Chapter 3.104 Property Tax Exemption for New, Multiple-Unit Housing

Charter, Code & Policies

Divisions

Site Map

News

City Code & Charter Policies & Rules (PPD)

POL

Government

Elected Officials

Auditor Griffin-Valade

Charter, Code & Policies

City Code & Charter

Online Code & Charter

Title 3

Chapter 3.104 Property Tax Exemption for New, Multiple-Unit Housing

Table of Contents (Printable Version)

-Note
3.104.010 Eligible Property.
3.104.020 Pre‑application Conference.
3.104.030 Application Procedure.
3.104.040 Public Benefits.
3.104.045 Approval Criteria.
3.104.050 Review of Application.
3.104.055 Rate of Return Analysis.
3.104.060 Exemption.
3.104.070 Termination.
3.104.080 Extension of Deadline.
3.104.085 Program Review.
3.104.090 Implementation.

-Note

(Substituted by Ordinance No. 162854, effective Mar. 22, 1990.)

3.104.010 Eligible Property.

(Amended by Ordinance Nos. 170667, 178286 and 179844, effective December 21, 2005.) To be eligible for the property tax exemption provided for by this Chapter a structure must meet all of the following criteria:

A. Be a multiple-unit structure having 10 or more dwelling units, and that include design elements benefiting the public as described in this Chapter and approved by City Council, including new construction and structures converted in whole or part from other uses, but not designed, used or intended to be used as transient accommodations, hotels or motels.

B. Be constructed after July 1, 1975, and completed on or before January 1, 2012; and

C. Located within either of the following described areas:

1. The Central City Plan District boundary as shown on Map A. Portland City Code Chapter 33.702; or

2. Within the boundaries of any urban renewal or redevelopment area formed pursuant to ORS Chapter 457.

D. Demonstrate that property tax abatement is required to achieve economic feasibility for the residential use intended.

3.104.020 Pre‑application Conference.

(Amended by Ordinance No. 182671, effective May 15, 2009.)

A. An applicant shall request a pre‑application conference with the Bureau of Planning and Sustainability, and at least 14 days prior to the date scheduled for the conference the applicant shall submit, on forms provided by the Bureau, the following:

1. A schematic drawing, showing the site plan, including major features and dimensions of the proposed development;

2. A statement describing the location of the proposed development; the number, size and type of individual dwelling units; the dimensions of the multiple‑unit structure(s), public and private access; parking and circulation plans; the source of water and proposed method of sewage disposal; landscaping; proposed residential and nonresidential uses; and a description of the public benefit prescribed in 3.104.040.

B. Prior to the conference, the Bureau shall review the information supplied and contact, for purposes of facilitating the application process, those bureaus, bodies, or other governmental agencies which may be affected by, or have an interest, in the proposed development.

The applicant shall meet with staff and discuss the proposed development. Thereafter, the Bureau shall provide the applicant with a summary of the meeting, including recommendations designed to assist the applicant in the preparation of the exemption application.

3.104.030 Application Procedure.

(Amended by Ordinance Nos. 170667, 171977, 179487 and 182671, effective May 15, 2009.)

A. A person seeking an exemption under the terms of this Chapter, shall apply to the Bureau of Planning and Sustainability not later than September 1 of the calendar year immediately prior to the first assessment year for which the exemption is requested. The application for the exemption shall be on forms prescribed by the Bureau and include the following information:

1. The applicant’s name, address and telephone number;

2. A legal description of the property and property account number;

3. A detailed description of the project including the number, size and type, of dwelling units; dimensions of the multiple‑unit structure(s), parcel size, proposed lot coverage of buildings, and amount of open space; type of construction; public and private access; parking and circulation plans; the source of water and proposed method of sewage disposal; other utilities requirements; landscaping; proposed residential and nonresidential uses; a description of the public benefit(s) prescribed in 3.104.040 included in the project. The applicant shall provide cost comparisons and market studies if requested.

In addition, the application shall contain a detailed construction and development cost analysis, sources and uses of funds analysis, operating income and expense analysis, and projected ten-year operating cash flow analyses for two scenarios: (1) modeling the project's operations with the tax abatement and (2) modeling the project's operations without the tax abatement. Each of these projected ten-year operating cash flow analyses shall include a calculation of the internal rate of return for the project. Internal rate of return is the annual discount rate, expressed as a percent, on a series of annual cash flows at which the net present value of an initial investment is equal to zero. The foregoing economic analyses shall be used to demonstrate the applicant’s economic need for the tax exemption. In determining this economic need the Portland Development Commission shall verify the applicant's projected internal rate of return for the project based on invested cash, equity, economic conditions, and other related factors as prescribed in Section 3.104.050 B.

