On July 26, 2004, the City Council adopted a resolution authorizing the City to apply for a Vertical Housing Development Zone designation to the State. The purpose of the VHDZ program is to encourage the development of multi-unit housing above commercial spaces in urban cores by providing a partial tax exemption on increased property value for qualified developments.
An application packet was submitted to the Oregon Economic and Community Development Department (OECDD) on September 20, 2004. Notification of the City’s intent to designate a VHDZ was given to all taxing districts in Springfield, explaining the program and providing special districts the opportunity to opt-out of the program. A Final Statement determining that no special districts chose to opt-out of the VHDZ program was submitted to OECDD on October 7, 2004. Springfield's downtown received its VHDZ designation from OECDD on October 12, 2004, making it the ninth VHDZ in Oregon.
Developing more housing units in the downtown is vital to the continued revitalization of the area. A significant residential component will provide support to commercial development and enhance public safety. The VHDZ designation will encourage such development by offering partial property tax exemption to qualified projects. This is not a low-income housing program since it applies equally to all levels of housing. It does not sacrifice commercial space in favor of residential use. Instead, the VHDZ program encourages both commercial and residential development, since a development must have both residential and commercial components to be able to qualify under the VHDZ program. Although this program offers tax exemptions to qualified projects, it is designed to ensure that taxing districts will not be negatively impacted. The tax exemption applies only to the additional value created by the project. Districts will receive taxes on 100% of the “pre-project” value of the property, plus taxes on at least 20% of the additional value created by the VHDZ project. Then after 10 years, the exemption expires and taxing districts will receive taxes on the full value of the property. In addition, VHDZ projects may stimulate commercial business in the immediate area, and cause surrounding property values to increase as a result. Developers of eligible projects apply directly to OECDD for the tax exemption. If approved, OECDD will provide the County Tax Assessor’s Office with the necessary information for the qualified project.
Receiving a Vertical Housing Development Zone designation is an important step in the process of revitalizing Springfield's downtown. The contact person for agencies, developers and other parties interested in the VHDZ program is Kevin Ko, Housing Programs Specialist. He can be reached at 726-2302 or at kko@springfield-or.gov.
