The 2017 Oregon Legislature has now passed the half-way mark for a session that will likely adjourn near the end of June. As things heat up for the final sprint, here are the major issues and bills still alive that could impact commercial real estate:
Budget deficit and possible corporate tax increase – Even though state tax revenues are at an all-time high, they are being significantly outpaced by obligations for pension payments to retired public employees and expansion of the state’s Medicaid expenses. The result is a projected deficit of $1.6 billion for the 2017-19 biennial budget, an amount that is driving renewed discussion of changes to the corporate tax rate.
Senate Revenue Committee Chair Mark Hass (D-Beaverton) is promoting the idea of a gross receipts tax of between 0.4 percent and 0.7 percent of a business’s Oregon sales above $1 million. The new tax, if approved, would replace the state’s existing corporate income taxes and could lead to a decrease in personal income tax rates. Any tax increase or new tax will need to be approved by a three-fifths supermajority of all legislators, which means that several Republicans would need to vote with the Democratic majority.
Transportation Funding Package – While there is near unanimous agreement in the Legislature that additional funding is needed for increased transportation investment by the state, there are deep divisions on how to generate the additional revenues. A special joint bipartisan committee has been devoting many hours to refining the approach, and there seems to be optimism in Salem that a deal will be reached. Such a deal is shaping up as a combination of increases to the gas tax, registration and licensing fees, along with a new excise tax on new car and bicycle sales, and a new employee payroll tax devoted to transit. For the Portland metro area, there could be an additional state and local funding package dedicated to freeway “bottleneck” areas and a new light rail line to Tigard and Tualatin.
HB 2939, Construction Excise Tax Cap – A major bill aimed at increasing the supply of affordable housing units was passed in the 2016 short session. One of the provisions allowed cities and counties the ability to impose a new construction excise tax, but residential and commercial construction were treated differently under it. For the residential side, the tax was capped at 1% of value; for the commercial side, there was no cap and 50% of the revenues could be used by the local government at their complete discretion. HB 2939, introduced at the request of NAIOP and BOMA, would impose the same 1% cap for all new development. The bill had a public hearing on April 4th and efforts are under way to come up with a set of amendments that get enough votes to send it out of committee and on to the full House of Representatives.
HB 2004, Rent Control/No Cause Evictions – The bill would lift the prohibition that prevents cities and counties from enacting local rent control regulations and restrict landlords who wish to evict tenants without cause. HB 2004 passed the House of Representatives on April 4th with a near party line vote and now awaits action in the Senate Committee on Human Services. Early indications are that there aren’t enough votes in the Senate for passage.
HB 2510, Authorizes Commercial Tenant to Install Vehicle Charging Station – The bill would create new statutes mandating that a commercial tenant must be allowed to install an electric vehicle charging station “for the use of the tenant, employees of the tenant or customers of the tenant. . .in, or near, any parking space assigned to the tenant or the rental unit of the tenant.” The tenant would be fully responsible for all expenses associated with the charging station and its installation, and the requirement wouldn’t apply to commercial buildings with less than one parking space per rental unit. HB 2510 passed the House on April 3rd by a 46-12 vote, and now awaits action in the Senate Committee on Business & Transportation.
During the last three months, CAB’s government relations efforts have focused on the following:
Portland Park Fee Increase – As reported previously, CAB has joined with five other real estate and business organizations to strongly oppose an increase in the City’s Park System Development Charge (SDC) that would be charged to all new commercial development. The increase, which ranged from a doubling of the existing rate within the central business district (CBD) to a quadrupling outside the CBD, would add between $0.15 per square-foot (warehouses) and $1.28 per square-foot (office) to the cost of permitting.
Despite this opposition, however, the Portland City Council voted 3-2 on May 27th to approve the increase. Commissioners Steve Novick and Dan Saltzman voted against it, while Mayor Hales and Commissioners Fish and Fritz voted in support.
Following that vote, our coalition of opposition organizations chose to move forward with a legal challenge to the increase in Multnomah County Circuit Court. Attorneys from the Tonkon Torp law firm filed a writ of review on July 24th, and a court hearing has been scheduled for December 17th at 11:00.
Metro Urban Growth Boundary Review – As required by state law, Metro has spent the last two years conducting an analysis of residential and commercial lands needs for the next twenty years. Their preliminary conclusions were that the current land supply within the Urban Growth Boundary was adequate for projected growth through 2035 and that no additions would be necessary.
These conclusions, however, resulted in strong concerns and many questions being raised by CAB and other real estate groups, along with nearly all of the region’s mayors and many county commissioners. In response, while the Metro Council is expected to adopt the analysis and not expand the boundary this year, they have signaled their intent to begin a new review within the next two years rather than wait until the normal six-year cycle.
Members who have questions about any of the above or who encounter problems with a government agency are encouraged to contact CAB’s lobbyist, Kelly Ross, at firstname.lastname@example.org.