4. A description of the existing use of the property, including if appropriate a justification for the elimination of existing sound and rehabilitable housing;

5. A site plan and supporting maps, drawn to a minimum scale of one inch equal to 16 feet, showing the development plan of the entire project including streets, driveways, sidewalks, pedestrian ways, off street parking, loading areas, location, design, and dimension of structures, use of land and structure(s), major landscaping features, existing and proposed utility systems, including sanitary and storm sewers, water, electric, gas and telephone lines; and

6. Such other information required by state or local law or otherwise which is reasonably necessary to effectuate the purposes of this Chapter.

B. Concurrent with the submission of the application, an application fee as determined by the Bureau of Planning and Sustainability and the Portland Development Commission shall be required. In addition to the application fee, the applicant may be required to pay such other reasonable costs, including appraisal costs, incurred by the Assessor in processing the application. The Bureau of Planning and Sustainability shall collect any additional cost and pay the Assessor for the additional costs.

3.104.040 Public Benefits.

(Amended by Ordinance Nos. 178740 and 179487, effective August 10, 2005.)

A. Purpose. The purpose of this Section is to achieve the type of higher density, transit oriented development in the Central City and urban renewal areas desired by the adoption of this Chapter in addition to furthering other public policy goals of the City and the County. Therefore, a number of options are presented to the applicant in order to achieve one or more public benefits.

B. All rental projects containing more than 15 units applying for the exemption under the terms of this Chapter must include within the project and for a term of up to 15 years, but in no event less than the term of the exemption, at least 15 percent of the units for rent at rates which are affordable to and restricted to households earning 80 percent or less of the area median income. These affordable units shall be subject to an Extended Use Agreement (EUA) requiring that they be rented in accordance with these rent and income restrictions for a period that is 5 years longer than the tax abatement period (for example, a 10-year tax abatement period would result in a 15-year EUA). The EUA will be recorded against the property and will appear as a lien on the property's title. Compliance with the EUA shall be certified by the owner to the Portland Development Commission on a yearly basis. The EUA will be administered as described in Section 3.104.055.

1. For the units affordable to households earning 80 percent or less of the area median income under the terms of this Chapter, the units must be rented to households whose incomes do not exceed 80 percent of the area median income upon initial occupancy of the unit by that household. Subsequent monitoring of the incomes of these households is not required until the affordable unit again becomes available for rent, at which time it must be rented to an income qualified household earning 80 percent of the area median income for the remaining term of the property tax exemption, unless another unit has subsequently been rented at an equivalent affordable rate to a qualified household so that the project continues to comply with all provisions of this Section.

2. Measurement of household income shall be determined using the U.S. Department of Housing and Urban Development’s, or its successor agency’s, annual household income for the Portland Metropolitan Area for a family of one person (for a studio apartment), two persons (for a one-bedroom apartment), three persons (for a two-bedroom apartment), or four persons (for a three-bedroom apartment). Affordability shall be defined as a rental rate, which does not exceed 30 percent of the monthly gross income for a family earning 80 percent or less of the area median income.

C. All projects containing housing units available for individual purchase shall receive the property tax exemption only for those for-sale units which are available at an initial purchase price which does not exceed 95 percent of the Federal Housing Administration mortgage maximum for a single unit in the Portland Metropolitan area. The unit must be sold to a household earning no more than 100 percent of the area median income for a family of four as established by the U.S. Department of Housing and Urban Development, or its successor agency, during the year of sale in order to retain its property tax exempt status.

1. In order to qualify for this exemption, such units must be owner-occupied during the term of the exemption. Should any unit become available for sale during the term of the exemption, it must be sold to a household earning no more than 100 percent of the area median income for a family of four as established by the U.S. Department of Housing and Urban Development, or its successor agency, during the year of sale in order to retain its property tax exempt status.

D. In addition to the applicable provisions of Sections 3.104.040 B. and C. above, the project must include at least one of the following:

1. Open spaces available to the general public;

2. Day care facilities;

3. Permanent dedications for public use;

4. LEED Silver certification from the US Green Building Council;

5. 20 percent of the rental units have 3 or more bedrooms;

6. A total of 25 percent of the rental units are affordable to households at 80 percent MFI; or

7. Other public benefits approved by the Planning Commission and the City Council. The City Council shall specify the public benefit which is to be included in the proposed project. If the applicant fails to agree to include the public benefit as specified by the Council, the application shall be denied.

3.104.045 Approval Criteria.

An application may be approved if the reviewing body finds:

A. The construction includes one or more design elements specified in Section 3.104.040;

B. The construction project will at the time of completion, conform with the provision’, of Titles 24, 32, 33, 34, and the Comprehensive Plan; and

C. The applicant has complied with 3.104.010, 3.104.020, 3.104.030, and 3.104.040.

3.104.050 Review of Application.

(Amended by Ordinance Nos. 178740, 179487 and 182671, effective May 15, 2009.)

