Builders intend to sue Metro over tax

Group says funds not being used for their original purpose

By Jim Redden

The Portland Tribune, Nov 12, 2009

JONATHAN HOUSE / TRIBUNE PHOTO

Metro’s construction excise tax was originally targeted to help pay for planning in newly urbanized areas, such as these homes along Northwest Springville Road in Bethany, but the scope of the tax has since been expanded.

Future Portland-area plans are threatened by a dispute between regional land-use planners and a large segment of the construction industry.

At issue is a tax imposed on new construction to help local governments plan for building projects.

The construction excise tax was approved in March 2006 by Metro, the elected regional government charged with managing growth in most of the tri-county area. The tax was created to raise $6.3 million to help fund planning in outlying areas that recently had been brought into the urban growth boundary.

The Metro Council voted to renew the tax in June 2009. At that time, the council expanded the purpose of the tax to include planning in already-developed urban centers and transportation corridors.

“Most of the growth is occurring in centers and corridors, and that’s where most of the money is coming from to pay for the planning,” says Robert Liberty, the Metro councilor who chaired the committee that recommended the changes.

But now, the Home Builders Association of Metropolitan Portland has filed in Multnomah County Circuit Court a request for a legal review to overturn the renewal. Organization President David Nielson says the changes undermine the original purpose of the tax. The HBA was part of a coalition of interest groups that negotiated the tax with Metro in 2006.

“The bottom line is, when Metro proposed the tax three years ago, they got support from our industry and others by promising to use the money to fund planning in the expansion areas,” Nielson says. “Anybody should have a problem with the government creating a tax for one thing and then using it for something else.”

But Liberty says he is not sure there are enough votes on the Metro Council to renew the tax only for planning in the expansion areas.

“Only a few hundred homes have been built in the expansion areas in recent years,” Liberty says. “It doesn’t seem fair to make everyone else pay to plan for them.”

Liberty, however, concedes that without the tax, cash-strapped local governments could have a hard time planning for future growth anywhere within the region.

“It could slow everything down,” Liberty says.

Consensus breaks down

The dispute comes at an awkward time for Metro. The organization is working on an initiative called “Making the Greatest Place” that is intended to determine where and how the region will grow in coming decades. The effort is important because up to 1 million more people are expected to move to the seven-county Portland-Vancouver region by 2030 – with as many as 558,500 expected to live within the urban growth boundary.

But Metro Chief Operating Officer Michael Jordan has said the region must raise billions of dollars to pay for the infrastructure improvements needed to accommodate the additional people. In a report released on Sept. 15, Jordan said the region will need to spend $30 billion or more over the next 20 years to maintain and expand its infrastructure. According to Jordan, at least $10 billion in infrastructure funding must be raised through new taxes or by other means.

At the time, Jordan pointed to the construction excise tax as an example of how the region can come together to create new funding sources.

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