for public hearing an ordinance that would impose a charge of 25% of the increase in value when the increase was the result of citizen-initiated requests for zone changes, plan designation changes, or a change in the Urban Growth Boundary (UGB). The charge also would be imposed for those actions when initiated by the City or other governmental entity, but only if the property owner submitted some type of application (for example, building permit application) that could not have been approved without the City’s action making a change in the zoning, Metro Plan, Refinement Plan or UGB. On October 16, 2006, the council held a public hearing on the proposed ordinance, which is attached as Attachment A to this Agenda Item Summary (AIS). After discussion and consideration of the testimony presented at the public hearing, the council unanimously approved a motion to leave the record open until 5:30 p.m. on October 30, 2006. In addition, following the public hearing, the council asked a number of questions and directed that a work session be scheduled where staff could return to council with answers to those questions. The balance of this section provides answers to the questions and identifies some of the policy questions raised by the testimony. Some of the questions and comments by councilors also sought amendments to the ordinance. Attached as Attachment B are suggested motions to amend the ordinance based on the requests following the public hearing. Is the real property value-added charge a “land use regulation” that would create new Measure 37 claims? No. “Land use regulation” – for purposes of measure 37 – is defined as a land division ordinance, a zoning ordinance, a transportation ordinance or a comprehensive plan. (The definition also includes L:\CMO\2006 Council Agendas\M061211\S061211C.doc additional types of regulations, but those apply only to the state or the regional government in the Portland metro area.) This ordinance is none of those. Moreover, this ordinance does not restrict the use of property, which is another requirement under Measure 37. Is the charge subject to the property tax limits of Measure 5 and Measure 50? No. Measures 5 and 50 limit “taxes on property.” A “tax on property” is defined for those measures as a charge that is imposed directly on the property itself (like the library local option levy), or a charge that is imposed on the owner of property as a direct consequence of ownership. The real property value added charge is not imposed on the property, and is not imposed on the owner of property as a direct consequence of ownership. Instead, the charge is imposed as a consequence of an “upzoning” that increases the fair market value of the property. Will any of the tasks on the Planning Commission’s work plan potentially create Measure 37 claims? potential Yes. The following high priority work tasks have the – depending on the ultimate policy choices – to include components that could create Measure 37 claims: opportunity siting/infill compatibility standards; mixed use centers; minor code amendments; downtown and courthouse associated projects; south ridgeline habitat study; and Jefferson-Westside Neighborhood Metro plan amendments. For non-requested changes, is the change in value measured at the time of the change, or at the time that the property owner takes advantage of the change? As currently drafted, the ordinance would measure the change in value at the time that the council amends the zone, the UGB or the refinement or metro plan designation. Would a property owner be required to pay too much when property zoned agriculture is rezoned to R-1 (at time of annexation or otherwise), since the Assessor’s Office data on the value of property zone AG underestimates the fair market value of that land? No. Although the ordinance provides a “default” determination on the value of property (which is based on data from the Assessor’s Office), the property owner has the option of rejecting that default determination and submitting an appraisal that provides a more accurate measurement of the property’s fair market value before the zone change (e.g., agriculture) and after (e.g., R-1). The assumption in the question is that property zoned agriculture (if inside the UGB) is already selling for R-1 zoned prices. If that is the case, then the property owner can submit an appraisal demonstrating that fact, and unless the City obtains its own appraisal containing a different value, the value-added charge will be based on the property owner’s appraisal, rather than the default value. (If the City obtains its own appraisal, then the property owner can accept the value in the City’s appraisal, or can request that an independent hearings officer hold a hearing and determine the correct value.) How does the Assessor obtain its data and how accurate is that data? Attached as Attachment C is a memorandum from Larry Hill that answers the question. The Assessor’s data is by no means 100% accurate for every property at every moment in time. From staff’s