A. The Bureau of Planning and Sustainability shall send the Portland Development Commission a copy of the application within 10 days of its submission to the Bureau.

B. The Portland Development Commission shall thereupon review the application for economic feasibility and economic need and make a recommendation within 60 days thereafter recommend to the Planning Commission that the application be approved, denied, or approved subject to conditions. If the anticipated internal rate of return for the project for the period of the exemption exceeds ten percent, the Portland Development Commission shall recommend that the application be denied.

C. Within 60 days of the recommendation of the Portland Development Commission, the Planning Commission shall review the application to determine whether the proposed development is consistent with the City’s Comprehensive Plan. A recommendation shall thereafter be forwarded to the City Council that the application be approved subject to those conditions necessary to achieve the purposes of this Chapter. The Planning Commission shall specify in its recommendation to the Council the scope and nature of public benefit recommended for the proposed project.

D. The City Council shall review the application within 180 days of the date of application and approve, deny, or approve subject to conditions. Copies of the application shall be supplied the City Council at least 14 days prior to the Council’s review. Final action upon the application shall be in the form of an ordinance or resolution that shall include: the owner’s name and address; a description of the multiple‑unit housing; the legal description of the property and the Assessor’s property account number; and all conditions imposed and upon which approval of the application is based.

E. If the application is denied, a notice of denial shall be sent to the applicant within 10 days following the denial. The notice shall state the reasons for denial.

F. If the application is approved, the Bureau of Planning and Sustainability shall on or before the ensuing April 1 file with the Assessor a copy of the ordinance or resolution approving the application.

G. If the application is approved, the recipient(s) of the tax exemption must agree to a condition of approval to provide financial information to the Portland Development Commission by July 1 in years 5 and 9 of the tax exemption and two years after the tax exemption has expired. The purpose of this requirement is to provide information to the Planning Commission and City Council for their review of the program described in 3.104.085. The Bureau of Planning and Sustainability will notify tax exemption recipients and the Portland Development Commission 60 days in advance of the reporting requirement. Recipients will submit the required information on the Portland Development Commission’s Electronic Operating Statement (EOS) or similar form that might replace the EOS. Portland Development Commission staff will review the statement and prepare a report within 60 days that will then be forwarded to the Bureau of Planning and Sustainability. Bureau of Planning and Sustainability staff will periodically convey these reports to the Planning Commission for use in their review described in 3.104.085.

3.104.055 Rate of Return Analysis.

(Added by Ordinance Nos. 179487 and 182671, effective May 15, 2009.)

A. The owner shall provide financial data on an annual basis to the Portland Development Commission for each tax year that the exemption is in effect. The financial data shall be provided to the Portland Development Commission no later than 120 days from the close of the owner's fiscal year. The financial data shall include, but is not limited to, full project-based financial statements, Internal Revenue Service tax information, a ten-year operating cash flow statement showing actual cash flow for all prior years and the current year and shall include a to-date calculation of the internal rate of return for the project, and any other information deemed necessary by the Portland Development Commission to calculate or otherwise evaluate the owner's internal rate of return for the project.

B. For each year of the exemption, the Portland Development Commission shall prepare an annual analysis of the owner's financial data within 90 days of receipt of all required financial data from the owner. The analysis shall include a to-date calculation of the internal rate of return for the project. The Portland Development Commission shall calculate the internal rate of return by the same method utilized in its initial recommendation for the tax abatement.

C. The Portland Development Commission shall advise the owner annually in writing as to whether the financial analysis demonstrates that the projected internal rate of return for the project will exceed ten percent for the entire exemption period and could result in an Accrued Payment Liability ("APL") as calculated pursuant to Section 3.104.055 D.

D. The EUA will be terminated at the end of the tax abatement period, if the internal rate of return for the project is less than or equal to 10 percent.

If the 10-year internal rate of return for the project is greater than 10 percent, then:

1. the EUA shall be maintained on a portion or all of the units covered by the EUA as calculated in Section 3.104.055; or

2. the property owner shall pay an APL that shall be paid as calculated pursuant to this Section.

If as a result of the analysis prepared after the final year of the exemption, the Portland Development Commission has calculated that the internal rate of return during the term of the exemption has exceeded ten percent, the Portland Development Commission shall notify the Bureau of Planning and Sustainability. The Bureau of Planning and Sustainability shall send a notice to the last known address of the owner stating that the owner, at its option, shall either pay the APL to the City in order to have the EUA terminated or, alternatively, be subject to the EUA for the remainder of the EUA as calculated in this Section.

