A cheaper demolition tax for cheaper home? Council says no…

The Portland City Council spent nearly three hours Wednesday fine-tuning a proposed $25,000 demolition tax but shot down a dramatic suggestion to slash the rate depending on the price of a new home.

A final vote is set for Dec. 2, with the tax now looking similar to the version Mayor Charlie Hales proposed in September. Money collected from demolition taxes would be dedicated to a city-controlled fund to build affordable housing.

If approved, the new tax would go into effect March 1.

The City Council agreed Wednesday to apply the tax to all demolitions in single-family neighborhoods.

Officials eliminated language that would have offered a rebate to developers who tore down one home and replaced it with two or more units.

The council also agreed to waive the tax when a demolition makes way for affordable housing. Officials plan to set a price point based on similar city programs, one of which has a maximum sales price of $291,000.

The council also would allow property owners to tear down their own home without paying the tax. Some residents had complained they wanted to build anew but would be hampered by the tax.

But commissioners rejected a proposal from Commissioner Steve Novick to create a tiered tax based on the sales price of a new house.

Novick said it didn’t make sense to set the same $25,000 demolition tax for a replacement home that sells for $450,000 and one that sells for $1 million. The cheaper the replacement house, he argued, the cheaper the tax.

Hales countered that Portland would be only the third city nationwide to adopt a demolition tax. He told Novick the City Council could re-evaluate a progressive structure after the tax is implemented and results are known.

“What I want to see, frankly, first, is the drop in demolitions,” said Hales, setting a goal of preventing 100 demolitions annually. “My most urgent goal is to reduce the rate of demolition. The revenue effect is beneficial.”

In 2014 the city tallied 201 demolitions in single-family neighborhoods that resulted in new housing. Of those, 40 percent resulted in one-for-one replacement and 60 percent added density.

Despite objections from homebuilders and real estate agents, it appears Hales has support to pass the proposal next week, with only Commissioner Amanda Fritz indicating she may vote against it.

Lobbyist Jane Leo, who represents Portland Realtors, called Portland’s plan “fatally flawed.”

“It’s an attempt at a universal solution where one size doesn’t fit all,” she said.

City officials acknowledged one problem: a spate of demolition permits probably will be submitted before the tax is applied March 1.

bschmidt@oregonian.com

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