Molalla officials push back after Clackamas County pilot redistributed affordable'housing tax payments

City manager Dan Huff briefed the council on a Clackamas County pilot program that allows a county housing authority to accept a small ownership stake in an affordable housing project and remit a set payment in lieu of property taxes. Huff said the city discovered county staff had initially allocated pilot payments countywide rather than to the Molalla taxing district; the county later amended the intergovernmental agreement and adopted the Molalla taxing district distribution schedule.

Huff and councilors expressed concern that the earlier county distribution "undercut your taxing authority" and that the arrangement produced a small but recurring loss to the city and other local taxing districts over multiple years. Councilors asked staff for a dollar estimate of Molalla's lost revenue from the prior distributions and for an analysis of future lost tax revenue under the capped payment schedule (the pilot payment discussed was $25,000 with current distributions of about $24,092). Huff told council the county has acknowledged the issue and that county staff recommended formal policy guidance and consultation with impacted jurisdictions before future pilot agreements.

Councilors discussed possible responses: asking the county to rescind or renegotiate past terms, coordinating with other cities or associations (LOC/OMA), and evaluating whether legal or legislative remedies are warranted. Staff said they would provide a numeric estimate of past and projected revenue impacts and recommended cautious engagement given anticipated lawyer and administrative costs.