Amend approved application under the Multiple-Unit Limited Tax Exemption Program under the Inclusionary Housing Program for Pepsi Blocks Phase 1A, Building A located at 827 NE 27th Ave to decrease the number of restricted units (amend Ordinance No. 190051)
The City of Portland ordains:
Section 1. The Council finds:
- On behalf of the City of Portland, the Portland Housing Bureau (“PHB”) administers the Multiple-Unit Limited Tax Exemption Program (the “MULTE Program” or “Program”), authorized under ORS 307.600-307.637 and City Code Chapter 3.103.
- The MULTE Program provides a 10-year property tax exemption on the residential portion of the structural improvements so long as Program requirements are met. During the exemption period, property owners remain responsible for the payment of taxes on the assessed value of the land and any commercial portions of the project, except for those commercial improvements deemed a public benefit and approved for the exemption.
- The MULTE Program is an incentive provided to developments complying with the City Inclusionary Housing (“IH”) Program, which requires 99 years of restricted rents of a designated percentage of units within the building.
- Ordinance No. 190051, passed by the Council on July 15, 2020, authorized a 10-year property tax exemption under the MULTE Program, in conjunction with the City’s Inclusionary Housing Program for the development known as Pepsi Blocks-Phase 1A, Building A (the “Project”) and located at 827 NE 27th Ave (the “Property”). Using the option to reconfigure, the building’s original requirement of six studio, seven one-bedroom, four two-bedroom and one three-bedroom units, which is eight percent of the Project’s 219 units, would be provided in two studio, four one-bedroom, three two-bedroom and four three-bedroom units.
In addition, the Project voluntarily opted to restrict 31 additional units under Inclusionary Housing to fulfill Inclusionary Housing requirements for future on-site development approved in 2019-183735 LU. The additional Inclusionary Housing units are comprised of five studio, nine one-bedroom, nine two-bedroom and eight three-bedroom units for a total of 44 Inclusionary Housing units, or 20% of the Projects total 219 units. The Inclusionary Housing units would be restricted to households earning no more than 60 percent of Median Family Income (“MFI”) at the time of lease-up (the “IH Units”).
- The developers of the Project have requested to amend their approved MULTE application in order to accommodate a change in the Project’s unit-type mix as well as the removal of the voluntary IH Units. The total number of IH Units has decreased compared to the initial application. The amended application proposes to provide eight percent of the building’s 219 units. Using the option to reconfigure, the building’s base requirement of five studio, nine one-bedroom, three two-bedroom and one three-bedroom units would be provided in five studio and six three-bedroom units, which is five percent of the project’s total 219 units, and will be restricted to households earning no more than 60 percent of MFI at the time of lease-up.
- The MULTE Program has an annual cap limiting the approval of new property tax exemptions to no more than 15 million dollars of new estimated foregone revenue within a five-year period, defined as any current year and the previous four years. There is sufficient cap remaining for the 2022 calendar year to include the Project’s amended application.
- PHB has the responsibility for reviewing compliance of approved applications with the minimum MULTE Program requirements and has concluded that the amended application for the Project does indeed meet the minimum Program requirements.
NOW, THEREFORE, the Council directs:
- The amended request for a 10-year property tax exemption under the MULTE Program is hereby approved for five percent of the residential portion of the structural improvements of Pepsi Blocks-Phase 1A, Building A, including five percent of residential parking and common areas.
- Ordinance No. 190051 is amended as follows:
- The Project must restrict five percent of its 219 units to households earning no more than 60 percent MFI (the “Restricted Units”). The Restricted Units, through reconfiguration, will consist of five studio and six three-bedroom units.
- The Project must restrict five percent of its 219 units to households earning no more than 60 percent MFI (the “Restricted Units”). The Restricted Units, through reconfiguration, will consist of five studio and six three-bedroom units.
- All other portions of Ordinance 190051 will remain the same.
Official Record (Efiles)
An ordinance when passed by the Council shall be signed by the Auditor. It shall be carefully filed and preserved in the custody of the Auditor (City Charter Chapter 2 Article 1 Section 2-122)
Passed by Council
Auditor of the City of Portland
Mary Hull Caballero
Impact Statement
Purpose of Proposed Legislation and Background Information
To ensure Portland has economically inclusive development and neighborhoods, the city requires that new buildings being constructed (with more than 20 units) also provide Inclusionary Housing units (“IH Units”), restricted for 99 years under the Inclusionary Housing (“IH”) Program.
