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When Metro expands a city’s urban growth boundary, there’s no guarantee that development will follow. That’s particularly true when cities can’t afford to plan for it.

A tax on construction permits provides money for that purpose. Metro is making $3.5 million in grants available to help cities and counties prepare for development.

Twenty-six municipalities have applied, asking for a total of $6.8 million.

Happy Valley, in Clackamas County, got a grant from an earlier round of Metro’s construction excise tax planning grant program. City officials are seeking another grant in the current round, expected to be awarded in May 2010.

“As far as the city’s concerned, it’s been a very successful program,” said Jason Tuck, interim city manager. “When Metro expanded the urban growth boundary and put the burden on the city to plan it, we would not have had the resources to complete the work at the time.”

Happy Valley officials are looking at industrial areas to see what types of development would be the best fit, study environmental issues and make sure the parcels have the correct zoning and available services. A 400-acre area in southern Happy Valley around the Kaiser Permanente and Providence Health & Services medical sites might make a perfect site for manufacturing medical equipment, Tuck said.

Getting money to study the area will let Happy Valley officials know whether that’s an appropriate use, or if another type of manufacturing might bring more jobs. “That has just been a concept that’s discussed,” he said. “We don’t know if there’s a market for that.”

The grant program, passed in 2006, is paid for with a tax on construction permits in the three-county Portland metro area. Projects worth $100,000 or more pay a 0.12 percent tax, up to a maximum of $12,000 for projects worth more than $10 million.

Gresham has three programs that could receive grants. One could help form up to three new urban renewal areas.

Two of those sites are within Gresham city limits: the downtown and a 200-acre manufacturing site. “That’s what makes our application unique,” said Laura Shepard, the city’s communication manager. “We have pinpointed our regional center and our largest vacant industrial site.”

A third area, the Springwater industrial site, is within the urban growth boundary, but has not yet been annexed into the city. Gresham already has one urban renewal area: Rockwood-West Gresham.

Complete applications for the planning grants are due Jan. 29. Metro’s chief operating officer will make recommendations to the Metro Council in April.

Another round of grants will be awarded in 2012. By the time the program ends, in 2014, it will have raised an estimated $7 million to $10 million for grants.

Washington County planners are looking at ways to connect the growing Aloha-Reedville area near Hillsboro with popular transit corridors. A grant would help planners determine how residents want the area to develop and then write plans to help get them there, said Andrea Vannelli, senior planner with the county.

Earlier planning efforts have looked at development around MAX light-rail line stations. “The county did that planning 10 years ago or so with light rail,” Vannelli said. “But a lot of things have happened since then. The region has grown.”

With grants, Vannelli said, county officials can encourage the types of growth best suited for the area.

“There’s a fair amount of vacant land and a lot of redevelopment opportunity,” she said. “This work lays a lot of the groundwork.”