perspective, the lack of 100% accuracy should not matter since the property owner has the choice of accepting the Assessor’s data, or submitting his/her own appraisal that more accurately identifies the real market values. Does the ordinance limit the use of the funds to payment of Measure 37 claims? The intention – as directed by thecouncil – is certainly to limit the use of the funds. The purpose section L:\CMO\2006 Council Agendas\M061211\S061211C.doc – Section 2.100(1) – states that the purpose is “to develop a fund that can be used to pay compensation when a valid Measure 37 is filed.” The ordinance, however, does not contain an explicit limitation. Amendment 1A on Attachment B would add such an explicit limitation. Can the purpose of the fund be expanded to include use of the funds to purchase conservation easements in order to avoid the filing of and having to pay Measure 37 claims? Yes. The council has the power to impose the value added charge and to use the funds to purchase conservation easements. Amendment 1B on Attachment B would accomplish that purpose, as well as explicitly limit the use of the funds to payment of compensation for valid Measure 37 claims or to purchase conservation easements to avoid Measure 37 claims. Can a property owner pay the charge at the time of sale, rather than at the time of the change in zoning, UGB status or plan designation? As drafted, the ordinance requires payment at the time of the change (for a requested change) or at the time that the owner takes advantage of a change (for a non-requested change). The council could choose to allow a property owner to pay at the time of sale. In order to ensure that the City received payment, staff would recommend that the mechanism for such a deferred payment be similar to deferral of a local improvement district assessment: the property owner is given a choice to pay now, or to sign an agreement that gets recorded on the property requiring payment of the charge (plus interest). Amendment #2 on Attachment B would accomplish that purpose. Does the ordinance exempt land held by public entities or land zoned PL from payment of the value added charge? No. As presently drafted, the ordinance applies to publicly owned, as well as privately owned, land. The council could choose to exempt land held by public entities if it wanted to do so. Should the ordinance exempt zone changes which will conform a property’s zone to the property’s Metro Plan designation? The ordinance does not contain such an exemption, but the council could choose to exempt such zone changes. Should the ordinance apply only to those applications for amendments (to a property’s zone, UGB status, or designation in the Metro Plan or a refinement plan) that are submitted after the effective date of the ordinance? As presently drafted, the ordinance would apply to any application that is pending as of the effective date of the ordinance. The council could choose to have the ordinance apply only prospectively: i.e., only to those applications that are submitted after the effective date of this ordinance. Should the ordinance apply only to “requested” changes, and not to “non-requested” changes? As presently drafted, the ordinance applies to both. The council could choose to delete the provisions related to non-requested changes. Should the council postpone action on the ordinance until after the 2007 legislative session and after a work group of interested parties (including such parties as 1000 Friends of Oregon, appraisers and the Home Builders Association) can work with staff to develop an improved-version of the ordinance? In the weeks following the public hearing, Susan Muir was contacted by Rob Zako and Rick Duncan requesting an opportunity to meet to discuss some possible deficiencies in the ordinance. During and L:\CMO\2006 Council Agendas\M061211\S061211C.doc after that meeting, there were suggestions that adoption of the ordinance be postponed so that further agreement on portions of the ordinance could be achieved. With additional time, and an opportunity to see what the 2007 Legislature does, an ordinance might be developed that can have more widespread support. RELATED CITY POLICIES As previously indicated, creation of a fund to pay compensation for valid Measure 37 claims could help the City preserve its regulatory authority under its Land Use Code (Chapter 9). COUNCIL OPTIONS The council may: 1. Adopt the ordinance as drafted; 2. Amend the ordinance and then adopt it; 3. Provide direction to schedule another work session on the proposed ordinance following the 2007 legislative session; or 4. Take no further action. CITY MANAGER’S RECOMMENDATION In light of the suggestion from a variety of interested parties for more time to improve the ordinance, the City Manager recommends that the council defer action on this ordinance. SUGGESTED MOTION I move that this ordinance be scheduled for a work session following the 2007 legislative session. ATTACHMENTS A. Proposed Ordinance. B. Requested amendments C. Memo from Larry Hill