Mayor’s Musings: Construction Excise Tax (CET)

Editor’s Note: This is the first edition of “The Mayor’s Musings,” where Newberg’s Mayor contributes their ideas and thoughts to the column which can help provide perspective or insight into current happenings around City Hall. This is an opinion piece written by Newberg’s mayor, edited only for grammar, spelling, and clarity if required, by Newsberg. Any opinions stated within the post are those of the Mayor alone, and not shared by Newsberg. This column intends to support the public flow of information between Newberg’s government and its citizens.

I am Mayor Bill Rosacker, creating this communication tool which I will call the “mayor’s musings”. I will use this to give the citizens of our beautiful community insight into my plans, actions, and reasoning. I love this community and my deepest desire is for it to prosper.

The opinions are mine alone, I am not speaking for the city staff or the city council.

In this first edition of the “Mayor’s Musings,” I will discuss the Construction Excise Tax, or CET, and the funds raised through this program. 

The state legislature authorized the CET, to allow cities to collect money for the sole purpose of facilitating the construction of affordable housing.  Affordable housing is defined as housing that is affordable for families making 80% or less of the area median income or AMI. The AMI in Newberg is $114,400 per year for a family of 4. 

In my opinion, if your family makes $91,000 per year, you do not need public assistance.

The last mayor and city council adopted the tax at the maximum possible rate: 1% of the assessed value of new commercial or residential construction. This means that the purchaser of one of the row homes built at Crestview Crossing that sold for about $500K was assessed about $350K so the 1% tax would be about $3,500.00. 

Some may believe that the builder paid for it and it does not affect the cost of the building. This is, at best, partially true, and likely this raises the sales price by more than the actual cost (I may address this subject in a later publication).

Why do Cities Adopt CETs? 

1. It is easy. It can be done simply by a four-person majority of the City Council. Most large taxes must be approved by the voters.
2. Like a “sin tax,” most people won’t oppose a tax that they don’t think that they pay.
3. It creates a huge pool of money that the City Council will control.

The current council stopped the collection of these taxes as of April 1, 2023. My reasoning is simple, we can’t tax ourselves into prosperity. Two of the city’s most pressing problems are: 

1. We have a shortage of housing.
2. Housing is not affordable. 

This tax exacerbates both problems to solve the affordability issue for a very small number of lucky recipients. The tax has collected $1.5M. The city gets 4% for administration of the funds and the county gets 15% to use for down payment assistance in Yamhill County. (Do you know anyone who received down payment assistance? I don’t.) 

The Affordable Housing Committee is currently asking for proposals to spend around $300K of the funds. I predict that the funds are going to help a small number of citizens complete projects, which will be beneficial to them but will do very little to foster affordable housing. Alternatively, the funds could be used by the developer of an apartment building to pay fees to the city with the promise to keep rents “affordable” for 60 years. At 35% of $91,000 per year, the max rent for a 3-bedroom apartment is $2650 per month, well above current market rates.

The current council set aside $1M of the funds for a “legacy project” that will be the subject of future publications.

Thank you for reading this, and let’s keep moving forward together.

– Bill Rosacker, Newberg Mayor

Bill Rosacker was elected as Newberg’s Mayor in 2023. He has “25+ years of experience as a home builder and outside sales representative.” Mayor Rosacker owned and operated BQC LLC, a home building company from 1997 to 2022. For further information or comment, Mayor Rosacker can be reached via email.