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Newberg Cancels Construction Excise Tax

Newberg City Council voted to end a tax on new construction which significantly increased the cost of building housing in city limits and is offering to refund developers who recently paid it.

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On Monday, May 1, the Newberg City Council voted to cancel the City’s Construction Excise Tax (CET for short) effective July 1, 2023. Additionally, anyone that paid or will pay the CET from April 1 thru June 30 2023 may apply for a refund.

The Construction Excise Tax was created in 2020 as a 1% tax applied to new construction of either residential or commercial building. It increased the price of a new home by approx. $3,000 to $6,000 and could add $300,000 or more to the cost of a major commercial building. The money it generated was to be used to incentivize selected developers to create more “affordable housing” options by helping them pay for Newberg’s System Development Charges. However, city records indicate that in at least one case, Crestview Crossing, the builder cancelled plans for 12 housing units at reduced prices and with deed restrictions designed to create perpetual affordability because, “with the Construction Excise Tax (CET) implementation they were not able to provide the affordable units due to the cost increase of paying the CET.”

Voting to cancel the tax were: Mayor Rosacker, Councilor McBride, Councilor Kilburg, and Councilor Wheatley.

Councilor Olson and Councilor Hollamon voted to keep the tax.

Councilor Carmon was absent from the meeting.

Mayor Rosacker said of the tax, “These funds that we would be dispensing have to go for developer incentives. Well, this (removing the tax) is a developer incentive.”

Since its 2020 enactment, the CET has generated approx. $1.3M of which approx. $250K was required to be paid to the State of Oregon, and ~ $60K used for administration costs.

The $1M balance of Construction Excise Tax Funds had yet to be used for any affordable housing when the current city council and mayor took office this year. The $1M unspent funds must still be used in support of an affordable housing strategy.

You may watch the May 1st City Council meeting session by clicking the video player embedded below

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