Saturday, June 20, 2015

MUPTE: Investing in a Better Downtown Eugene

The 13th & Olive project by Capstone Collegiate Communities, a beneficiary of Eugene's Multi-Unit Property Tax Exemption (my photo)

I attended the June 8 MUPTE Matters public forum hoping to learn from all sides of the debate regarding whether the City of Eugene should reinstate the controversial property tax exemption program it suspended in 2013. I left the meeting further convinced of the need to revive MUPTE but also disappointed the discussion did not feature more of its most vocal opponents. 
The intent of the Multi-Unit Property Tax Exemption (MUPTE) program has been to stimulate the construction of multi-unit housing in the core area and to ensure its use as a place where citizens have the opportunity to live as well as work. The City did this by offering developers who otherwise might choose to build anywhere but within downtown Eugene up to a 10-year exemption on property taxes based on the value of the improvements. The program has delivered mixed results since it was first enacted in 1977. 
Emceed and moderated by Rick Dancer, the MUPTE Matters forum did feature varied points of view regarding MUPTE from five panelists; however, each emanated from the same general perspective. All of the speakers are strong proponents for using a focused property tax exemption like MUPTE to achieve long-term, comprehensive city planning goals. 
The panel included:

In particular, Mia Nelson (who, along with Joshua Skov, would subsequently author a highly persuasive opinion piece for the June15 edition of The Register-Guard) convincingly recited reasons why MUPTE is desirable and necessary to encourage the development of housing in the downtown core. These included:
  • Land use: The City of Eugene expects to see as many as 40,000 new residents arrive over the next couple of decades. Upholding the seven “pillars” of Envision Eugene, the city’s plan to accommodate this population growth, would be difficult at best without making the best use of the land we have available within the urban growth boundary. Without MUPTE, developers might choose to locate projects on the periphery of the urban area at odds with the city’s goals and the best interests of our community and neighborhoods. 
  • The need for downtown housing: Notably, Eugene currently lacks an adequate pool of market-rate housing options located in its central core relative to cities of similar size elsewhere in the country. Ultimately, it will be a critical mass of residents that dictates the continued economic vitality and vibrancy of downtown. 
  • The economics of development: Building downtown is more costly than building elsewhere and presents unique challenges (i.e. construction staging). Many desirable projects simply do not “pencil out” without the benefit of the property tax exemption.(1) Revenue from multi-unit housing in Eugene is currently not high enough to encourage the construction of market-rate apartments and condominiums in our downtown core without the benefit of incentives.

I’m convinced the best return on investment for public coffers comes when smart and sustainable development occurs downtown. Experience has taught us we can’t rely on the marketplace alone to ensure this happens. Density provides the biggest bang for our buck even if that bang must be deferred to make it happen at all. Typically, the tax yield from a single acre of dense, multi-use, downtown development far exceeds that of many acres of sprawling suburban housing, strip-malls, or big-box stores. Which would you rather have? Hundreds of thousands of dollars in additional tax revenue per year after expiration of a temporary tax waiver? Or do you prefer a much lesser amount in perpetuity because developers are reluctant to construct desirable projects on the same site without the waiver? 
Although conspicuously absent at the forum, the arguments in opposition to MUPTE are familiar enough: 
  • “MUPTE only lines the pockets of greedy developers.”
  • “Look at all the student housing that’s been built. We don’t need anymore.”
  • “MUPTE favors larger projects and developers.”
  • “It’s unfair! I built something (outside of the MUPTE boundaries) and I didn’t get anything.”
  • “Development downtown will happen anyway.”
  • “MUPTE doesn't guarantee construction of affordable housing.”
  • “MUPTE diverts millions of dollars of tax revenues from the city, county, and schools.”
  • “Capstone!”
Ah, Capstone. For all the wrong reasons, many Eugeneans now associate the huge 1,300+ bed student housing project with MUPTE. I blogged about it in 2012 before any shovels had broken ground. From the beginning, I believed it was way too large and for better or worse would impact the character of our downtown for a long time. I must have been prescient. As built, the project is a disappointment. The troubled development could be one reason why the City Council may choose to saddle MUPTE with crippling changes or scuttle the program altogether. 

As Rick Dancer said, Eugene seems to spend a lot of time planning out of fear of change or making a mistake. He’s seen what bad decisions in the past have led to. Too often they paralyze us. He’d rather see us learn from mistakes like Capstone and move forward. That’s why he has great hope for the new generation of young professionals and leaders who will shape the future of Eugene’s downtown. In his opinion, they’re the ones who are optimistic and willing to build upon the successes, rather than the failures, of a program like MUPTE. I share Rick’s hope and do find the surge of youthful confidence in our city very encouraging. 

I wish the opponents to MUPTE turned out to provide a more balanced forum. If they did, I might have witnessed the substantive reasoning necessary to convince me the underlying premise for using property tax exemptions as a development tool is flawed. I might have heard ideas about how the city can practically realize an effective MUPTE that also addresses such concerns as the need to provide more workforce housing. To date, I’ve yet to be swayed in a compelling fashion by MUPTE opponents.

I do remain wary of relying too heavily upon imperfect planning tools shaped by imperfect, albeit well-intentioned, human beings. The dynamics of development and the factors that contribute to achieving a livable community will always be far too complex to effectively and flawlessly codify and regulate. Regardless, I do believe incentivizing the type of development we want for our downtown—as opposed to doing nothing at all—is necessary if we want the best possible outcome for Eugene. 

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This past Monday, June 15, the Eugene City Council conducted a public hearing on the subject of possible MUPTE revisions. Under the council’s proposed new rules, student apartment complexes would not be eligible for the waivers, local contractors would have to be hired to work on projects, and developments would have to meet energy efficiency and environmental building standards. My understanding is the council will meet again on July 8 and eventually vote (later this fall?) to either reinstate the incentive or sunset it permanently.

(1) A case in point is former Eugene mayor Brian Obie’s proposed $67 million mixed-use Market District development to be located next to the 5th Street Market. Without MUPTE, Obie says the project will not be as large or dense, and likely result in fewer market-rate apartments than originally intended.

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