In exchange for providing IH Units, developers receive some benefits, including a 10-year property tax exemption – typically on all residential units in the Central City, or on only eligible rental units restricted under the IH Program outside the Central City.
On July 15, 2020, the Council passed Ordinance 190051 which authorized a 10-year property tax exemption for Pepsi Blocks-Phase 1A, Building A. Under Ordinance 190051, the developer selected to provide eight percent of the building’s 219 units. Using the option to reconfigure, the building’s original requirement of six studio, seven one-bedroom, four two-bedroom and one three-bedroom units would be provided in two studio, four one-bedroom, three two-bedroom and four three-bedroom units, which is six percent of the project’s total 219 units, and will be restricted to households earning no more than 60% median income for 99 years.
In addition, the Project is vested under a Planned Development, 2019-183735 LU, in which there is the potential for a total of five buildings to be constructed on the Site. The developer had elected to utilize On-Site Consolidation, which allows for the IH requirements of each building within a site to be transferred to another building on the same site. Pepsi Blocks-Phase 1A, Building A had been selected as the consolidation building and would have absorbed the transferred IH units from other potential buildings constructed on Site. As the first Building constructed, Pepsi Blocks-Phase 1A, Building, had elected to voluntarily restricted an additional 31 units under Inclusionary Housing, comprising of five studio, nine one-bedroom, nine two bedroom and eight three-bedroom units in the Project. As each subsequent building of the Planned Development came in for permit review, PHB would have reviewed each building for its IH obligations and determined if Pepsi Block-Phase 1 A, Building A could have absorbed the transferred IH Unit obligations.
In total, Pepsi Block-Phase 1A, Building A was originally approved to restrict 44 of the 219 units, or 20% of the residential units under the MULTE Program.
Since the passage of the aforementioned Ordinance, the developers of the building have requested to amend their approved 10-year property tax exemption application in order to accommodate a change in the Project’s unit-type mix as well as the removal of the voluntary IH Units. For the building associated with this amended ordinance, below are the options available to the developer in city code. The option selected by the developer is in bold and highlighted.
On-Site Units | New Off-Site Units | Existing Off-Site Units | Fee-in-Lieu | |
Units at 80% of Median Income | 33 Units | N/A | N/A | N/A |
Bedrooms at 80% of Median Income | 43 Bedrooms | N/A | N/A | N/A |
Units at 60% of Median Income | 18 Units | 44 Units | 55 Units | N/A |
Bedrooms at 60% of Median Income | 23 Bedrooms | N/A | N/A | N/A |
Units at 30% of Median Income | N/A | 22 Units | 33 Units | N/A |
No Inclusionary Units | N/A | N/A | N/A | $4,208,500 |
The developer’s amended application selected the option to provide eight percent of the buildings 219 units. Using the option to reconfigure the building’s IH obligation into larger type units, the building’s original requirement of five studio, nine one-bedroom, three two-bedroom and one three-bedroom units, will be provided in five studio and six three-bedroom units, which is five percent of the project’s total 219 units. The IH Units will be restricted to households earning no more than 60% median income for 99 years.
Original IH Unit Requirements (18 IH Units) | Total Bedrooms in Original IH Unit Requirements | IH Obligation utilizing Reconfiguration (11 IH Units) |
(5) Studio (9) One-Bedroom (3) Two-Bedroom (1) Three-Bedroom | 23 bedrooms | (5) Studio (6) Three-Bedroom |
Because this building is outside the Central City Plan, the tax exemption will apply to the IH Units.
