Approve application under the Multiple-Unit Limited Tax Exemption Program under the Inclusionary Housing Program for 23rd & Marshall Apartments located at 1137 NW 23rd Ave
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 percentage of units within the building.
- PHB received a request for a 10-year property tax exemption under the MULTE Program for the development known as 23rd & Marshall Apartments (the “Project”) and located at 1137 NW 23rd Ave (the “Property”), in conjunction with the City’s Inclusionary Housing Program. The Project, located in the Northwest District neighborhood, will be a mixed-use housing project and will restrict 15 percent of the total bedrooms in the Project to households earning no more than 60 percent of the median family income (“MFI”) at the time of lease-up. Using the reconfiguration option, one studio and two three-bedroom units, which is four percent of the project’s total 74 units, will be restricted to households earning no more than 60 percent MFI. The Owner of record for the property is CE John Properties 71 LLC (“Owner”).
- 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 application.
- PHB has the responsibility for reviewing compliance of applications with the minimum MULTE Program requirements and has concluded that the application for the Project does indeed meet the minimum Program requirements.
NOW, THEREFORE, the Council directs:
- The request for a 10-year property tax exemption under the MULTE Program is hereby approved for four percent of the residential portion of the structural improvements of 23rd & Marshall Apartments, including four percent of residential parking and common areas.
- Approval of the application is provided subject to the Project meeting the following conditions:
- The Project must restrict four percent of its 74 units to households earning no more than 60 percent MFI (the “Restricted Units”). The Restricted Units, through reconfiguration, will consist of one studio and two three-bedroom units.
- The application will comply with the Program requirements established in City Code Chapter 3.103, including the requirement that the Owner sign a Regulatory Agreement and report annually to PHB each tax year that the exemption and restrictions are in effect.
- The Restricted Units will be built to meet all minimum Americans with Disabilities Act and Fair Housing Act requirements. The Project will also be built to ensure at least five percent of the Restricted Units, totaling one, be fully adaptable to become fully accessible per ADA and FHA standards if necessary to accommodate tenants with disabilities.
- The Project must restrict four percent of its 74 units to households earning no more than 60 percent MFI (the “Restricted Units”). The Restricted Units, through reconfiguration, will consist of one studio and two three-bedroom units.
- PHB shall provide a copy of this Ordinance to the Multnomah County Tax Assessor as prescribed by City Code Section 3.103.050 (A).
- If, prior to the completion of construction, the Project is changed in any way that would reduce the number, percentage or distribution of the Restricted Units in the Project, or the approved public benefits provided, Owner must provide written notice to PHB. If such changes still conform to the Program requirements, PHB will amend the Regulatory Agreement. Such amendment would not be subject to City Council approval if changes are minor and would result in substantially the same Project.
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.
For the building associated with this ordinance, below are the IH Program options available to the developer in city code. The option selected by the developer is in bold.
On-Site Units | New Off-Site Units | Existing Off-Site Units | Fee-in-Lieu | |
Units at 80% of Median Income | 11 Units | N/A | N/A | N/A |
Bedrooms at 80% of Median Income | 13 Bedrooms | N/A | N/A | N/A |
Units at 60% of Median Income | 6 Units | 15 Units | 11 Units | N/A |
Bedrooms at 60% of Median Income | 7 Bedrooms | N/A | N/A | N/A |
Units at 30% of Median Income | N/A | 7 Units | 19 Units | N/A |
No IH Units | N/A | N/A | N/A | $1,318,153 |
The developer selected the option to provide eight percent of the building’s 74 units. Using the option to reconfigure the building’s IH obligation into larger type units, the building’s original requirement of two studio, three one-bedroom and one three-bedroom units, will be provided in one studio and two three-bedroom units, which is four percent of the project’s total 74 units, and will be restricted to households earning no more than 60 percent median income for 99 years.
Original IH Unit Requirements (6 IH Units) | Total Bedrooms in Original IH Unit Requirements | IH Obligation utilizing Reconfiguration (3 IH Units) |
(2) Studio (3) One-bedroom (1) Three-bedroom | 7 bedrooms | (1) Studio (2) Three-bedroom |
Because this building is outside the Central City Plan District, the tax exemption will apply to the IH Units.
Overview of building and units:
74-unit building at 1137 NW 23rd Ave
- Market rate units: 71 units
- IH Units: 3 units
Building Unit Summary | Studio | One Bedroom | Two Bedroom | Three Bedroom |
Total | 20 | 36 | 15 | 3 |
Market Rate | 19 | 36 | 15 | 1 |
Restricted at 60% of Median Income | 1 | 0 | 0 | 2 |
Average Square Footage | 428 | 590 | 859 | 1,177 |
Largest Square Footage | 433 | 714 | 904 | 1,177 |
Smallest IH Unit | 419 | - | - | 1,177 |
Regulated restricted rents compared to new construction market rate rents in the same neighborhood:
Building Rent Summary | Studio | One Bedroom | Two Bedroom | Three Bedroom |
Market Rate | $1,643 | $2,171 | $3,238 | $5,259 |
Restricted at 60% of Median Income | $1,119 | - | - | $1,662 |
Monthly Rent Difference | $524 | - | - | $3,607 |
Annual Rent Difference | $6,288 | - | - | $43,284 |
Over the 99 years of required rent 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 developer will pay the $2,550 application activation fee to Multnomah County, should the 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 $39,092 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 $12,900 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:
Estimated total foregone revenue: | $39,092 |
Estimated first year value of the tax exemption: | $4,245 |
Estimated annual value of the tax exemption per IH Unit during the exemption period: | $1,303 |
Estimated annual foregone revenue per IH Unit over 99-year restriction term: | $132 |
Central City Plan District: Yes No
Remaining 5-Year Cap: $12,245,230
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 would result in estimated foregone property tax revenues to the City totaling $12,900 over ten years for 3 units affordable at or below 60% MFI. Total cost to all jurisdictions forgoing revenue is estimated at $39,092. The estimated value of the tax exemption for the first year is $4,245 (all jurisdictions), which equals approximately $1,303 per affordable unit per year of affordability. The City will still benefit from property taxes collected on the improved value of the land during the exemption period. The City will pay Multnomah County the $2,550 application activation fee if the application moves forward.
Agenda Items
1030 Regular Agenda in December 7, 2022 Council Agenda
Passed to second reading
1061 Regular Agenda in December 14-15, 2022 Council Agenda
Passed
- Commissioner Mingus Mapps Yea
- Commissioner Carmen Rubio Yea
- Commissioner Dan Ryan Yea
- Former Commissioner Jo Ann Hardesty Yea
- Mayor Ted Wheeler Yea