City councilors unanimously passed an ordinance establishing a Multiple-Unit Property Tax Exemption (MUPTE) program in Cottage Grove on Dec. 9 in a bid to address Cottage Grove’s housing needs.
The program allows new multi-unit housing developments of three or more units to avoid property taxes on the value of new residential construction for up to 10 years, though the property continues to generate taxes on the land value and any commercial portion of the property.
“This will be a very valuable tool in encouraging more housing and filling the need for housing in the community,” said City Manager Richard Meyers.
According to the city’s adopted program, developers applying to the MUPTE program qualify by including one or more from a list of public benefits such as child care facilities, open spaces, recreation facilities or dedication of land for public use.
The housing must also be located within a quar-ter mile of the Lane Transit District fixed route service, a span which encompasses about 87 per-cent of the city’s urban growth boundary.
Each applicant is subject to a public hearing and must be considered by the council.
The MUPTE program is intended to encourage growth of a broader range of housing by lowering operating costs. It comes to Cottage Grove after a housing needs analysis released this year recommended that the city would have to build 69 units per year to meet its 20-year housing goals.
The housing needs analysis also identified a particular need for housing that is affordable to low- and middle-income households as well as a greater range of housing types.
“It’s desperate out there,” said Councilor Mike Fleck during the council meeting. “I’m here to tell you it’s a huge problem and we need to do something about it. We have also not built an apartment complex in this town since the 1980s. … And we need a carrot to incentivize these kinds of developments.”
While the MUPTE program exempts qualified developments from paying property taxes for up to 10 years, its core theory rests on the idea that the exemption will generate more tax revenue in the long run by making projects financially feasible. Without financial feasibility, the projects may not be built and the city would ultimately miss out on the potential tax revenue. In effect, it would reduce the opportunity cost of a stagnating development rate.
“If you truly have an issue in which lots are not being developed … they are going to sit at their current tax vacancy for a long-term duration,” said City Planner Amanda Ferguson. “[MUPTE] is basically to create an environment in which those larger developments can occur, because otherwise the properties are just going to sit vacant.”
A downtown lot on Main Street between Sixth and Seventh streets, for example, has remained vacant since 1985.
“It’s been really challenging trying to encourage developers, particularly from out of town, to come to Cottage Grove,” said Ferguson. “Because without any recent examples of multi-family having been built, you can’t get any cross-comparables. ... It’s a catch-22 that we’re caught in. We need to figure out some way to change that paradigm to encourage that first set of people who are going to build multi-family.”
Similar programs have been implemented in Salem and Eugene with apparent success. Since 1978, Eugene’s MUPTE program has incentivized 28 residential projects, adding 1,490 units to its housing stock. Salem has seen seven residential projects since 1976, creating 748 units in its downtown core.
The Cottage Grove program is intended to enable a denser downtown as well, which would hypothetically reduce the average vehicle usage in the city and encourage more economic activity in the city center.
Several members of the community have voiced support for the program.
“The high cost of housing in Cottage Grove has restricted growth and has been a hindrance to the health and vitality of our community,” wrote Cottage Grove Community Development Corporation Chair Matt Parsons in a letter to the city. “Allowing for different housing options encourages development, not only for low income, but affordable housing for all.”
Local developer Len Blackstone raised the desperate need for housing in the community at the Dec. 9 City Council meeting.
“The vacancy factor in this community is zero, practically speaking,” he said. “It’s actually negative if there’s the possibility of having negative vacancy because … every year we lose about 15 school teachers in our school district because they can’t find housing.”
Former Mayor Jim Gilroy also spoke in support of the program, encouraging the council to consider the housing health of the community.
Outgoing Chamber of Commerce Executive Director Travis Palmer praised the program as well, citing the program’s strength in addressing the city’s needs.
“Housing is incredibly tight in Cottage Grove,” he said. “We need housing and we need it yesterday.”