regarding Assessor data. FOR MORE INFORMATION Staff Contact: Susan Muir, Executive Director Telephone: 682-6077 Staff E-Mail: susan.l.muir@ci.eugene.or.us City Attorney: Glenn Klein Telephone: 682-5080 Staff E-Mail: glenn.klein@harrang.com L:\CMO\2006 Council Agendas\M061211\S061211C.doc ATTACHMENT A ORDINANCE NO. __________ AN ORDINANCE ESTABLISHING A REAL PROPERTY VALUE-ADDED CHARGE; ADDING SECTIONS 2.100, 2.105, 2.110 AND 2.115 TO THE EUGENE CODE, 1971; AMENDING SECTION 8.005 OF THAT CODE; AND ADOPTING A SEVERABILITY CLAUSE. Section 1, The following caption and Sections 2.100, 2.105, 2.110 and 2.115 are added to the Eugene Code, 1971, to provide: REAL PROPERTY VALUE-ADDED CHARGE 2.100 Real Property Value-Added Charge – Establishment. (1) Purpose. Measure 37 requires governments either to compensate property owners when certain regulations reduce the real market value of real property, or to waive those regulations. Sections 2.070 through 2.095 of this code establish a process for the city to follow in processing those Measure 37 claims. Measure 37, however, does not provide any funds to pay compensation. Under certain circumstances, the city takes regulatory action that increases the real market value of real property, including changes in the zoning of real property and changes in a property’s designation in the Metropolitan Area General Plan (“Metro Plan”) or a refinement plan. When a property owner requests such a change, or takes advantage of such a change initiated by the city, the city should receive a portion of that increase in value in order to develop a fund that can be used to pay compensation when a valid Measure 37 claim is filed. (2) Charge Imposed. A real property value-added charge is imposed on the increase in real market value, measured as set forth in subsection (4), whenever the city approves one of the actions listed in subsection (3) after [the date of adoption of this ordinance]. The amount of the charge shall be equal to 25% of the increase in real market value resulting from the action. (3)Regulatory Actions Triggering Charge. (a) The charge created by subsection (2) shall be imposed on the following actions when requested by the property owner or by someone on behalf of the property owner: 1. A zone change; 2. An amendment to the Metro Plan or refinement plan designation for the property; or 3. An amendment to the Urban Growth Boundary (“UGB”). (b) Where a zone change, amendment to the Metro Plan or refinement plan designation, or amendment to the UGB was Ordinance - 1 ATTACHMENT A not requested by or on behalf of a property owner, and instead was initiated by the city or another governmental entity, the charge shall not be imposed at the time of that change or amendment. Instead, the charge shall be imposed if, and at the time that, the property owner submits an application to the city for an approval – such as a development permit, as defined in section 9.0500 of this code, or land use approval - that could not be approved but for the zone change, Metro Plan or refinement plan amendment or UGB amendment. (4) Measure of Increase in Real Market Value, The increase, if any, in the real market value of the property shall be measured by the change in the real market value of the land under its new zone, designation or UGB status, as compared to its real market value under its prior zone, designation or UGB status. The change in real market value shall be determined as provided in section 2.105 of this code. 2.105 Real Property Value-Added Charge – Determining Changes in Real Market Value. (1) The city manager shall adopt an administrative rule pursuant to section 2.019 of this code that establishes a per acre real market value for different zones and plan designations for property inside the city. The values adopted by the manager shall be based on the median real market value per acre for land in the city with that zone or designation according to data maintained by Lane County Assessment and Taxation. The city manager may update the values contained in the administrative rule whenever the manager determines that the most recent assessment and taxation data justifies updating the administrative rule. (2) Except as provided in subsections (4) through (7) of this section, the per-acre values established by this administrative rule shall be used to determine the value of the property following the change in zoning, plan designation or UGB status, by multiplying the applicable per-acre value times the acreage of the property subject to the zone change, or amendment to the plan designation or UGB. (3)Except as provided in subsections (4) through (7) of this section, the pre-change value of the property shall be equal to the real market value assigned to the land by Lane County Assessment and Taxation immediately prior to its rezoning or redesignation. (4) If a property owner disagrees with the real market values as determined under subsections (1) through (3) of this section, the property owner may obtain and submit to the city an appraisal for the