Wednesday, October 8, 2008

Also on the Waterfront

I'm excited about what's going on at our waterfront, and it's because of more than just our great new park. For many years the city and the Port have butted heads on the future of the largest block of industrial lands in the city, but now there is a plan in place which has both city and Port support. Not to put too fine an edge on it, but we need more than just tourist industry jobs in our city. We have a healthy and growing technology cluster here, and I expect these plans to help encourage its growth. Check out the Gorge Technology Alliance's great white paper on our tech cluster. Also check out the Port of Hood River's report on the waterfront development project. It's slightly dated, but it's still useful.

The Port is concentrating on developing the "core" area of their lands-- basically those bordered by I-84, Portway Avenue, 2nd Avenue, and the Wastwater Treatment Plant. They've chosen not to tackle the thornier issues of how to use some of the waterfront plots until they have some good experience under our belt. Smart move. As a community we can learn from these first steps and then make better decisions about some of the more delicate parcels.

The plan funds infrastructure improvements such as an upgrade to the wastewater treatment plant and road improvements through an urban renewal district. Urban renewal uses a mechanism known as "tax increment financing" (TIF) to pay for improvements. There have been many questionable uses of TIF around the country in recent years, so it's worth discussing what it is and why it makes sense in this case. The basic idea is that undeveloped land does not generate much tax revenue for government. Under TIF, a government can borrow money to put in infrastructure to encourage land to be developed, then pay off that loan using the increased taxes generated by the newly developed land. State law allows any increased taxes to finance certain improvements. Since an empty lot doesn't generate nearly as much property tax as an industrial building, this "increment" can be substantial. Part of the tax bill continues to go to the normal places, but the increment goes back to the urban renewal agency to pay for infrastructure.

The assumption in TIF is that the property would not have been developed otherwise, so it is in the interest of the governmental bodies that receive property tax revenue to agree to the temporary diversion of property tax increases in order to get future tax revenues. All the taxing districts on your tax bill (city, county, school district, transportation district, etc.) will see the taxes generated from the urban renewal district frozen at today's levels until district finishes paying for its infrastructure. The increment in taxes due to greater development pays those bills.

If the property in an urban renewal district would have been developed without the public tax funding of the infrastructure improvement, then the TIF scheme becomes a way to channel tax revenue away from local governments and toward private developers. The tax increment which would have happened anyway doesn't go to benefit our schools and local governments, it goes to pay for infrastructure that private developers should have paid for. Governments have used questionable TIF funding to the benefit of big box stores in many jurisdictions, so it is worth asking, "Why does this project justify TIF funding."

There are two reasons the waterfront district would not get developed without TIF funding. First, the odor from the sewerage treatment plant has made it extremely difficult to keep tenants in the building near the plant, let alone attact new development. The TIF will pay for capping and filtering parts of the plant to get rid of the odors. Second, private developers have been scared away by the decades of political battle over this chunk of land. This agreement between the city and the port is clear proof that we've put that behind us and are moving forward.

I know this was a long entry, but I'll end it with a bold statement: 2008 marks the turning point for the Hood River Waterfront. The Park and the new industrial development will not only transform the waterfront, but the entire city.

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