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Fair Growth and Farmlands Project

Read more about a policy concept aimed at protecting farmland and funding costs related to development in urban growth expansion areas.

The Portland Metropolitan region faces several serious challenges to maintaining its livability in the face of growth over the next several years, including a lack of funds to pay for planning and infrastructure in areas added to the urban growth boundary (UGB), the impacts of Measure 37 and continuing loss of farmlands around the UGB.

The Fair Growth and Farmlands Project

The Fair Growth and Farmlands Project was initiated by Metro Councilors Robert Liberty and Carl Hosticka to consider how these challenges could be addressed through a windfall tax placed on the increases in land value that occurs when land is added to the regional UGB.

Rural land lying outside the UGB in the Portland area is zoned primarily for exclusive farm use (EFU), forest conservation uses, or for rural home sites on two-, five- or 10-acre lots. (Areas zoned for rural residential uses are often referred to as “exception areas.”)

When land in these zones is added to the UGB by action of the Metro Council, it increases dramatically in value, by 200, 400 or even 1000 percent, because this government action allows the land to be used for intense urban uses, like subdivisions, shopping centers or office buildings.

The Metro Council decided to study a windfall tax in December 2002. The subject came up again in August 2005 when the Metro Measure 37 Task Force recommended using windfall tax profits to address Measure 37 claims and other regional objectives. Revenues from this source of funds, using a reasonable set of assumptions, could range from $100 million to more than $1 billion over 20 years.

The subcommittees recognized that a tax on windfall profits from UGB expansions would not provide enough revenue to satisfy the various regional needs for which it might be used. However, the revenue from this source could make a substantial contribution to meeting those needs and should be given serious consideration.

Recommendations

The subcommittees recommended that revenue from a tax on the increase in value of land added to the urban growth boundary in future expansion areas should be used:

  • To pay for 80 percent of the cost of concept planning and half of the cost of comprehensive planning for those expansion areas.
  • To pay for new infrastructure (new roads, sewer lines, school buildings, etc.) in the expansion areas.
  • To pay for new or replacement infrastructure in existing communities inside the UGB, preferably in order to fulfill the regional strategy for growth.
  • To provide permanent protection of farmland by the voluntary sale and purchase of development rights for land inside exclusive farm use zones in Clackamas, Multnomah and Washington counties.
  • To create a “fairness fund” overseen by a panel of citizens, to address issues of fairness related to reductions in value caused by government regulations.

The first two of these categories of uses would receive a majority of the funds.

With respect to the tax, the subcommittee recommended:

  • The tax should only become due upon a voluntary act by the developer to develop the property, specifically, approval of an application to develop. As long as the landowner used the land as it was zoned before it was added to the boundary, no tax would be due.
  • The tax should only apply to future urban growth boundary expansions.
  • The tax should be levied on the increase in value of land when Metro adds it to the urban growth boundary so it can be developed. That increase in value would be based on a model of urbanization value gains developed by Metro incorporating fair market value appraisals made by county assessors as well as various other factors.
  • The first 100 percent of profit should be exempt from the tax.
  • Voters must approve the program, including the tax and the uses of the funds.

At this time, this is only a policy proposal; the full Metro Council has not adopted or endorsed any particular policy solution to protecting farmland or funding infrastructure development through a windfall profits tax mechanism. This report is the first step in a longer public dialogue to address funding solutions to pay for growth in UGB expansion areas.

A copy of the full report is available for download below.

Need assistance?

Metro Councilor Robert Liberty
503-797-1552 | 503-797-1793 fax
robert.liberty@oregonmetro.gov

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