This is the second installment of a four-day series examining the urban renewal district proposed for downtown Corvallis on the May 19 ballot.

Sunday: How urban renewal districts have worked in other Oregon cities and towns.

Monday: How the urban renewal district might work in Corvallis.

Tuesday: What projects might be financed in downtown Corvallis by the district?

Wednesday: The cases for and against creating the district.

Read the whole series on our Urban Renewal Web site

Ballots arriving this week in Corvallis mailboxes ask the question: "Shall the downtown Corvallis urban renewal plan, including the use and collection of tax increment funds, be approved?"

So far, city, county and school government have signed on to the plan, but it's up to voters whether the idea has legs.

"Corvallis has a wonderful downtown, but it is at risk, especially in times like these. If not given needed attention, it could decline and fail, becoming little more than an empty shell like downtowns in other cities," said Ward 2 Councilor Patricia Daniels, who represents downtown. "A renewal district provides the means to sustain it in hard times and make it even better in good ones."

Urban renewal creates money for public projects in troubled areas through a system called "tax-incremental financing."

The basic idea is simple: Tax money is directed toward a specific area to fund improvements with the hope of encouraging private investment there.

Any increase in property value in a renewal zone for a set number of years is taxed at the usual rate, but the additional tax money goes to a special account to pay for improvements within the zone. Such improvements might include a parking structure or a streetscape makeover.

The district doesn't impose any new taxes; the money for the district comes from the growing value of property within the zone. The catch is that other beneficiaries of tax money, such as cities or schools, aren't able to take advantage of that growing value.

An urban renewal program in Corvallis has been cooking since August 2006, when the city found that the downtown area contained areas that qualified as "blight" under the state definition, which looks for infrastructure problems, visual appearance and the ratio of building improvements to land value.

That's something that hasn't set well with Ward 8 Councilor David Hamby.

"I've lived in a big city for some time; I've seen blight," he said. "I asked the question several times and was told yes, the area meets the definition."

Under a renewal program, any increase in property value in a renewal zone for a set number of years is taxed at the usual rate, but goes to a special fund to pay for improvements within the zone. Such improvements might include a parking structure, road improvements or public areas.

In December, city councilors disbanded the Downtown Parking Commission and created a Downtown Commission to keep an official eye on planning and supervision.

If an urban renewal program is approved, the commission would advise the City Council, which would likely be the ultimate decision makers and dole out funds for renewal zone projects.

Benton County Commissioners endorsed the urban renewal zone in downtown and south Corvallis in early April, despite reservations.

The county has long been wary of an urban renewal zone, particularly its potential to draw away tax money from the county taxing districts.

"We've got a conflict," said Commissioner Linda Modrell after the commission endorsed the plan. "We're giving up revenue in anticipation of getting some revenue long-term. We're gambling."

The Corvallis School Board endorsed the plan on a 4-3 vote.

Much of the reason elected officials seem to be backing the plan is the caveat that Corvallis voters must approve the zone. State law doesn't require an election to create an urban renewal zone, but such a vote can be required locally, as it is in Corvallis.

That's the tack Hamby said he is taking.

"Because of the implications for downtown and the rest of the city, I'd like the voters to weigh in on their feelings of the importance of downtown," he said.

Urban renewal basics

What does an urban renewal zone do?

Under state law (ORS Chapter 457) cities and counties may create an urban renewal agency with power to propose and act on plans and projects to remove "blight." Examples of blight include buildings that are unsafe or unfit for occupancy or the existence of inadequate streets.

A renewal zone creates money for public projects through a system called tax-incremental financing. The system directs money to fund improvements with the hope of encouraging private investment there.

What is tax-incremental financing?

When a renewal zone is created, any increase in property value within the zone for a set number of years (usually 20) is taxed at the usual rate, but taxes generated from any increase in value are set aside for programs within the zone. Improvements might include a parking structure, a streetscape makeover, or grants to encourage development.

In 2007, there were 55 active urban renewal agencies. All but four were city agencies. There were 84 plan areas located in 23 counties.

How much money are we talking about?

The zone will collect $35 million. Plans expect the district to last through 2030. If the $35 million is collected before then, it will expire. If it takes longer to collect, the district will last until the money is collected.

Will schools be impacted by the zone?

