That contradictory effect is the result of the interplay between the taxing authority of Portland’s urban  renewal agency, the Portland Development Commission and Portland Public Schools.

Currently, the PDC can divert funding from other property tax districts such as the city of Portland, Multnomah County and Portland Public Schools. And because the agency’s taxing authority predates 2001,     it can also divert money raised by local option levies.

House Bill 2632 would remove that authority. It would affect nearly 100 urban renewal agencies statewide,   but the vast majority of the monetary impact would be seen in Portland, where the PDC currently diverts    $7.5 million from Portland school levies.

If the bill passed, that $7.5 million would be sent back to schools. Along the way the tax would be subject to “compression” thanks to Oregon’s property tax limitations, resulting in $4.5 million in new revenue for Portland Public Schools and a $3 million tax cut for property owners.

“We think the voters want that money to go to education and we want to find a way to get that back,“ said David Williams, a lobbyist for Portland Public Schools.

There’s one glitch left to work out. Multnomah County thinks it could cost up to $300,000 to reprogram the county’s tax assessment system to handle the complex transaction.

The House Revenue Committee unanimously approved the bill Wednesday morning, acknowledging that the Senate may need to amend the law to make it phase-in over time, allowing for tax assessors to upgrade software.

That’s a small price to pay for a $4.5 million shot in the arm to schools, said Rep. Jules Bailey, D-Portland.

“We shouldn’t let a small one-time cost in administration get in the way of getting more money to schools and critical services,” Bailey said.

–Christian Gaston