Comment of the Week: Financing government with parking garages is a bad model

Comment of the Week: Financing government with parking garages is a bad model

rendering with fake people

If we want to invest in something that makes money,
how about homes instead?

Portland’s economic development agency is casting about for new funding, and some people seem to think that developing a bunch of big parking garages is the ticket.

We’re working on a post following up on last week’s look at a taxpayer-financed $26 million hotel parking garage. In the meantime, readers have been having an interesting conversation about it. And reader Iain MacKenzie, who goes by “Maccoinnich” in the comments and who also happens to be the guy behind development-tracking website NextPortland.com, had one of the best-informed takes on the issue.

“This is part of the reason that they want to build this garage … they believe that it will provide them with ongoing revenue for decades.”
— Iain MacKenzie, NextPortland.com

The Portland Development Commission faces a choice, MacKenzie wrote: should it be trying to make money by pouring its investments into constructing multimillion-dollar parking garages? Or could it do better with something the city says it will actually want more of in the future, like housing?

Before we quote MacKenzie, it’s useful to know how the PDC currently makes money. It’s not actually very complicated, and it’s worth understanding if you want to know how the city works.

A lot of local government — schools, police, parks, libraries — is paid for by property taxes. If a piece of land gets more valuable because someone builds a new building on it, taxes on that property go up and public services get additional money. But in a series of designated “urban renewal areas” around the city, more than half of those additional property taxes that come from new buildings are instead sent to the PDC, which is supposed to reinvest them in improvements (sidewalks, streetcars, or apparently parking garages) to the surrounding area, which theoretically spurs even more development in that area. Then someday the urban renewal area expires and all the other city services get a gush of new property taxes from the recent development.

The extra property taxes that come from that new development are called “TIF,” for “tax increment financing.”

But as MacKenzie notes, many of the city’s urban renewal areas are set to expire, which could leave the PDC with a lot less TIF money to play with.





And that’s where parking garages seem to be coming into the PDC’s long-term strategy. Here’s MacKenzie’s comment:

As Tony’s blog post mentions, this is a period of transition for the PDC. Since the agency’s inception they’ve mostly been funded by TIF money generated in urban renewal areas. This funding model has been very successful in some areas (the River District) and somewhat unsuccessful in other areas (Gateway). Right now all of the urban renewal areas are approaching the end of their lives, and the PDC has a finite amount of money to spend. Even if the City was to create a new URA along Powell/Division, as has been mentioned, it would be a long time before it was generating enough TIF to fund new capital projects.

“A few years ago no one was building market rate apartments, despite the well documented need in retrospect. Right now no one is building condos.”
— Iain MacKenzie

They are currently studying the long term financial sustainability of the agency. Despite the beating they are rightly receiving on this thread, the PDC has done a lot of things that are good for active transportation, including providing the City’s share of funding for our light rail network and paying the entire cost of the Eastbank Esplanade. If the PDC ceases to exist that funding source does as well.

This is part of the reason that they want to build this garage, as they believe that it will provide them with ongoing revenue for decades, even without Urban Renewal. For the same reason, they have talked about building a garage on the currently vacant parcel they own at NW 6th & Glisan, immediately east of the new PNCA.

Even assuming that their financial models are correct, building parking garages is a bad model. It goes against every policy currently going into the Comprehensive Plan. A better way would be to work out how they can finance projects that build long term revenue while also furthering the City’s goals. Nick Fish raised the idea (and I think it’s a good one) that they should consider a land lease model for the Post Office site, rather than parceling off and selling the land immediately. Another idea might be to make counter cyclical investments. A few years ago no one was building market rate apartments, despite the well documented need in retrospect. Right now no one is building condos, even as house get further away from what a first time buyer could afford. I would be shocked if they couldn’t develop a model to build condo units in the $200,000-$400,000 range (as the Cyan originally intended to offer). This would both generate revenue for them and help with Portland’s ongoing affordability problem. Those are just a couple ideas, but I’m sure there are many other ways they could make money for the city without sacrificing our collective values.

Aside from the PDC, most of Portland’s city government seems solid on the principle that no public dollars should further expand car infrastructure. The PDC is about to hire a new executive director. Even if it’s too late for our leaders to change course on paying to build a big parking garage across the street from the state’s best transit hub, they still have a chance to hire someone who will spend the public money on the public’s interests.

— Michael Andersen, (503) 333-7824 – michael@bikeportland.org

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