Overview of building and units for Ordinance No. 190051:
219-unit building at 827 NE 27th Ave
- Market rate units: 175 units
- IH Units: 44 units
Studio | One Bedroom | Two Bedroom | Three Bedroom | |
Total | 68 | 85 | 54 | 12 |
Market Rate | 61 | 72 | 42 | 0 |
Restricted to 60% of Median Income | 7 | 13 | 12 | 12 |
Average Square Footage | 570 | 604 | 1,045 | 1,291 |
Largest Square Footage | 653 | 962 | 1,274 | 1,301 |
Smallest IH Unit | 526 | 615 | 829 | 1,281 |
Overview of building and units for amended application:
219-unit building at 827 NE 27th Ave
- Market rate units: 208 units
- IH Units: 11 units
Studio | One Bedroom | Two Bedroom | Three Bedroom | |
Total | 68 | 102 | 37 | 12 |
Market Rate | 63 | 102 | 37 | 6 |
Restricted to 60% of Median Income | 5 | 0 | 0 | 6 |
Average Square Footage | 570 | 853 | 1,144 | 1,292 |
Largest Square Footage | 653 | - | - | 1,301 |
Smallest IH Unit | 526 | - | - | 1,281 |
Regulated restricted rents compared to new construction market rate rents in the same neighborhood:
Studio | One Bedroom | Two Bedroom | Three Bedroom | |
Market Rate | $1,695 | $2,121 | $3,148 | $3,575 |
Restricted to 60% of Median Income | $1,119 | - | - | $1,662 |
Monthly Rent Difference | $576 | - | - | $1,913 |
Annual Rent Difference | $6,912 | - | - | $22,956 |
Over the 99 years of required restriction, market rents will only continue to increase at a faster rate compared to regulated rents.
If this ordinance is not approved by City Council, the development will proceed without any IH Units.
ORS 307.621 and City Code Section 3.103.060(B) state that PHB will take applications to City Council for approval in the form of an ordinance and deliver approved applications to the Multnomah County Tax Assessor. This action meets those requirements.
Financial and Budgetary Impacts
The City paid Multnomah County a $9,000 application activation fee on July 9, 2021 for the first approved application and no further fees are due to Multnomah County should the amended application move forward.
This Ordinance approves a property tax exemption resulting in foregone tax revenue. The total estimated amount of the property tax revenue not collected for the 10 years of the exemption period is valued at approximately $171,565 in today’s dollars, assuming a four percent discount rate and a three percent annual assessment increase. This 10-year estimate includes taxes foregone by the City of Portland, Multnomah County and other entities which receive property taxes within Multnomah County. The reduced amount of property taxes to the City of Portland over the 10 years is roughly 33 percent of that amount, or $56,616. The City will still benefit from property taxes collected on the improved value of the land during the exemption period.
Property Tax exemption value and foregone revenue for Ordinance 190051:
Estimated total foregone revenue: | $549,333 |
Estimated first year value of the tax exemption: | $59,647 |
Estimated annual value of the tax exemption per IH Unit during the exemption period: | $1,249 |
Estimated annual foregone revenue per IH Unit over 99-year restriction term: | $127 |
Property tax exemption value and foregone revenue for amended application:
Estimated total foregone revenue: | $171,565 |
Estimated first year value of the tax exemption: | $18,628 |
Estimated annual value of the tax exemption per IH Unit during the exemption period: | $1,560 |
Estimated annual foregone revenue per IH Unit over 99-year restriction term: | $158 |
Central City Plan District: Yes No
Remaining 5-Year Cap: $12,418,569
Property Management: Not selected yet
Community Impacts and Community Involvement
As the largest taxing jurisdiction affected by the tax exemption programs, Multnomah County has approved the administration of the programs in order to meet shared affordable housing goals.
100% Renewable Goal
Approval of the MULTE does not impact the City’s total or renewable energy use.
Budget Office Financial Impact Analysis
This action amends a previously approved MULTE application and reduces the number of units affordable at 60% AMI from 13 to 11, accommodating a change in the project’s unit-type mix and the removal of voluntary IH units. This significantly reduces the estimated total foregone revenue from $549,333 to $171,565 over 10 years for all jurisdictions, $56,616 of which represents the reduced property tax revenue to the City of Portland.
Agenda Items
564 Regular Agenda in June 22, 2022 Council Agenda
Passed to second reading
593 Regular Agenda in June 29-30, 2022 Council Agenda
Passed
- Commissioner Dan Ryan Yea
- Former Commissioner Jo Ann Hardesty Absent
- Commissioner Mingus Mapps Yea
- Commissioner Carmen Rubio Yea
- Mayor Ted Wheeler Yea