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Measure 49 Bulldozes Awareness of Other Building
Legislation
New construction excise taxes and growth management
laws pass below the radar
By Eugene
L. Grant
As appeared in “Legal Ease,”
our monthly column in the Daily Journal of Commerce
With Measure 49’s potential to roll back
Measure 37 commanding Oregonians’ attention, other pieces
of legislation that affect growth management are getting lost
in the shuffle. Anyone involved in real estate development should
understand these changes.
The 2007 Legislature enacted House Bill 2051 at Metro’s
request, delaying until 2009 the next urban growth boundary
expansion. Given the greatly reduced demand for new land to
develop, this delay may not hurt developers much.
The delay gives Metro time to adopt urban and rural reserves
in its potential expansion area pursuant to Senate Bill 1011.
The goal is to avoid the many difficulties experienced when
Metro last expanded the UGB. The last expansion generated heated
support and opposition to many of the proposed expansion areas,
and several parties fought Metro’s expansion plans with
extensive and expensive litigation.
These twin bills attempt to minimize the contention and uncertainty
in the UGB expansion process by means of Metro and the affected
counties entering into agreements to determine which land is
suitable for inclusion. The rural reserves will be lands better
suited for long-term forest or farm use. The urban reserves
will be lands better suited to accommodate up to 50 years of
urban growth in metro Portland.
The UGB must contain enough land for 20 years of urban growth
as well as another 20 to 30 years’ worth of land in urban
reserves for a total 40- to 50-year land supply at the time
reserves are established. Metro and Washington, Multnomah and
Clackamas counties together will establish the reserves.
Although these urban and rural reserves may improve the UGB
expansion process, all the contention and uncertainty will now
simply advance to this new reserve designation process.
The extremely high stakes make dispute inevitable. Owners of
lands designated as urban reserves will see market values increase
dramatically; the opposite holds true for those with rural reserves.
With so much money at stake and so many environmental impacts,
the Metro reserve designation will be just as intense as the
last UGB expansion. The real benefit of the expansion postponement,
however, may be that it provides enough time to get through
this inevitable battle before the land is actually needed inside
the UGB.
Schools gain right to tax
Another twin set of bills are SB 336 and SB 1036, which affect
school development. For years, school districts and home builders
battled in the Legislature over control of school district growth
management and whether developers of new subdivisions should
pay charges to finance new schools that accompany growth. Repeated
efforts by the school districts and their supporters to impose
school system development charges on new housing were opposed
and defeated by the home builders in large part due to the Republican
control of either or both of the legislative branches.
In 2007’s Democrat-held Legislature, the school districts
didn’t get a system development charge. But they did win
the right under SB 1036 to impose a construction excise tax
of up to $1 per $1,000 of housing. That means a $400,000 house
will pay $4,000 to the school district, regardless of whether
a student occupies the new home. The rate is 50 cents per $1,000
up to a maximum of $25,000 per nonresidential building. Some
exemptions apply, including ones for low-income housing.
The financial result of the construction excise tax is in many
respects the same as a school system development charge. The
main difference is the maximum dollar amount of the excise tax
as opposed to the very complicated, expensive and often-contested
fiscal impact analysis required to determine the maximum amount
of a system development charge.
Of potentially greater impact on developers is SB 336, which
gives school districts the power to effectively block development
in addition to taxing it. The district can block development
when it believes there is inadequate capacity to service the
students expected from the new development.
Whenever a developer applies for local government approval
of a proposed residential project, schools are asked whether
they have any comments on the application. In the past, a school
district statement of inadequate school capacity was not a legal
criterion on which a city or county could deny a development
application, unless the application would change the property’s
zoning.
SB 336 makes school capacity relevant to all development applications,
dramatically increasing the uncertainty as to whether land may
be developed consistent with its present zoning. This legislation
also requires school districts to coordinate their school growth
planning with cities’ zoning and planning for new residential
development.
Although cities and counties theoretically can approve developments
over the objections of the school district, it would be rare
for a city or county decision-maker to do so and face the wrath
of soccer moms and other school supporters. The upshot is that
school districts can now effectively block new residential development
perceived to exceed school capacity.
For more information, please contact:
This advisory is a publication of the Real Property Group of
Davis Wright Tremaine LLP. Our purpose in publishing this advisory
is to inform our clients and friends of recent legal developments.
It is not intended, nor should it be used, as a substitute for
specific legal advice as legal counsel may be given only in
response to inquiries regarding particular situations.
Copyright ©
2007, Davis Wright Tremaine LLP.
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