property from an appraiser certified by the State of Oregon as a General Appraiser. The appraisal must comply to the maximum extent possible with the Uniform Standards of Professional Appraisal Practice, and shall include appraised amounts for the property both Ordinance - 2 ATTACHMENT A (a) prior to the change in zoning, plan designation or UGB status, and (b) subsequent to the change. (5) If a property owner obtains and submits an appraisal as provided in subsection (4) of this section, then the city shall either accept the values contained in the appraisal, or obtain its own appraisal. If the city accepts the values, then the value-added charge shall be based on the difference between the pre-change and post-change values contained in that appraisal. If the city chooses to obtain its own appraisal, the city’s appraisal shall meet the same standards as required for the property owner’s appraisal. (6)If the city chooses to obtain its own appraisal, the city shall provide to the property owner a notice of determination as to the real market values and a copy of the appraisal on which that determination is based. Within 15 days following the property owner’s receipt of the city’s determination and appraisal, the property owner shall decide whether to (a) accept the real market values as determined by the city, or (b) appeal the issue in accordance with section 2.021 of this code. Unless the owner submits the appeal under section 2.021 within 15 days of the receipt of the city’s determination and appraisal, the city’s determination shall be final and not subject to further review. (7)If the property owner submits a timely appeal request under section 2.021, a hearings officer shall hold a hearing and issue a decision on the change in value. The hearings officer’s decision shall be the city’s final decision on the matter. 2.110 Real Property Value-Added Charge – Requested Changes . (1) At the time a property owner or someone on behalf of a property owner submits an application for a zone change, plan amendment or UGB amendment, the applicant shall deposit with the city: (a) The amount of the charge as determined in accordance with subsections (1) through (3) of section 2.105 of this code; or (b) The amount of the charge based on an appraisal performed under subsection (4) of section 2.105 of this code, together with a copy of the appraisal required under that subsection. If the application for a zone change, plan amendment or UGB amendment is denied, the amount of the charge deposited shall be returned to the applicant. (2) If the applicant fails to deposit the charge as required by subsection (1), the city manager shall determine the amount that is due based on subsections (1) through (3) of section 2.105 of this code, and shall send written notice of that determination to the property owner. The amount due as determined by the city manager in accordance with subsections (1) through (3) shall be final, unless the property owner appeals that determination pursuant to section 2.021 of this code. Ordinance - 3 ATTACHMENT A The sole basis for an appeal shall be that the manager erred (a) in applying the administrative rule adopted under subsection (1) of section 2.105, or (b) in reviewing the information from Lane County Assessment and Taxation related to the most recent determination as to the real market value. For purposes of this appeal, the real market values contained in the administrative order and in the records of Lane County Assessment and Taxation shall be conclusively presumed correct. No appraisal or other information may be presented to or considered by the hearings officer. The city manager shall forward the notice of determination of the amount of the charge and requirement for its deposit to the applicant. The notice shall contain a statement that failure to submit the deposit by the date set forth in the notice will result in the imposition of a lien against the applicant’s property, which shall be recorded in the city’s lien docket. (3) If the applicant submits a deposit under subsection (1) of this section based on an appraisal, the city manager shall inform the applicant, as provided for in subsection (5) of section 2.105, whether the city accepts the real market values contained in the applicant’s appraisal. If the city does not accept those values, and if the final determination of real market values (after the city obtains an appraisal and possibly after a hearing) establishes values that result in a greater change in value than calculated by the applicant, the applicant shall submit the additional value-added charge that is due. Failure to do so shall result in the imposition of a lien for the additional amount due, which shall be recorded in the city’s lien docket. 