New Oregon Law Authorizes Property Tax Abatement for Environmental Remediation: How to Turn a Brownfield into a Successful Redevelopment

August 24, 2016News, Real Property & Land Use

By: Alan Sorem

Real Estate & Land Use

Earlier this month, I was provided the opportunity as Chair of the Oregon State Bar Land Use Legislative Committee to present for the third consecutive year at the Oregon State Bar’s Real Estate and Land Use Section’s Summer Forum. Much of my presentation concerned four bills that were adopted as part of legislative compromise to address the affordable housing problems in Oregon. However, I believe a less publicized bill may be more important for real estate development professionals.

HB 4084 became law effective June 2, 2016. This law is intended to encourage redevelopment of properties containing environmental hazards by providing property tax incentives for reimbursement costs of environmental clean-up. The City of Salem alone has approximately 245 known brownfield sites identified by the Oregon Department of Environmental Quality (DEQ).  Oregon has approximately 5,000 brownfields. These estimates do not include approximately 7,500 additional sites identified as only containing leaking underground storage tanks (LUSTs). Remediation of known and newly discovered brownfield sites remains an important issue for redevelopment in Oregon. As regulatory and market pressures for infill redevelopment continues, developing skills to recuperate remediation costs will also increase in importance.

HB 4084 authorizes local governments to adopt an ordinance or resolution providing property tax incentive programs that grant special assessments to brownfield sites (as defined by ORS 285A.185), or exemptions to new and existing improvements and personal property on brownfields, for periods of up to 10 years with a 5-year extension. Local governments must adopt eligibility criteria that include site evaluations, preliminary assessments, and descriptions of any necessary response to releases of hazardous waste. HB 4084 also mandates that remedial actions must be conducted in coordination with the Oregon DEQ pursuant to a prospective purchaser agreement, order, or other approved plan. Agreement from among 75% of taxing districts as determined by percent of combined tax rate must agree to the ordinance (an increase from 51%).

In the event of a disqualification of the tax deferral due to failure to comply with required remediation actions, all deferred taxes will be due and owing. Super fund sites and state assessed industrial (ORS 306.126) and utility sites (ORS 308.505) are exempt. The tax benefit is to automatically terminate upon the end of the 10 year term (as extended) or date in which the benefit equals the previously approved eligible costs, i.e., actual costs incurred in remediation.

To learn more about HB 4084, prospective purchaser agreements, or other strategies for environmental remediation as part of real estate development, contact the attorneys in the Real Estate and Land Use Group at Saalfeld Griggs PC.