Budget Message - FY 2007-08 5/07
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WOODBURN
ORE G 0 N
Incorporated 1889
May 19,2007
Urban Renewal Agency Budget Committee
270 Montgomery Street
Woodburn, OR 97071
RE: Proposed Urban Renewal Bud!!et for 2007-08
Ladies and Gentlemen:
Presented for your approval and recommendation to the Woodburn Urban Renewal Agency is
the proposed Urban Renewal budget for 2007-08. The recommended budget of$2,375,695
represents a decrease of$84,305 (3.4%) from the revised budget for 2006-07. The budget will
reimburse the City for the Agency's share of completing the Front Street improvement project.
The budget also supports debt service payments for the borrowing transacted in 2005-06,
maintains a required reserve for debt service, reimburses the City for administrative costs, and
includes a small contingency.
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Statute requires the Agency to expend funds for debt service. Except for the small amount
reserved for contingency, and a reserve maintained for debt service but accounted for in a
separate object, this budget is a debt service budget. The Front Street project is a joint
City/Agency project, budgeted in the City's Capital Plan. The Agency reimburses the City for
its share of costs. Reimbursements are made in accordance with an agreement between the City
and the Agency. Debt was contractually established between the City and the Agency and will
be reestablished prior to June 30, 2007 for another year. Because the tax increment received on
an annual basis was insufficient to fund projects on a pay-as-you-go basis, the Agency borrowed
$1.85 million in 2005-06 to complete Front Street. A debt service payment of $228,000 is
included in this budget. $342,000 more is set aside as a debt service reserve, pursuant to the
borrowing agreement.
No project budgets are recommended for 2007-08. The Agency will adopt project budgets as
borrowing capacity increases in future years. Because the Agency is currently involved in only
one project, and because decisions remain to be made regarding projects to be undertaken in the
future, no Capital budget or CIP plan is presented for 2007-08. This is the last year this budget
will be so abbreviated. A downtown plan is being completed, which will recommend projects
that will form the basis for the Agency's six-year capital plans beginning in 2008-09 and
continuing through the life of the program. The Downtown flan is scheduled to be finished in
September 2007. When it is, and additional financial analysis related to debt timing is done, a
comprehensive Agency budget and capital impmyement plan can be developed.
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Office of the City Administrator
270 AJontgomery Street. \Voodburn, Oregon 97{171
Ph.503-982-5228 . Fax 503-982-5243
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WOODBURN UUAN RENEwAL AGENCY
2007~08 Recommended Annual Program Budget
This budget includes $1,760,000 for the Front Street project, which is $176,000 more than was
approved in 2006-07 and increases by more than $600,000 the Urban Renewal Agency's total
contribution to the project. In theory, these monies are available to be used on the project. The
Urban Renewal plan anticipated funding sidewalk work on Highway 214 that was or will be
financed from ODOT sources. The Plan also included a new connection from Front Street to
Highway 214, which will probably not be built due to wetland and engineering constraints. The
Plan may also include a larger City share in the widening of Highway 214 than will be required.
The Plan represented a snapshot of renewal need in time and is not controlling on a project-by-
project basis. The Agency can dedicate funds to projects that are not in the Plan if those projects
fit into the expenditure categories outlined in the Plan, and the Agency can dedicate more or less
funding to projects identified in the Plan than was originally estimated based on changing needs
and priorities. In reality, however, reprogramming monies to the Front Street project delays the
availability of monies for other uses, such as commercial rehabilitation or housing projects.
Front Street was planned as a three-phase project to underground overhead utility lines, widen
and replace pavement, and install curbs, gutter, sidewalk, lighting and landscaping from
Settlemier Avenue to the high school. Project costs were originally estimated at $2,600,000,
with an Agency share of$2,05l,000. Public Works CIP funds, Traffic Impact Fees (TIFs),
Economic Development loan monies and, potentially, local improvement district funding
rounded out sources needed to build the project. Phase I, from the Settlemier intersection to
Cleveland Street, was completed in 2006 at an Agency cost of $611 ,000 and a total cost of
$925,000. Phase II was intended to underground utilities between Cleveland Street and
Hardcastle Avenue and in the adjacent alley, and complete streetscape work. Phase III, from
Hardcastle Avenue to the high school, was intended to underground utility lines, renovate and
widen the roadway, and install curbs, gutter, sidewalk, lighting, and landscaping. Project costs
for the final two phases were revised in 2006-07 from the original estimate of nearly $1.7 million
to $2.3 million. The Agency's share was increased $140,000 to help offset this increase.
