Urban renewal is a financial tool that funds projects and activities identified in an urban renewal plan and within an urban renewal area. The purpose of urban renewal is to make public investments in designated geographic areas of a city to remove blight, improve property values, and leverage private investment. These public investments spur redevelopment in areas where it might not otherwise occur.
Urban renewal uses Tax Increment Financing to finance improvements and redevelopment in specific areas of a city by reinvesting the increase in the area's property taxes. When an urban renewal area is created, the assessed property value within the district is set (or “frozen”) and those taxes continue to go to taxing jurisdictions (city, county, school district, etc.). Any increase in the tax assessed value that occurs in that area (referred to as the “increment”) is collected by the urban renewal district to use for redevelopment projects that are identified in the urban renewal plan. The plan includes a timeline and/or funding capacity limit, called Maximum Indebtedness, under which it must operate. When the projects in a plan are complete and funding expended, the area closes and the taxing jurisdictions begin receiving their full share of taxes.
In Salem, urban renewal funding has been used to renovate historic downtown buildings, construct and rehabilitate pedestrian bridges and pathways, construct road and transportation improvements, purchase and cleanup vacant and contaminated property, and establish grant and loan programs to attract new businesses to an area.