2.115 Real Property Value-Added Charge – Non-Requested Changes. (1) Purpose. This section governs the imposition of the real property value-added charge when the change in zoning, plan designation or UGB status is not one that had been requested by or on behalf of the property owner. In this situation, the charge shall be imposed only if a property owner decides to seek a regulatory approval – such as approval of a development permit, land division, or other land use permit – that could not be approved if the change in zoning, plan designation or UGB status had not been approved. (2) The city shall forward to a property owner who becomes subject to a real property value-added charge as a result of an action initiated by the city under section 2.100(3)(b) a notice identifying a potential real property value-added charge. The charge will not become due and payable until such time as the property owner takes some action such as the submission of an application for a development or land use permit that relies upon and takes advantage of the city-initiated action. If there are multiple city-initiated actions involving the same Ordinance - 4 ATTACHMENT A property occurring at different times, the charge shall be computed for each individual action as though it were being imposed at that time. The notice shall be recorded in the city’s lien docket as a potential future charge upon the property. (3) Upon receipt of a notice under subsection (2), a property owner who disagrees with the city’s valuations may appeal the city’s determination to a hearings officer in accordance with the provisions of section 2.021 of this code. The decision of the hearings officer is final. If the hearings officer’s decision establishes a different amount of value-added charge than initially established by the city manager, the lien recorded in the city’s lien docket shall be corrected to reflect the amount established by the hearings officer. Section 2. Subsection (11) of Section 8.005 of the Eugene Code, 1971, is amended to provide: 8.005 Administrative Code . (11) Applications for permit. To obtain a permit, the applicant shall complete and file an application and related materials as required by the city manager in regulations developed pursuant to this code. If the property is subject to a real property value-added charge under sections 2.100 through 2.115 of this code, no application may be submitted, or accepted by the city, unless the applicant has paid to the city the amount of the value-added charge. Section 3. If any section, subsection, sentence, clause, phrase, or portion of this ordinance is for any reason held invalid or unconstitutional by any court of competent jurisdiction, that portion shall be deemed a separate, distinct, and independent provision and that holding shall not affect the validity of the remaining portions of this Ordinance. Section 4. Notwithstanding the effective date for imposing the real property value-added charge as set forth in the proposed section 2.100(2), the charge shall be imposed with respect to any application for a zone change or change in plan designation pending upon the effective date of this ordinance. The City Manager shall forward to any such applicant a notice setting forth the amount of the real property value-added charge based on subsections (1) through (3) of section 2.105 of the Ordinance - 5 ATTACHMENT A Eugene Code, 1971. Any such applicant may choose to accept that amount, or alternatively, obtain and submit to the city an appraisal pursuant to section 2.105(4). In the event that the applicant submits such an appraisal, then subsections (5) through (7) of section 2.105 also shall apply. No development permit, as defined by section 9.0500, shall be issued until the charge has been deposited with the city. Section 5. The City Recorder, at the request of, or with the concurrence of the City Attorney is authorized to administratively correct any reference errors contained herein or in other provisions of the Eugene Code, 1971 to the provisions added, amended or repealed herein. Passed by the City Council this Approved by the Mayor this ____ day of ____________, 2006 ____ day of ______________, 2006 ___________________________ _____________________________ City Recorder Mayor Ordinance - 6 ATTACHMENT B Motion 1A – (Explicitly limits use of funds): Move to amend the last sentence of Subsection (1) of Section 2.100 to provide: “When a property owner requests such a change, or takes advantage of such a change initiated by the city, the city should receive a portion of that increase in value in order to develop a fund for payment of valid Measure 37 claims. The use of the funds received shall be limited to the payment of compensation for a valid Measure 37 claim.” [NOTE: ONLY Motion 1A or 1B should be made, but not both.] Motion 1B – (Expands purpose for use of funds to include purchase of conservation easement, and specifically limits use of funds to payment of claims and purchase of conservation easements): Move to amend the last sentence of Subsection (1) of Section 2.100 to provide: “When a property owner requests such a change, or takes advantage of such a change initiated by the city, the city should receive a portion of that increase in value in order to develop a fund for payment of valid Measure 37 claims and purchase of