Thursday, March 3, 2016

Update-MY Projection of PDX Construction Excise Tax Annual Revenue Potential: $16.5M to $22.3 Million With $8.7-$9.6M for Portland?

Update: Thanks to input from Bend staff, I corrected the City of Bend CET collections to $602K for the current fiscal year (8 months), my  earlier reference to affordable housing fund included other revenues.

Now that the inclusionary housing bill has been passed by the House I thought it would be interesting to post my educated guess as to the potential annual collection of funds from the construction excise tax portion of the bill.  Local adoption of a robust CET will be a KEY tool to fund the affordable housing made possible by lifting of the statewide preemption on inclusionary zoning. 

Fortunately the CET in place for Metro for the last few years give us a base set of data to use to calculate the possible collections from a local/county CET. (Metro data is found in quarterly financial report HERE).


1. Localities will decide whether to impose a CET and the rate. The max rate for residential is 1%, there is no max rate for commercial. 
2. Implementation cannot start for at least 90 days after the legislature ends. 
3. Construction activity could slow down significantly from the average over the last several years and there could be a rush to get permits before the fee kicks in. 
4. Given relatively small potential CET collections in smaller cities, it is highly unlikely that all cities will adopt a CET. (Although Metro is NOT permitted to adopt this new CET, they already track the values of improvements for their existing CET and would be in a position to report in a more transparent way foregone CET /affordable housing revenue for those local governments who do NOT adopt a CET). 

Metro Wide CET PROJECTIONS Using Multi Year Average ($16.5 M) or 2015 Average ($22.3 M).

The Excel worksheet HERE opens to a worksheet that shows the annual CET collected by Metro over the last few years.  I added a column that shows my calculation of the value of improvements required to generate the tax collected AND a new column showing how much MAY be collected if ALL the jurisdictions shown adopted a 1% CET. 

This spreadsheet shows that since 2008 the average Metro CET was $2 million a year, while a 1% local/county CET would have generated 8.33 times as much or $16.5 million a year.  [The current Metro CET is .12 percent vs max of 1% with the local CET in the inclusionary housing bill].

In 2015 the Metro CET generated $2.6 million a year, while a local/county CET would have generated 8.33 times as much or $22.3 million a year. 

Local Government Annual PROJECTION Using 2015 Activity : $9.6 Million for Portland? 

The 2nd worksheet shows how much CET was collected by local governments in 2015 and I added a column that shows my calculations of the value of improvements required to generate the tax collected AND a new column showing how much WOULD have been collected in 2015  if ALL the jurisdictions show adopted a 1% CET. 

For 2015 the Metro CET generated $2.6 million, with $1.15 million in Portland; under the new CET Portland could have generated 8.33 times as much or $9.6 million a year. The next highest potential CET collection would come from Washington County at $2.7 million a year.

I added a 3rd worksheet that shows Metro CET collections by jurisdiction for FY 2007-2015. Portland's average share for those 11 years was 39.2%, so using that percentage the Portland CET annual projection using a 1% CET would drop to $8.7 million. 


The actual value of the improvements , and the fees collected, could be even higher since the Metro CET excludes affordable housing developments AND limits the maximum fee to $12,000 per project, for projects with improvement values of $10 million or more. [That is a ceiling that makes no sense IMHO]. 

I don't see those types of limits in the inclusionary housing legislation. As I also noted before the CET on commercial construction does not appear to be limited by statute to 1%.

As a frame of reference, The City of Bend has collected $601k so far this fiscal year (8 months). That fee that was 1/5 of a percent but I believe that fee has gone up to 1/3 of a percent. 

Originally created and posted on the Oregon Housing Blog. 

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