State money for school district operations isn't determined by property tax collections, so per-student funding for schools wouldn't decrease if a renewal zone is put in place.

Under state law, bonds and local option taxes approved by voters after Oct. 6, 2001, are not affected by tax increment financing.

The City of Corvallis, the Corvallis School District and Linn-Benton Community College all have bonds issued before 2001 that would be affected by the renewal district, though downtown contributes a fraction of the $6 billion in property taxed by the county each year.

Who decides where the money goes?

Cities must designate an "Urban Renewal Agency" to plan projects and distribute funds. In Corvallis, the agency would be the City Council, advised by the Downtown Commission.

Ward 2 rep answers questions about the URD

Daniels lays out city's steps in developing the urban renewal plan

Corvallis City Councilor Patricia Daniels represents Ward 2, which includes downtown Corvallis. Daniels is a proponent of the measure that would create an urban renewal zone. The Gazette-Times asked her some specific questions about the plan and its implications.

Why does Corvallis need an urban renewal district?

Corvallis has a wonderful downtown, but it is at risk, especially in times like these. If not given needed attention, it could decline and fail, becoming little more than an empty shell, like downtowns in other cities. A renewal district provides the means to sustain it in hard times and make it even better in good ones.

Why was downtown targeted for a renewal district?

Citizens throughout the community (not just downtown interests) have clearly articulated it as the heart of Corvallis - and thus meriting a special focus - for more than 30 years.

Second, the proposal for a renewal district is the result of more than five years of community input, careful planning, and thorough professional research that included housing, parking and market studies.

Third, a renewal district allows this investment in our downtown to happen with public involvement and according to a plan, with a way to help pay for it, instead of depending solely on the whims of private parties, the vagaries of the marketplace and the unpredictabilities of the larger economy.

The plan area includes the Evanite property. What portion of the tax revenue would be available to the company?

No tax revenue is necessarily available in any specific amount ahead of time, for Evanite or any other property. It is impossible to know what Evanite or some future owner might wish to build on that property, nor can anyone know whether they would request renewal funds nor how much and for what. Finally, all activities and projects requesting any renewal funds would need to meet specific criteria.

Would cleanup efforts there be eligible for urban renewal funds?

No, because any cleanup is the property owner's responsibility and would have to take place before urban renewal funds could be considered.

Does the urban renewal plan include a path through the Evanite property to connect downtown with south Corvallis?

The plan includes funding to help pay for a path to connect downtown with south Corvallis. The plan describes a proposed route through property currently owned by Evanite. However, the plan also provides that if that public access cannot be secured, alternative routing can be considered.

Will projects inside the plan area be exclusively public projects, or will private developers also be eligible for money?

Projects can be either public or private, or a combination of both. Whether public or private, any activity whose proponents request urban renewal funds must meet specific criteria.

What happens if property values inside the zone don't increase at a rate that allows projects to be completed?

First, it is not envisioned that funds from the district would fully pay for most projects. Rather, the funds are more commonly used to pay for part of a project or activity, as an incentive to help the activity or project leverage grant funds or obtain larger amounts of private financing.

Part of the funding projections include debt service. Isn't this a pay-as-you-go plan?

Most districts start out slow, because the funding stream takes time to accumulate sufficient funds. However, once it's clear how the money is coming in, districts can borrow against the predictable revenue in order to get some really good projects done sooner; this is what Albany has done, for example.

How would you address the idea that tax-increment financing "locks-up" property tax money in the downtown area that might be better used elsewhere?

By far the majority of the downtown's taxes would continue to flow to the various taxing jurisdictions. It's true that this financing reallocates a small amount of property tax money to be used in the renewal area. But it's a very small percentage - roughly half of a percent in city revenues.

No real definite projects have been identified for the plan area. Why? Are there any projects that are more likely to be completed?

The whole point is to have a pot of money available to take advantage of opportunities that come up, and we can't very well know in advance what opportunities might arise five or 10 years from now. However, based on cash flow estimates, a few specific activities in the plan are proposed for the first five years.

One is the establishment of a revolving loan fund for structural building improvements, and another is a smaller revolving loan program to help with historic renovations. A third is the creation of an improved, coordinated signage system throughout downtown to direct newcomers to public parking, the Riverfront, Benton County Courthouse and other key downtown locations.

Matt Neznanski can be reached at 758-9518 or matt.neznanski@lee.net