Washington County approves reduction in transportation tax

In a welcome reprieve for the local development community, the Washington County Board of Commissioners voted 4-1 yesterday afternoon in favor of a temporary rate reduction for the new transportation development tax (TDT) that took effect earlier this year.

Approval of county ordinance 729 will give developers a one year reduction of 20 percent on TDT charges assessed on new homes and commercial development projects permitted after July 1, 2009.  Developers who have already paid the tax will be eligible for credits on construction projects permitted between July 1 and December 1, when the new ordinance is scheduled to take effect.

Adoption of the new county ordinance is expected to reduce the amount of tax applied to single family residential developments by $920 each during the first year.  For retail shopping centers, the tax reduction will save $1147; medical clinics will be spared $2,269; and new office buildings will be reduced by $886 until next July.  

County leaders agreed to review the tax credit in April 2010 to determine whether further credits are still needed.  Currently, the county TDT rates are scheduled to be reduced by 10 percent on July 1, 2010 and by five percent on July 1, 2011.  Assuming the local economy and building permit activity has recovered in three years, the voter-approved TDT would resume in full effect after July 1, 2012.

When the TDT was first proposed by local community leaders and transportation planners 18 months ago, the tax was seen as an important new source of funding for county road projects, bridge repairs, and public safety improvements in Oregon’s fastest growing county.  With the support of Westside Economic Alliance and allied business interests, the proposed tax was endorsed by the County Commission in September 2008, and easily won voter approval in a countywide ballot last November.  The new tax applied only to new construction projects, but specifically exempted existing developments, tenant improvements, repairs or maintenance projects

At the time, the development tax was scheduled to be phased in incrementally with 25 percent increases scheduled on July 1 of the next four years.

But when the local and national economy hit the skids late last year, construction activity and building permits virtually dried up, and revenue expectations from the new tax fell sharply.  In May 2008, permits for new home construction in Washington County slipped below 200 units per month for the first time since records were first kept in 2001.  In seven consecutive years, housing permit activity had peaked at more than 500 units during the warm summer months.  But since October 2008, records show the 12-month rolling average of new residential building permits in Washington County has slipped to just 134 units.

Testifying in favor of the proposed rate reduction and tax credits at yesterday’s public hearing, spokesmen for the Home Builders Association of Portland, Westside Economic Alliance, and the Hillsboro Chamber of Commerce voiced concerns about the recessed economy in all sectors, since voters approved the TDT last November.  According to the latest employment date, unemployment in Washington County remained at 10.1 percent in September, with more than 17,400 jobs being lost in the past year.  The economic downturn has had a dramatic impact on the number of new homes and commercial building permits being issued, and the business groups testified the increased development tax would inhibit new construction, and further reduce expected revenues to pay for new transportation projects.

Members, committees and staff of Westside Economic Alliance wish to acknowledge and thank Washington County Commissioners Andy Duyck, Roy Rogers, Dick Schouten, and Chairman Tom Brian for their solidarity and support of the local business community by approving Ordinance 729 during their public hearing yesterday afternoon in Hillsboro.  In turn, Westside Economic Alliance has pledged its continued support for funding transportation and public infrastructure projects in Washington County, and looks forward to restoring the TDT to full strength when the local economy and construction activity regains the vitality and pace that has been the hallmark of our region.