Agenda - Budget Hearing 5/19/2008Woodburn Urban Renewal Agency 2408-09 Recommended Annual Program Budget
BUDGET MESSAGE
Ladies and Gentlemen:
Presented for your approval and recommendation to the Woodburn Urban Renewal
Agency is the proposed Urban Renewal budget for 2008-09. The recommended budget
of $3,022,548 represents an increase of $64b,853 (27.2%) from the revised budget for
2007-08. 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-Ob, maintains a required reserve for debt service,
reimburses the City for administrative costs, and includes a small contingency.
Statute requires the Agency to expend funds for debt service. The budget is comprised of
debt service appropriations, Contingency, and a Reserve for Debt Service (which is
required by the loan agreement}. The Front Street project is a joint City/Agency project
and is budgeted in the City's Capital lmprovement Program. The Agency reimburses the
City for. its share of cosh. 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, 2008 for another year.
Because the tax increment received on an annual basis was insufficient to fund projects
on apay-as-you-go basis, the Agency borrowed $1.85 million in 2005-06 to complete
Front Street. A debt service payment of .$229,000 is included in this budget. $342,000
more is set aside as a debt service reserve, pursuant to the borrowing agreement.
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 2008-09. 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 2009-10 and
continuing through the life of the program. The Downtown Plan should be finished early
in calendar 2009. When it is, and additional financial analysis related to debt timing is
done, a comprehensive Agency budget and capital improvement plan can be developed.
This budget includes $2,050,000 for the Front Street project, which is $290,000 more
than was approved in 2007-08.
The Urban Renewal Plan represented a snapshot of renewal need at a point in time and is
not controlling on aproject-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.
It's important to remember that urban renewal is an incremental process. Changes occur
u.~.. one at a time, over time. Urban renewal requires time to build momentum, and it builds
momentum in two ways.
1 Urban Renewal
Woodburn Urban Renewal Agency 2008-09 Recommended Annua! Program Bud et
g
First, tax increment increases gradually, until a borrowing can be su orted. Then w
is done. While that work is bein pp ork
g done and that debt is being serviced, funding increases
to build capacity to borrow again so more work can be done. And so on. De endin on
cost, one project, such as Front Street ma be all an ur p g
y ban renewal agency can afford for
a period of years; So it is important that agencies select projects carefull to have the
greatest positive influence on rivate investme y~
p nt. Our Agency has done this, thus far.
The Downtown Plaza created acity-center where none existed, and has had a ositive
influence in upgrading the appearance of surroundin b p
g usinesses. 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 rovidin eas
access to the Downtown; necessar if mor p g y
y e 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 rivate
investment. This means providin infrastructure: stre p
g ets, utilities, and open spaces -the
things public agencies do best; and. the.. creation. of incentives to entice rivate investors
who would otherwise Look elsewhere toe p
g nerate returns on their Investments, until such
time as those incentives are no longer necessary because increasing ro ert values and
p p Y
enhanced economic vitality are investment incentive enough. Ultimatel the success of
urban renewal relies on rivate investment y
p ,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 enerate the
maximum private investment in the urban renew g
al area. This is why a thoughtful and
thorough development strategy, in the form of a downtown plan, is so im ortant. Staff is
making a concerted effort to work with th p
e consulting team and the community to prepare
a practical plan that addresses all of the factors that influence private investment in, and
the vitality of, a downtown.
I am pleased to present this budget to you, and look forward to answering an uestions
Yq
you may have regarding it..
Sincerely
~~-~ 4
Scott D. Russell
Interim City Administrator
2 Urban Reneu~a!
Woodburn Urban Renewal Agency
2008-09 Recommended Annual Program Budget
DEPARTMENT: URBAN RENEWAL
URBAN RENEWAL D/VISION: DEBT SERVICE
FUND: DEBT SERVICE
PROGRAM DESCRIPTION
This ro ram repays the Urban Renewal Agency's debt obligations. Statute requires that
p g
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 entitles 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 2008-09 are estimated at $524,000. Debt obligations for
2008-09 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 $1,850,000, ten-year, obligation entered
into with Bank of America during 2005-06.
PROGRAM FINANCIAL SUMMARY
2005.06 2006.01 2007.08 2001.08 2008.09 Change Change
Account Received Received Amended Yr End Est Recom'd ($) (°/°)
Working Capital CO 1,827,695 2,080,548 2,443,548 615,853 33,70°/°
Property Tax 419,961 460,301 493,000 499,000 524,000 31,000 6.29°/0
Interest an Invest 54,857 96,937 55,000 92,000 55,000 0 0.00°/°
Note Proceeds 1,847,650 0 #DIV10!
TOTAL REVENUE 2,322,468 557,238 2,315,695 2,611,548 3,022,548 646,853 21,23%
2005.06 2006.07 2001.08 2007.48 2008.09 Change Change
Object Class Expended Expended Amended Yr End Est Recom'd ($) (°/°)
Debt Service 806,158 267,732 1,999,500 228,000 2,293,000 293,500 14.68°/0
Equity 0 0 376,195 0 729,548 353,353 0.00°I°
TOTAL EXPENSE 806,758 267,132 2,315,695 228,000 3,022,548 646,853 27.23%
3 Urban Reneu~al
Woodburn Urban Renewal Agency 2008-09 Recommended Annual Program Budget
RECOMMENDED BUDGET
The recommended budget of $3,022,548 for 2008-09 represents a increase of $646 853
(27.2%) from the revised budget for 2007-08. '
The Debt Service Budget of $2,293,000 increases 14.7 percent over 2007-08 and reflects
budgeting for the Front Street widening and renovation project ($2,055,000. This
bud et also su }
g pports the cost of servicing the debt incurred m 2005-06 to pay for renewal
projects ($229,000} and reimburses the City for special administrative, legal, and auditin
services supporting the urban renewal ro ram $9 000. g
p g ( )
Equity for 2008-09 includes a $342,000 reserve for bond indebtedness and a Contin enc
of $387,548. The reserve for bond indebtednes g y
s represents 150 percent of the maximum
debt service amount, and is required pursuant the Agency's agreement with Bank of
America. Contingencies represent the amount of funding on hand after 2008-09
obligations are met.
POLICY ITEMS (Recommended)
0 $2,055,000 in Debt Service increases the Agency's share of Front Street
improvements, from Cleveland Street to the High School includin
g
undergrounding utility lines, renovating and widening the roadway streetscape,
and renovating and installing curbs, gutters, and sidewalk, and installing
landscaping and lighting.
0 $9,000 in Debt Service maintains the Urban Renewal Agency's share of the cost
of a citywide audit ($3,000}, and consulting services associated with project
planning and financing ($3,000) and specialized legal services ($3,000).
4 Urban Renewal