The city of Bend is set to pause its multi-unit property tax exemption program Thursday on the heels of criticism of a $10.6 million tax break for the Jackstraw development.

The tax exemption program offers 10-year tax breaks for housing developments located in certain areas of the city that wouldn’t normally be built in exchange for added public benefits. It was passed in 2022 as allowed by statewide legislation, but the city tailored it to fit Bend’s needs.

City staff recommended putting the program on hold because it’s become “administratively ineffective and burdensome,” staff said.

The move comes just weeks after the seven-story Jackstraw development near NW Arizona Avenue was approved amid controversy for a 10-year, $10.6 million tax break by multiple taxing districts, including the City Council and the Bend-La Pine School District board .

City councilors double as the Bend Urban Renewal Agency, which implements the council’s policies for urban renewal areas like Juniper Ridge and the Core Area, which is located in the center of Bend.

At a City Council meeting Wednesday, all councilors, acting as the urban renewal agency, showed interest in pausing the program, which will be formalized with a vote at a future meeting. In the meantime, city staff are expected to explore other tax-exemption programs for middle-income housing and accessory dwelling units.

The multi-unit tax exemption program has also reduced revenue for the city’s tax-increment finance district in the Core Area, according to a memo from the city.

The intent of the tax-increment finance district is to capture increased property tax revenue until 2050 and channel that money back into the Core Area to fund improvement projects and incentivize growth.

The multi-unit tax exemption program — along with poor market conditions and the decreased assessed value of new construction — is reducing the amount of money going into the Core Area’s fund, the city memo said.

Revenue growth for the fund was projected to maintain a rate of 4%, per a plan that was adopted in 2020. In actuality, the fund is only projected to grow at a rate of around 1% now, which is prompting the city to reevaluate its tax exemption programs.

Eric King, Bend’s city manager, said Wednesday the projected number may change.

“We want to do worst case scenario,” he said. “We don’t want to paint a picture that’s overly rosy.”

The pause on the multi-unit tax exemption program doesn’t apply to developments that are already under consideration for an exemption. Those are a proposed six-story, more than 240-unit apartment and retail building within the Timber Yards development and a proposed three-story apartment building on Penn Avenue by local developer Hiatus Homes.