Additional City revenue sources were also dedicated to the project to make up the difference.
During 2006-07, as project engineering and discussions with Portland General Electric (PGE)
progressed, it became clear that changes to the scope of work are required, which further and
dramatically increase project costs. These include the need to reconstruct existing Front Street
sidewalk; to replace sidewalk on side-streets resulting from unanticipated utility undergrounding
in those locations; additional sections that must be undergrounded on side-streets due to PGE's
system configuration; PGE's system conversion charges; and grade changes through the
Hardcastle Street intersection. These changes increase the estimated cost of the project to
$4,091,600.
Staff identified funds to address cost increases, including raising the total urban renewal share of
the project, tapping into STP Exchange monies, drawing from gas-tax resurfacing funds,
increasing the use of TIFs to allowable limits, and seeking a CDBG grant. Together, these
support approximately $3.1 million of the estimated $4.1 million cost. To fund the remainder,
staff proposed grant funding, and requiring PGE to absorb $500,000 through forced
undergrounding. As I write this message, staff is preparing an application for $300,000 in
CDBG funding and has applied for a $250,000 Immediate Economic Opportunities grant from
the State of Oregon. The City Council has also adopted an ordinance establishing a process for
forming underground utility districts, the first step in the forced utility undergrounding process.
These sources still leave a funding gap of approximately $250,000 which may be closed through
additional grant opportunities, or which can be closed by dedicating additional urban renewal
and city funding to the project if it is extended into 2008-09. The City Council will soon
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Urban Renewal
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WOOPBl.1B.N' UJ.lB,AN ],UNliWAI.AGENCY
2007-08 Recommended Annual Program Budget
conduct a public hearing to decide whether it will require PGE and the utilities sharing their
poles to participate in the cost of utility undergrounding. The Council will weigh the benefits of
undergrounding carefully, as a forced conversion will allow some ofthese utilities to pass their
costs on to rate-payers. In the alternative, the Council may decide to forgo undergrounding on a
portion of North Front Street, to reduce project costs by an amount that eliminates the use of
forced undergrounding as a financing mechanism. In either case, amounts included for the
project in this year's urban renewal budget will not change.
At the five year mark, there may be temptation to feel that urban renewal has not done enough to
change the appearance of the downtown. It's important to remember that urban renewal is an
incremental process. Changes occur one at a time, over time. Urban renewal requires time to
build momentum, and it builds momentum in two ways.
First, tax increment increases gradually, until a borrowing can be supported. Then work is done.
While that work is being done and that debt is being serviced, funding increases to build capacity
to borrow again so more work can be done. And so on. Depending on cost, one project, such as
Front Street, may be all an urban renewal agency can afford for a period of years. So it is
important that agencies select projects carefully, to have the greatest positive influence on private
investment. Our Agency has done this, thus far. The Downtown Plaza created a city-center
where none existed, and has had a positive influence in upgrading the appearance of surrounding
businesses. The Plaza is viewed as a pivotal asset and a key attractor to mixed use development
in the Downtown Plan that is currently being drafted. Likewise, the Front Street project is
integral to providing easy access to the Downtown; necessary if more people are going to live in
the area, and if businesses there are to thrive.
Second, private investment must take root, and grow. Urban renewal will not succeed if the
Public is the only actor. The Public's role is to invest in projects that foster private investment.
This means providing infrastructure: streets, utilities, and open spaces - the things public
agencies do best; and the creation of incentives to entice private investors who would otherwise
look elsewhere to generate returns on their investments, until such time as those incentives are no
longer necessary because increasing property values and enhanced economic vitality are
investment incentive enough. Ultimately the success of urban renewal relies on private
investment, willingness to invest in properties and business ventures, the amount or timing of
which cannot be accurately predicted.
