Santa Rosa moves forward with new tax district to spur growth downtown. Here’s how it would work
Santa Rosa is pursuing a new economic development tool that city officials hope will drive more private investment into the city’s urban core.
The City Council on Tuesday unanimously adopted a resolution of intention — the first step in a lengthy process — to form a new financing district that would use a portion of property taxes to pay for infrastructure improvements and other projects.
It’s the latest initiative in Santa Rosa’s broader strategy to boost redevelopment in the aging downtown and speed new housing construction in the city center.
The city is looking to partner with Sonoma County on the proposal.
The mechanism is similar to the former public agencies in Santa Rosa and across the state that for decades used tax increment financing to spur redevelopment of so-called “blighted” areas. Facing a financial crisis driven by the Great Recession, Gov. Jerry Brown ended those agencies in 2012 and sought to recoup some of the money to help balance the state budget.
The city since 2016 has sought to incentivize construction in the area by streamlining permit requirements, allowing developers to build higher and reducing fees.
But construction has been slow amid an economic slowdown, rising interest rates and other market factors.
Just 130 units have been built downtown since 2016 but city leaders say efforts are finally paying off with more than 400 units under construction and 870 in the development pipeline.
“It did feel like a hurry up and wait situation for the past four to five years but it is a long game that we’re talking about and the momentum is happening,” said Raissa De La Rosa, Santa Rosa’s economic development division director.
City officials and proponents believe the revenue generated from the financing district could help make it easier for projects to get underway by paying for costly site work. It could also help beautify the area and make it more attractive to developers.
“There’s no one tool that will help us drive investment downtown,” De La Rosa said. “Anything that layers into that cake that makes Santa Rosa a delicious investment, we’re looking at all of those, and this is just one.”
The Downtown Action Organization, a group affiliated with the Santa Rosa Metro Chamber that oversees a taxing entity formed to promote downtown, and the Railroad Square Association supported the measure.
How would it work?
The financing district does not impose any new taxes or result in increased taxes for property owners, De La Rosa said.
Instead, districts use a portion of the property tax increment revenues generated by an increase in the assessed value from properties within the boundary that are redeveloped or sold to pay for infrastructure improvements and other projects.
Taxes already committed to schools are protected.
It isn’t expected to meaningfully impact city or county general funds, De La Rosa said.
The baseline property value is frozen for all properties in the district when the district is formed. Only a portion of taxes beyond that baseline can be set aside for projects, and how much the city and county contribute from the increased revenue is up to elected officials.
Who would be affected?
The new financing district spans the area just west of Railroad Square to Brookwood Avenue from College Avenue south to Highway 12.
Historic neighborhoods and established residential areas where city staff don’t anticipate redevelopment or tax growth are carved out of the district.
Establishing the district doesn’t require voter approval unless 25% of property owners in the district protest its creation.
City officials had weighed expanding district boundaries to include the Roberts Avenue area south of Highway 12 and other parts of Roseland.
The city will look at creating a standalone financing district in Roseland in the future instead.
Roseland was one of three county redevelopment areas, and Santa Rosa’s former redevelopment agency sought to invest in projects around downtown.
How much money could it generate and what will it pay for?
Properties in the district currently generate about $4.2 million in property taxes, about $2.9 million of which goes back to the city and county after a portion is set aside for schools.
Assuming a 5% growth in tax revenue from new development, the district could generate as much as $5.9 million over 30 years or $16.3 million over 45 years if the two governments commit 75% of the estimated tax increment to the fund, according to a city analysis.
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