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PORTLAND-The Portland City Council on Wednesday unanimously passed a six-month moratorium on all applications related to the city’s property tax exemption program for new apartment developments that make at least 15% of their units affordable to people making less than 80% of median income. The vote follows last month’s denial of an application by Trammell Crow Residential for a 22-story, 319-unit project that would have been the first apartment building in the South Waterfront, where thousands of mostly for-sale units are planned. It was the first time the Council had ever denied an application that met the minimum requirements.

The moratorium directs the city’s Bureau of Planning in consultation with the Portland Development Commission, City Council offices, and community stakeholders to review the policy goals of the program, the fiscal impact of the program, and the list of public benefits, and then present recommendations to the Council within 180 days. “We were trying to do what we thought the city was asking us to do, to deliver housing diversity,” TCR’s local executive Robert Hinnen told GlobeSt.com after the council denied the company’s application in August. “Unfortunately, the city changed their minds; they apparently do not care about that diversity anymore.”

The week before the vote, Councilman Sam Adams and Randy Leonard said publicly they were not going to approve TCR’s tax abatement application regardless of the proposal because the project doesn’t deliver enough social benefit for the estimated $92 million that the program takes off tax rolls each year. Mayor Tom Potter and Councilman Erik Sten said they would approve because TCR followed the rules established to be eligible for the benefit.

That left Dan Saltzman, who said he would approve it if TCR evenly distributed the affordable units types among all the units types planned for the building. That meant he wanted TCR to turn some of the income-restricted units from studios and one-bedroom units into two-bedroom units that would be more appropriate for couples and families. “The current economics don’t support being able to do that,” said Hinnen.

If the city is preparing to get rid of the abatement program altogether, Hinnen predicts it will result in no new supply of apartments in Downtown in the face of rising demand, which will cause a significant increase in rents Downtown which will further affect income diversity in the area. On the flip side, he says “existing landlords are well positioned” to benefit from the situation.

“The situation in Portland right now is tax revenues are pretty scarce so people are putting a real tough eye on anything that limits possible tax collections,” Councilman Erik Sten told GlobeSt.com after TCR’s application was denied. “But this is somewhat penny-wise and pound-foolish; we will not be getting more condominiums that pay taxes by not supporting this, we will get fewer apartments, and I think that’s not a good step for us.”

The city has been raising the bar that must be cleared before developers can obtain the property tax break. Last year, the council added the 15% requirement, and earlier this month it approved annual financial reviews of those receiving the breaks to make sure that, after the waiver expires, they are receiving no more than a 10% profit on the income-restricted units.

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