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What is urban renewal?

Urban renewal is a program, codified in state law, designed to help communities improve and redevelop areas that are physically deteriorated, unsafe, poorly planned, under-developed or in need of redevelopment. All fifty states have some form of urban renewal legislation. Though it has undergone many changes since its inception, urban renewal has endured as an effective way for cities and towns to make capital investments into their future.

 

Where does HURA get its authority?

Legislation enabling urban renewal in Idaho dates back to 1965.  (See Idaho Code, Title 50, Chapter 20).  A city can create an urban renewal agency by ordinance.  Once created, they are independent of the city government and, by law, may use tax increment financing to finance development of urban renewal areas.  Hayden Urban Renewal Agency (HURA) was created by the Hayden City Council in December 2005 and will mature December 31, 2029. 

 

How is HURA funded?

Like most urban renewal agencies across the country, the HURA relies on tax-increment financing for funding.  When an urban renewal district is put into place, property tax revenues within the district are separated into two groups: Base and Increment.

 

The Base valuation is the assessed value at the time the district is formed.  The taxing entities collect tax on the base value as they did before the URA district was formed. 

 

The Increment is generated by the increase in assessed value within the urban renewal district from the time the district is created until it is closed.

 

The easiest way to explain how this works is to use a property tax bill example for a theoretical property within HURA that developed during the life of the district.

 

Example: Property within HURA district that was underdeveloped in 2005 and redeveloped into a commercial business with a much higher valuation:

  • 2005 Assessed Value = $400,000

  • 2022 Assessed Value = $5,000,000

Therefore, HURA receives the tax revenue generated by the increment, or the difference between the tax generated by the 2005 assessed value and the current assessed value.  Notice that the tax bill to the property owner is the same either way (i.e. $6,061+$14,889 = $20,950). 

 

Once the HURA district closes, the increase in assessed value in the district will increase the total valuation which opens up the option for decreased levy rates and lower tax burden, particularly for residential properties. Many areas where tax increment financing is used will see no major development for many years without this vital tool.

Do taxes go up because of HURA?

Though this is a complicated question, the short answer is no. All properties within a taxing district, whether they fall within or outside of HURA, are levied at the same rates by the taxing entities. The general idea is that HURA’s activities will help raise property values within the District, translating into more valuable property within the District, which could result in lower overall levy rates when the District closes.  

How are levy rates determined for properties within the district?

Properties are taxed at the same levy rates whether the parcels are located inside or outside of the HURA district boundary.  HURA is not a taxing district.  Tax levy rates are adjusted annually by the taxing districts.   

 

What are some of the effects on a property being in the district?

Property taxes are not affected.  Positive effects include HURA being able to use tax increment financing to improve infrastructure such as parks, roadways, sidewalks, lighting, and sewer lines, finance the demolition of deteriorated structures, and other improvements that meet HURA’s mission.

If HURA didn't exist, would the City have more tax dollars to use each budget year?

No, the City's levy rate is based on the City's budget compared to current assessed value of property outside the district and the 2005 assessed value of properties within the HURA district.  If HURA did not exist, the City's budget would not change; therefore, the levy rate would adjust to compensate and the City’s tax revenue would remain unchanged.

What has HURA used its revenue for since 2006?

HURA has participated in many important efforts to help spur development within the district and assist the City with important infrastructure upgrades totaling more than $4.5 million.  Most notable include:

  • Assisting the City with the 2023 City Hall upgrade which included an elevator

  • Assisting the City in funding designs/studies for infrastructure projects

    • Ramsey Road Sewer

    • Government Way/Miles Avenue signal design​

    • Government Way Corridor Study

    • Hayden Avenue design (US 95 to Government Way)

  • Assisting with public infrastructure that was a barrier to development 

    • Ramsey Road sewer construction in advance of the City's road project​

    • Supplemental funding for Croffoot Park expansion

    • Hayden Avenue Construction (US 95 to Government Way)

    • Purchasing property and developing the parking lot north of City Hall (formerly the Cotton Club that had a fire and was derelict)

    • Supplemental funding for the Government Way downtown revitalization

  • Purchasing property and developing the parking lot north of City Hall

  • Purchasing property and developing the parking lot north of Capones

  • Public Art and benches

  • Purchasing property on the northwest corner of Government Way/Hayden and cleaning it up to be developable

  • Reimbursing a developer for an important sewer line east of US 95 south of Lancaster (developer reimbursed using only 75% of the increment generated by their own property)

  • Purchasing property adjacent to the Owl Café for potential future redevelopment

 

Can HURA use eminent domain?

