Two plans proposed to pay down delinquent local improvement district debt vary in who would suffer in the short term.
The Keizer Urban Renewal Board and Planning Commission will consider the matter at a joint meeting at 6 p.m. Wednesday, Nov. 9 at the Keizer Civic Center.
The proposal favored by city staff is to extend the urban renewal district, which spreads the burden out among the city, fire districts, Marion County and other entities with taxing authority in Keizer.
Councilor Joe Egli prefers the city take on that debt itself, ending the urban renewal district and using about $315,000 in annual revenues resulting from the end of urban renewal to make debt service payments.
“This is a deal that we made with the developer,” Egli said. “It’s not a deal the school district, the fire district or Marion County or the transit district made, it’s not the rest of the districts around us responsibility that the developer is in default. We’re asking them to bear the load, and it’s not right.”
City Manager Chris Eppley said that plan was considered, but was scuttled before the Keizer City Council had its initial work session on the topic. He said it would cause the layoff of four to five employees over the next 20 or so years.
“We analyzed it up front and decided to find other alternatives,” Eppley said. “… Given our very low staffing numbers to begin with, the negative impact to our capacity to perform the missions of our general fund programs [which are] 80 percent public safety, would be extremely large.”
Both proposals call for foreclosing on and taking possession of five parcels owned or controlled by Keizer Station co-developer Chuck Sides. The total debt issued to develop street, sewer and other infrastructure in the shopping center is about $26.8 million; however, much of Keizer Station is now owned by other parties that are continuing to make debt service payments.
Those properties would then be sold to recover at least part of the outstanding debt. Egli’s proposal includes selling those parcels by 2016, while Eppley’s plan could allow the city to sell them at an optimal time in the market.
“We can wait for the market to rebound, bringing the values up much higher, and hopefully fully covering the delinquent principal,” Eppley said.
“It makes us responsible for what we’ve done,” said Egli, who said the plan could still work if the land remained in city hands after 2016. “We’re more likely to speed up foreclosure and we’re more likely to sell the property if we’re fully invested.”
The total owed on the five delinquent parcels is about $8.5 million, although Eppley said that number doesn’t include accruing interest and penalties.
Eppley is proposing an extension of the urban renewal district that would shrink revenues to about 30 percent of what the district is allowed to collect. The remaining 70 percent would go back to taxing entities like Marion County, Salem-Keizer Transit, Keizer Fire, Marion County Fire District No. 1 and others. Urban renewal dollars that otherwise would go to Salem-Keizer Schools are reimbursed by the state.
Eppley said in a series of emails that the issue is not that the city could default on its bond debt prior to 2031, when a final bond payment is due. However, he said the city has been making payments on the principal in addition to required interest payments. Stopping those large principal payments means more interest, he said.
“Interest is charged on the total outstanding principal, therefore if we don’t take action early on, the problem compounds in the later years well beyond the $8.5 million owed in principal on the five delinquent properties,” he said.
Some expenses, like civic center maintenance, currently paid out of urban renewal must be absorbed into the city’s general fund. That leaves about $315,000 of new money coming to the city after the urban renewal district expires, which Egli said could be applied to the bond payments.
A clear loser in either outcome is River Road Renaissance, the business revitalization program that handed out sidewalk and facade improvement grants along River Road. Both proposals call for using all the remaining $1 million in its line item for debt payments. Both proposals could potentially pay back those funds and use them for River Road improvements.
By the numbers
When an urban renewal district is created, property taxes to other taxing entities within the district are frozen, with any increases going to the district. If the district is extended for four years past its expected expiration date, here’s how much local entities stand to give up.
Salem-Keizer Schools: $1,753,240*
Marion County: $1,173,170
City of Keizer: $808,096
S-K Schools Bonds: $534,116
Keizer Fire District: $524,537
Salem Area Mass Transit: $295,076
Chemeketa Community College: $242,723
Willamette Education Service District: $115,060*
KFD Bonds: $52,120
CCC Bonds: $33,157
Regional Library: $31,722
Marion Soil & Water: $19,390