conservation easements in order to avoid Measure 37 claims. The use of the funds received shall be limited to the purchase of such conservation easements or payment of compensation for valid Measure 37 claims.” Motion 2 – (Allow payment at time of sale): Move to amend Section 2.110 by adding a new Subsection (4) and amending the lead sentence of Subsection (1) to provide: “(1) Except as provided in subsection (4) of this section, at the time a property owner or someone on behalf of the property owner submits an application for a zone change, plan amendment or UGB amendment, the applicant shall deposit with the city:” “(4) In lieu of the deposit and payment required by subsection (1) of this section, an applicant may elect to enter into a deferral agreement provided by the city that requires payment of the charge, plus interest, upon the sale of the property. The agreement shall be recorded in the Lane County Records.” Move to amend Section 2.115 by adding a new Subsection (4) to provide: “(4) A property owner who becomes subject to the real property value-added charge under this section may elect to enter into a deferral agreement provided by the city that ATTACHMENT B requires payment of the charge, plus interest, upon the sale of the property. The agreement shall be recorded in the Lane County Records.” Move to amend Subsection (11) of Section 8.005 to provide: (11) Applications for permit. To obtain a permit, the applicant shall complete and file an application and related materials as required by the city manager in regulations If the property is subject to a real property developed pursuant to this code. value-added charge under sections 2.100 through 2.115 of this code, no application may be submitted, or accepted by the city, unless the applicant has paid to the city the amount of the value-added charge or has entered into an agreement provided by the city that defers payment of the charge. ATTACHMENT C Central Services Finance Division Financial Analysis City of Eugene th 100 West 10 Ave, Suite 400 M Eugene, Oregon 97401 EMORANDUM (541) 682-8417 (541) 682-5802 FAX www.ci.eugene.or.us Date: December 11, 2007 To: Mayor Piercy and City Councilors From: Larry Hill, Senior Financial Analyst, 682-5722 Subject: Accuracy of the Real Market Values Assigned to Property, with Regard to a Proposed Ordinance Establishing a Real Property Value-Added Charge. This memo follows up on a question raised at the October 16, 2006 public hearing concerning the accuracy of the Real Market Values. The proposed ordinance directs City staff to identify the Real Market Value of subject property under the property’s current zone/plan designation, and estimate the average A&T Real Market Value for the property under the proposed new zone/plan designation. The Charge would be based on the difference between the two values. Lane County Assessment & Taxation property value data would be used, together with data available through LCOG on property zoning and plan designation. I have asked Lane County Assessment & Taxation (A&T) to describe the accuracy of the Real Market Value (RMV) assigned to property. Deputy Assessor Anette Spickard replied as follows: "We are required by law to set the values of all property in the county to 100% of real market value as of January 1 each year. We conduct mass appraisal and value large groups of similar properties together. We use all three approaches to valuation; income, cost, and market, depending on the type of property. Our data is accurate as of January 1 each year within + or - 10% on an individual property which is the expected standard within the appraisal industry. If an owner disputes our accuracy, they appeal to the Board of Property Tax Appeals and present evidence to show how our value is incorrect. The Department of Revenue validates and confirms the [statistical] accuracy of our real market values each year through the Assessor's Ratio Study.... So, in response to your question "how accurate is our RMV?" my answer is very accurate to the extent that you remember our values are intended to reflect a single point in time, January 1, for property taxation purposes only. Our values are not to be used in lieu of a private fee appraisal for real estate financing, lending, banking or other transaction purposes. Our values are not intended to reflect "real-time" market values of a property. For example when taxpayers receive their tax statements at the end of this month, the RMV listed is as of 1/1/2006, which is already 10 months out of date and was based on market activity from 2005 which was different than the market that is occurring today." In summary, A&T’s RMV for a property will generally lag current RMV by a year or more, and with continuing increases in property values we can generally expect that current RMV will be higher on average than will be reflected in A&T data. Note also that at the time each year’s values are established it is possible that an individual property’s actual RMV may vary by as much as 10% from the RMV assigned by A&T.