Idaho Code 7-701A limits and restricts eminent domain for urban renewal or economic development purposes and does not allow appointed boards to exercise eminent domain.  Additionally, Idaho Code 50-2010(a) now states that “if a board of commissioners for an urban renewal agency includes one (1) or more commissioners who are appointed to the board of commissioners, that board may act only in an advisory capacity to the local governing body with regard to eminent domain decisions, and any final decision on the use of eminent domain shall be made by the local governing body that created the urban renewal agency.” Therefore, HURA’s board cannot conduct an eminent domain process. 

 

Typically, for public infrastructure projects, HURA provides financing to the City through agreement.  Therefore, public infrastructure projects are normally City projects that HURA helps fund at the City’s request.   

If Council decides to allow the existing boundary to expand, will the newly included properties have to be declared as deteriorated or deteriorating?

The expanded boundary would need to be determined to meet the criteria in Idaho Code 50-2903(8). Typically, the City would hire a consultant to supplement the existing eligibility study and provide a report of their findings.  Sometimes there is concern about urban renewal eligibility due to a common impression that “slum and blight” must exist in the boundary for it to be eligible. This is not true. The statutes emphasize that, in addition to slum and blight, many other conditions can make an area eligible. These conditions are grouped into two primary types of development: Deteriorated; Deteriorating. These two terms are very specifically defined and, when broken down into their components, identify many causes that may contribute to eligibility of the boundary.

If the existing boundary is expanded, would notices be sent out to property owners within the new boundary (or a public hearing) before declaring the boundary as deteriorated or deteriorating?

Not typically, as there are no adverse impacts to the property owner to be included in the district boundary. The existing boundary meets the eligibility criteria in Idaho Code, but that does not mean that every parcel included within the boundary is in a state of disrepair. Rather, the boundary in its entirety was found to meet one or more of the eligibility criteria in Idaho Code.  Expansion of the district boundary will have no effect on the use of the property, valuation of any individual parcel, or the rights of the individual private property owners. However, being included in the district could allow for HURA revenue to help fund public infrastructure projects that may benefit private property.  For example, HURA could then help fund a road project that improves traffic flow and positively impacts property within the district.  

Can City Council dictate how HURA spends their revenue?

No, the HURA board operates independently from the City Council.  The HURA board is appointed by the City Council and includes a City Council member.  

What is an Owner Participation Agreement?

At times, there are barriers to development or redevelopment of property within the District.  These barriers may be a lack of public infrastructure (sidewalks, curb, road widening, sewer lines, etc) or may be characteristics of the site (environmental concerns, demolition needed of rundown buildings, etc).  The developer may approach HURA with a proposal for HURA to assist by reimbursing the developer with increment generated on their property.  In HURA, generally, the developer is only eligible to receive up to 75% of the increment generated each year.  The remaining 25% goes to HURA for other activities. 

 

Example: A developer wants to construct a restaurant on a property within the district.  However, the existing buildings on the property are rundown and need to be demolished.  In addition, there are environmental concerns on the property and cleanup must be addressed prior to development.  Finally, the City code requires frontage improvements along the frontage of the property (widening of the road, curb, and sidewalk) at the time of development. 

The developer estimates that the valuation of the property will increase once the re-development occurs and approaches HURA with a proposal:

  • Existing Assessed Value: $300,000

  • Estimated Valuation after Development: $2,000,000

  • Environmental Clean-up: $15,000

  • City-required Frontage improvements: $80,000

  • Total Requested Reimbursement: $95,000

The Developer approaches HURA to fund the demo and City public infrastructure improvement.  HURA and the Developer enter into an Owner Participation Agreement for which the developer is entitled to reimbursement through the increment generated on his development. The estimated annual tax is shown as follows:

If HURA agreed to reimburse based on 75% of the increment generated by the property, the developer could receive roughly $4,100 annually until either the total request was fully reimbursed to the developer or the HURA district matures.  In this scenario, it would be unlikely the developer would be fully reimbursed by the end of the District.  However, all the risk to get reimbursed is on the developer.    

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