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Oregonian, The (Portland, OR) - Friday, January 3, 2003

Author: ERIC MORTENSON - The Oregonian

Summary: A 10-year waiver to the retail-residential project near Gresham Station will cost the city $355, 000

Developers of The Crossing, a planned five-story apartment building with 24, 000 square feet of retail space on the ground floor, think it will attract young, single people. They don't blush from mentioning it in the same breath as Portland's affluent Pearl District.

The Crossing will have a new MAX light-rail stop at its doorstep. The building will snug up against Gresham Station, the shopping center that has a Borders bookstore, Starbucks, clothing stores such as The Gap and Ann Taylor Loft, and a QFC grocery.

With its eye-pleasing design, it will be a desirable, high-quality project, said Terry Vanderkooy, Gresham's community development manager.

But it will come at a cost. A 10-year property tax exemption granted to The Crossing and to a second-phase office building will cost the city of Gresham $355, 000 in tax revenue and will short Multnomah County by $436, 000 .

The Gresham City Council's Dec. 17 approval of the tax exemption -- the city's fourth such project -- has some people questioning the program's worth.

The exemption, intended to attract transit-oriented development , amounts to $10 for every $1, 000 of assessed value, or two-thirds of the fixed tax rate.

Taxes for schools are assessed and collected, but Gresham, the county, TriMet, Metro and the Port of Portland give up their share for 10 years. The tax break applies to the buildings; land is taxed at the full rate.

Approval of The Crossing's application for a tax exemption came as the city confronts serious budget problems. Property taxes collected by the city are dedicated to emergency services, so any loss in revenue hurts the police and fire departments.

Councilor Hanna dissents

" It strikes me that we're singing two tunes," said Councilor Jack Hanna, who cast the lone vote against the tax exemption. "We need the revenue, and we're giving it away."

The tax exemption is the second subsidy attached to the development . Metro bought the 2.2-acre site for $ 700 , 000 and plans to sell it back to the original owner , Peak Development , for about $ 400 , 000 .

Neighborhood activist Bill Willmes said it shouldn't be necessary to subsidize development at Gresham Station, the successful shopping center along Division Street and Civic Drive.

"If it was in Rockwood, I wouldn't say a word," Willmes said, referring to Gresham's poorest neighborhood.

"My point is, this is going to be developed one way or another, with or without a tax exemption. I feel pretty strongly that anything in Gresham Station is going to be built -- you don't have to give away the kitchen sink."

But city planners and the developers describe the city's policy as a calculated gamble. The tax exemption encourages developers to build higher-quality projects because their initial costs are reduced, they say.

If the building lasts for 50 years and is taxed at the full rate for the last 40, the city recoups the investment.

"Yes, it would eventually be developed, maybe within the next three to five years without too much of a stretch," development manager Vanderkooy said. "But it would be more at the minimum end of the market, with fewer units, and the design would not be as good. The market is just not there by itself."

If that's the case, the city shouldn't manipulate the tax structure to bring it about , said John Charles, environmental policy director for the Cascade Policy Institute, a free-market research center.

"There's no compelling reason to exempt them from property taxes," Charles said. " It raises the burden for everybody else."

Charles said the market doesn't support the type of development that planners favor.

Developer cites expenses

However, the developer said he wouldn't be able to build the apartment project without the tax exemption. The land is zoned for mixed use, which is more expensive to build because the building is taller, requires elevators and must have firewall protection between the retail and residential areas, said Mike Rossman, a partner in Peak Development .

It 's also tougher to obtain financing, Rossman said.

The Crossing will have 80 apartments, most of them studio or one-bedroom units. Five or six shops will be on the ground floor, with parking beneath that.

Construction on the $11 million project will begin in June. The project is expected to generate enough light-rail trips that TriMet will open the MAX station at Civic Drive, which hasn't been used.

Peak Development built Central Point apartments in downtown Gresham, which has 22 units above 3,500 square feet of street-level retail. The project won a governor's Livability award and is one of the four projects built under the tax exemption program.

The others were the Gresham Central apartments at Eighth Street and Roberts Avenue, and the Landmark town houses at Eighth Street and Linden Avenue.

City staff have estimated that Gresham loses about $40, 000 annually in property tax revenue because of the exemptions granted to Central Point and the Landmark town houses. The exemption for Gresham Central was for five years and has expired. That project is taxed at the full rate.

Eric Mortenson: 503-294-5972; ericmortenson@news.oregonian.com

Caption: Illustration

Edition: SUNRISE


Page: C02

Dateline: GRESHAM

Record Number: 0301030030

Copyright (c) 2003 Oregonian Publishing Co.

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