The projects the Agency undertakes and the programs it implements must generate the maximum
private investment in the urban renewal agency. This is why a thoughtful and thorough
development strategy, in the form of a downtown plan, is so important. Staff is making a
concerted effort to work with the consulting team and the community to prepare an implement-
able plan that addresses all of the factors that influence private investment in, and the vitality of,
a downtown: traffic circulation, parking, housing mix, development opportunities, design
requirements, partnerships, incentives and financing options, business development, and
marketing. I am excited about this study, and am looking forward to its completion and the
positive effect it will have on Woodburn's urban renewal program. In the meantime, I am
pleased to present this budget to you, and look forward to answering any questions you may have
regarding it.
JCB
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Urban Renewal
WOODBURN UBBAN RBNBWAL AGENCY
2007-08 Recommended Annual Program Budget
DEPARTMENT: URBAN RENEWAL
DIVISION: DEBT SERVICE
FUND: DEBT SERVICE
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PROGRAM DESCRIPTION
This program repays the Urban Renewal Agency's debt obligations. Statute requires that urban
renewal funds be expended to support debt service. Revenues derived from property tax
increment support the fund. Urban renewal agencies do not have permanent tax rates; they
obtain funding through tax increment financing. Tax increment financing allocates revenues to
an agency based on the amount of the urban renewal area's excess or "incremental" value, the
amount of assessed value above a base value that was frozen at a specific point in time.
Woodburn's Urban Renewal frozen base value is based on the 2001 tax year. Urban renewal
does not place an additional burden on taxpayers. Rather, it shifts existing tax growth to the
Agency from the taxing entities that would have otherwise continued to receive it had the
Agency not formed. In Woodburn's case, these entities include the City of Woodburn, the
County of Marion, the Woodburn School and Fire districts, Chemeketa Community College and
the Chemeketa Cooperative Regional Library Service, and the Willamette Special Education
District. Pursuant to State Law, the State of Oregon "backfills" on an annual basis the amounts
shifted away from the School district. Proceeds for 2007-08 are estimated at $493,000. Debt
obligations for 2007-08 are established in two ways: by contractual arrangement with the City of
Woodburn, for charges associated with audit, legal, and consulting services and for the Front
Street project; and for debt service of a $1,850,000, ten-year, obligation entered into with Bank
of America during 2005-06.
. PROGRAM FINANCIAL SUMMARY
ObjectClc1ss
Debt Service
Equity
TOTAL EXPENDITURE
2004-05
Expended
285,947
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285,947
2005.06
Expended
806,758
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806,758
2006.07
Amended
1,823,500
636,500
2,460,000
2006.07
Yr End Est.
520,000
o
520,000
2007.08
Baseline
1,999,500
376,195
2,375,695
2007.08
Recom'd
1,999,500
376,195
2,375,695
Change
($)
176,000
.260,305
.84,305
Change
(%)
9.65%
-40.90%
.3.43%
RECOMMENDED BUDGET
The recommended budget of $2,375,695 for 2007-08 represents a decrease of $84,305 (3.4%)
from the revised budget for 2006-07.
The Debt Service Budget of$1,999,500 increases 9.7 percent over 2006-07 and reflects
budgeting for the Front Street widening and renovation project ($1,760,000). This budget also
supports the cost of servicing the debt incurred in 2005-06 to borrow funds to pay for renewal
projects ($228,000) and reimburses the City for special administrative, legal, and auditing
services supporting the urban renewal program ($6,500).
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Equity for 2007-08 includes a $342,000 reserve for bond indebtedness and a Contingency of
$34,195. The reserve for bond indebtedness represents 150 percent of the maximum debt service
amount, and is required pursuant the Agency's agreement with Bank of America. Contingencies
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Urban Renewal
WOODBURN UBBAN RBNBWAL AGENCY
2007-08 Recommended Annual Program Budget
represent the amount of funding on hand after 2007-08 obligations are met. The budgeted
amount will be reduced in future years, as additional debt, related to new projects and programs,
is incurred.
. POLICY ITEMS (Recommended)
~ $1,760,000 in Debt Service increases the Agency's share of Front Street improvements,
from Cleveland Street to the High School including undergrounding utiliry- lines,
renovating and widening the roadway streetscape, and renovating and installing curbs,
gutters, and sidewalk, and installing landscaping and lighting.
~ $6,500 in Debt Service maintains the Urban Renewal Agency's share of the cost of a
citywide audit ($2,500), and consulting services associated with project planning and
financing (2,500) and specialized legal services ($1,500).
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Urban. Renewal