The amount of the APL shall be equal to (1) the net present value, using a 10 percent annual discount rate of the difference between the project's actual annual cash flows over the abatement period and the proforma projected cash flows for the project that would provide a 10 percent internal rate of return for the abatement period or (2) equal to the maximum amount of property taxes that would have been assessed if no exemption had been granted, whichever is less.

If the internal rate of return for the project is calculated to be greater than 10 percent and the project owner elects not to pay the APL, then the EUA will be maintained on the number of units required to reduce net present value, using a 10 percent annual discount rate, of the project's projected market-rate (unrestricted) annual cash flows, during the 5-year EUA period after the end of the tax abatement period, by an amount equal to the APL.

3.104.060 Exemption.

(Amended by Ordinance Nos. 170667 and 179487, effective August 10, 2005.)

A. Except as provided for under Subsection 3.104.060 B., multiple-unit housing for which an exemption has been approved under the terms of this Chapter shall be exempt from ad valorem taxation for up to 10 successive years beginning July 1 of the year immediately following the calendar year in which construction is completed, determined by that stage in the construction process when, pursuant to ORS 307.330, the improvement would have gone on the tax rolls in the absence of the exemption provided for in this Chapter. The exemption shall not include the land upon which the project is located, nor any improvement(s) not part of the multiple-unit housing except those improvements deemed a public benefit as specified in 3.104.040. The exemption provided in this section shall be in addition to any other exemption provided by law.

B. In the case of a structure converted in whole or in part from other uses to multiple family, only the increase in value attributed to the conversion shall be subject to the exemption

3.104.070 Termination.

(Amended by Ordinance Nos. 170667, 178286, 179487, 179844 and 182671, effective May 15, 2009.) If, after an application has been approved under this Chapter, the City finds that the work was not completed on or before January 1, 2012; that any provision of this Chapter has not been complied with; including a determination by the Portland Development Commission as provided in Section 3.104.055 that the internal rate of return for the project exceeds ten percent for the exemption period; or that any agreement by the owner or requirement imposed by Council is not being satisfied, the Bureau of Planning and Sustainability may send a notice of proposed termination of the exemption to the owner’s last known address.

A. The notice shall state the reasons for the proposed termination, and shall require the owner to appear before the City Council at a specified time, not less than 20 days after mailing the notice, to show cause, if any, why the exemption should not be terminated.

B. If the owner fails to show cause why the exemption should not be terminated, the City Council shall adopt an ordinance or resolution terminating the exemption A copy of the ordinance or resolution shall be filed with the County Assessor and a copy sent to the owner at his last known address, within 10 days after its adoption.

C. If the owner does not seek review of the termination of an exemption pursuant to ORS 34.010 to 34.100, upon final adjudication, the county officials having possession of the assessment and tax rolls shall correct the rolls in the manner provided for omitted property under ORS 311.205 to 311.235, to provide for the assessment and taxation of any property for which exemption was terminated or modified by the City or by a court, in accordance with the finding of the City or the court as to the assessment year in which the exemption is first to be terminated. The County Assessor shall make such valuation of the property as shall be necessary to permit such correction of the rolls. The owner may appeal any such valuation in the same manner as provided for appeals under ORS 311.207 to 311.213. Where there has been a failure to comply with ORS 307.670, the property shall become taxable beginning July 1 of the calendar year in which the noncompliance first occurred. Any additional taxes becoming due shall be payable without interest if paid in the period prior to the 16th of the month next following the month of correction. If not paid within such period, the additional taxes shall be delinquent on the date they would normally have become delinquent if timely extended on the roll or rolls in the year or years for which the correction was made.

3.104.080 Extension of Deadline.

(Amended by Ordinance Nos. 170667, 178286 and 179844, effective December 21, 2005.) Notwithstanding the provision of 3.104.070, if the City finds that construction of the multiple-unit housing was not completed by January 1, 2012, due to circumstances beyond the control of the owner, and that the owner has been acting and could reasonably be expected to act in good faith and with due diligence, the City may extend the deadline for completion of construction for a period not to exceed 12 consecutive months.

3.104.085 Program Review.

(Added by Ordinance No. 178740, effective October 8, 2004.) The Planning Commission will review the program requirements every five years and make a recommendation to City Council on possible changes to the program. This review will take into consideration the information gathered from tax exemption recipients as required by 3.104.050 G. and any other information the Commission considers relevant.

3.104.090 Implementation.

(Amended by Ordinance No. 182671, effective May 15, 2009.) The Bureau of Planning and Sustainability and the Portland Development Commission shall establish procedures and prepare forms for implementation and administration of this Chapter.