A General Overview of Urban Renewal Agencies and Plans
Oregon law allows municipalities to activate an urban renewal agency (“UR Agency”) with power to adopt an urban renewal plan (“URP”) to remove “blight.” In order to activate a UR Agency, a city council must, by nonemergency ordinance, declare that blighted areas exist and a need for an urban renewal agency. The city council must also choose amongst three options provided in ORS 457.045, for the exercise of the UR Agency’s powers. Examples of blight include, without limitation, unsafe buildings, population loss, improper utilization of areas, and inadequate infrastructure. The area where the URP will be carried out is known as the urban renewal area (“URA”).
A URP may include storefront grant/loan programs (e.g., façade improvement), redevelopment grant/loan programs, infrastructure projects, public building development, and assistance to private developers and owners to rehabilitate/redevelop property. Advantages of urban renewal include historical preservation, improved housing, economic growth, and improved quality of life. Some disadvantages result from improper planning and may include displacing persons and businesses unnecessarily and incurring debt without satisfactorily accomplishing desired improvements.
URAs may be financed through tax increment financing (“TIF”). In short, TIF derives from an increase in the assessed value of property in a city over the assessed value at the time the URP was adopted (the “frozen base”). In theory, URA improvements increase assessed property values and ad valorem taxes derived from the increase are used to pay for specific projects in the URA or to repay indebtedness incurred to carry out the projects.
Urban Renewal Plan Contents
The UR Agency proposes a URP, which must include the following:
- A description of each project and an outline of major project activities.
- A map and legal description of the URA.
- An explanation of how the plan relates to local objectives.
- Proposed land uses, maximum densities and building requirements for the URA.
- A description of relocation methods for residents and/or businesses (if applicable).
- A description of property to be acquired by the URA (if any) and how it will be disposed of (e.g., sale or lease), along with an acquisition/disposition schedule.
- The maximum amount of indebtedness to be issued or incurred.
- Possible plan amendments considered to be “substantial amendments,” which require the same notice, hearing and approval procedure required of the original plan.
- If the URP includes a public building, an explanation of the building’s benefit.
The URP must also include a report that contains the following:
- A description of the physical, social, and economic conditions in the URA and the expected impact, including the fiscal impact, of the plan;
- Reasons for the selection of each urban renewal area in the plan;
- The relationship between each URP project and existing conditions in the URA;
- The estimated costs for each project and the sources of funds to pay the costs;
- The anticipated completion date for each project;
- The estimated amount of TIF revenue required for the URA and the anticipated year in which indebtedness will be retired;
- A financial analysis sufficient to determine the feasibility of the plan;
- A fiscal impact statement estimating the impact of TIF; and
- A relocation report in the event residents and/or businesses will be required to relocate.
Urban Renewal Plan Required Recommendations and Concurrence
The UR Agency must send its URP and report to the city’s planning commission for recommendations before presenting the plan to the city council for approval. The UR Agency must also deliver the URP and report to the governing body of each taxing district (e.g., school districts and special districts) affected by the URP. In adopting the plan, the city council must accept, reject, or modify the recommendations of each taxing district. A proposed URP that includes a public building project must satisfy additional legal requirements.
Notice of Hearing
Notice of a hearing concerning a proposed URP must be mailed to each individual or household in one of the following groups:
- Owners of real property that located within the municipality;
- Electors registered in the municipality;
- Sewer, water, electric or other utility customers in the municipality; or
- Postal patrons in the municipality.
If the URA governed by the plan extends beyond the boundaries of the municipality, notice must also be sent to everyone in the selected group who is located in URA.
The notice must state:
- A hearing to consider an ordinance adopting a URP will occur on a specified date;
- The proposed maximum indebtedness that can be issued/incurred under the plan;
- The ordinance, if approved, is subject to referendum; and
- A copy of the ordinance, URP, and accompanying report can be obtained by contacting a designated person within the municipality.
Urban Renewal Plan Approval
The city council may approve the URP by nonemergency ordinance after public notice, hearing and consideration of public testimony, and planning commission and taxing district recommendations. No later than four days following ordinance adoption, notice of the ordinance approving the URP and notice of the presumption of URP validity 90 days after adoption, must be published in a newspaper having the greatest circulation within the municipality.
The adopting ordinance must include the following determinations and findings:
- The urban renewal area is blighted;
- The rehabilitation and redevelopment are necessary to protect the public health, safety, or welfare of the municipality;
- The URP conforms to the city’s comprehensive plan and economic development plan and provides an outline for accomplishing projects proposed in the URP;
- Provision is made to house displaced persons within their financial means;
- If acquisition of real property is provided for, it is necessary;
- Adoption and execution of the URP is economically sound and feasible; and
- The city must assume and complete any activities prescribed it by the URP.
Recording of Approved URP
A copy of the ordinance approving the URP must be sent to the UR Agency. Next, the UR Agency records the URP with the county recording officer.
Powers of the UR Agency
State law empowers a UR Agency to take a broad range of actions necessary to complete URP projects. Some significant powers include the ability to acquire land for redevelopment and the ability to lease or sell such property to private enterprises or public agencies.
Urban Renewal Funding
Urban renewal may be funded through TIF, loans, grants, bonds and selling property. TIF is a common urban renewal financing method. At the time a URP is adopted, a county assessor calculates the total tax assessed value of the area and establishes this value as the “frozen base” for the area. Growth above the base is the “increment.” Tax increment revenues are the property tax revenues generated by the increase in the assessed values over the frozen base. These taxes from the growth in the URA go to the UR Agency for use within the URA.
The amount of borrowed funds an urban renewal area may use is determined by setting a maximum indebtedness. This is the total amount of money that can be used on projects, programs, and administration of the urban renewal area. It is based on balancing the project needs in the area with the timeframe desired for use of the tax increment tool. Interest on any borrowing (bonds, lines of credit) is not counted towards the maximum indebtedness.
TIF Collection
Not later than July 15th of each tax year, the UR Agency shall determine and file with the county assessor a notice (Form OR-UR-50) stating the amount of funds to be raised for the URA.
Financial Statements
Not later than January 31st of each year, a UR Agency must prepare a statement, on the same basis on which its financial statements are prepared, containing:
- The amount of revenue received from TIF and debt issuance during the preceding fiscal year;
- The purposes and amounts for which any revenue received were expended during the preceding fiscal year;
- An estimate of revenue to be received from TIF and from debt issuance during the current fiscal year;
- A budget setting forth the purposes and estimated amounts for which the funds that have been or will be received from TIF and from indebtedness are to be expended during the current fiscal year;
- The maximum indebtedness for the URA, including the amount of indebtedness incurred through the end of the immediately preceding fiscal year; and
- An analysis of the impact, if any, of carrying out the URP on the tax collections for the preceding year for all concerned taxing districts.
The financial statement must be filed with the city council and distributed to each taxing district affected by the URP. Notice must be published that the statement has been prepared and is on file with the municipality and the UR Agency and the information contained in the statement is available to all interested persons. The notice must be published once a week for not less than two successive weeks before March 1st of the year in which the statement is filed. The notice must summarize the contents of the financial statement, except the analysis of the impact, if any, of carrying out the URP on the tax collections for all concerned districts must be set forth in full.
This blog post is not an exhaustive discussion of all legal issues and requirements applicable to urban renewal and should not be relied upon as legal advice. If you are interested in learning more about legal issues and requirements relating to urban renewal, you are encouraged to contact BLJ’s local government law attorneys, Jeremy Green, Garrett Chrostek, Dustin Hawkins, and Sarah Trautman.