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Wednesday, July 23, 2014

Old Town Development Plan Still Mired in Controversy, Still Likely to Advance

Posted by Denis C. Theriault on Wed, Jul 23, 2014 at 3:58 PM

OTCT_Opportunity_Sites.jpg
  • Portland Development Commission

The immediate fate of an Old Town/Chinatown redevelopment plan that's opened up a rift among Portland city commissioners—with Amanda Fritz and Nick Fish still steadfastly refusing to back one of its primary cash streams—is one of delay.

After one last modification this morning, the council will now wait until August 6 before voting on the neighborhood-created, Portland Development Commission-led plan. That includes the notion of waiving infrastructure fees worth as much as $7 million in a bid to replace fallow parking lots with new construction of working-class housing.

For the record, that change proved just as contentious as the plan itself. Fritz and Fish both said no, presaging their overall votes.

As originally drafted, the plan would waive fees for housing developments aimed at renters making no more than Portland's median income, so long as landlords agreed to forgo rent hikes for 10 years. But after Commissioner Steve Novick fretted last week that landlords might dramatically hike rents in year 11, Mayor Charlie Hales devised a workaround. Rent controls would remain in place for five more years, Hales offered—with the caveat that landlords could set prices for renters making 120 percent of the city's median income.

"This is even worse than the original proposal," Fritz said before logging her decision.

But even with that hiccup, the plan seems destined to advance—shrugging off deep political and administrative divisions, revealed in council meetings and emails obtained by the Mercury, on its way to a cautious embrace from neighbors and, presumably, developers. (THIS HAS BEEN UPDATED, WITH SEVERAL MORE EMAILS, AFTER THE JUMP.)

Novick is poised to join Hales and Housing Commissioner Dan Saltzman as the third vote, as he explained in my column last week—unsurprising given that Hales found $5 million in urban renewal money for seismic retrofits, one of Novick's main priorities.

In agreeing to say yes, Novick is willing to forgo a couple of million dollars in revenue for the Portland Bureau of Transportation—money that developers normally would pay to offset their projects' impact on the city's roads. His argument has been the same as Hales': Because no one's building in Old Town now, giving up that money in hopes of spurring development won't actually change PBOT's budget. Essentially, nothing is still the same as nothing.

Fritz and Fish have not been willing to give up that money when it comes to their own bureaus, parks, for Fritz, and water and environmental services, for Fish. And that's caused some thorniness. Emails to and from Hales' office show Hales tried to make a deal to help win Fritz's support. He offered to use urban renewal money to build a park later on, in exchange for the lost potential revenue.

His policy director on urban renewal, Jillian Dettweiler, wrote:

Yesterday the Mayor reviewed the likely projects in the “PDC Business & Development Incentives” with PDC staff, asking the question: what if there’s only $50 million available rather than $57 million, and we backfill the SDC waiver with TIF?. He was sufficiently convinced that the pipeline of mostly historic building renovations in the district that will need assistance to be done well justify the $57 million budget. Nevertheless, if this SDC program is successful and Parks has forgone some revenue, he would open to a request to use TIF to contribute to a Parks project that needs extra help in the next 5 years.

But Fritz's staff wasn't interested, noting that parks has already committed to projects that may cost millions more than what it has on hand. Her chief of staff, Tom Bizeau, wrote back:

I put a note on the list that indicated when you add up the numbers you will see that Parks is overspending in relation to cash on hand, i.e. the total amount spent (expended) is over 46 million while the cash on hand (with projected revenues from next year’s construction) is around 42 million as stated in the Memo from Mike Abbate. Essentially all the money is spent and then some.

(Sources say Parks Director Mike Abbaté wrote the entire council an email declaring that parks, not just Fritz, wouldn't support the fee waivers.)

Update 4:50 PM: Fritz's office has produced several more email, thanks to a public records request, including the Abbaté email referenced right above this. They include missives between Novick and Fritz, Abbaté and Novick, and Abbaté and Hales. Here's what Abbaté wrote late in the day July 8:

I am quite concerned about sending mixed messages to the very citizens we will need to help support a bond measure. Saying we need to continue taxing private property homeowners with a new bond measure for capital repairs and replacements while offering fee reductions to Old Town developers seems to shift responsibility from one sector of our economy to another.

One relatively simple solution would be to not waive SDCs, but rather to pay them from Urban Renewal funds. This honors the equity of the current system while preventing the domino effect of one neighborhood after another asking for a waiver of fees to promote economic redevelopment.

And here's the terse reply Hales wrote back later that night, asking questions that informed Bizeau's reply to Dettweiler above.

Mike -

Really.

Four questions. Please provide answers. Consult others like Paul Scarlett or Patrick Quinton if you need assistance.

1. What is the current balance in each of the parks SDC subaccounts?

2. What is the projected balance for six and twelve months from now in each of these accounts, given development projects in the permitting pipeline?

3. How much in Parks SDCs has been collected in OT/CT in 2010, 2011, 2012, and 2103?

4. How many development projects are now in the permitting pipeline in OT/CT and what is their projected yield in Parks SDCs?

(Abbate's detailed reply is here [pdf]. Read other emails—wonky, wonky, wonky emails—at the end of this post.)

A tradeoff of future infrastructure revenue comes at a tender time for the city.

Novick and Hales are pushing a street fee, arguing the city can't afford to pay for basic road safety and maintenance without a new funding source. As Abbaté notes, Fritz is scheduled, tomorrow afternoon, to ask for her colleagues' blessing in putting a $68 million parks bond replacement on the fall ballot. And Fish, just a year into his new job as commissioner in charge of utilities, just beat back a putsch by industrialists this spring to take over water and sewers in part because of legal complaints over how rate money is used.

Fish has said he supports the aims of the plan, so long as utility money isn't tapped.

"The question of whether to prime the pump isn't in dispute," he says. "The question is the tool to generate it."

Meanwhile, the city's also trying to legalize short-term rentals, potentially exacerbating concerns about the displacement of low-income housing. Subsidies like fee waivers have historically been offered only to affordable housing priced for people making no more than 60 percent of the city's median income. Old Town is home to a high concentration of affordable housing, and there's concern among advocates that some of those units might be lost in a push to increase the neighborhood's income diversity.

But at the same time, supporters of the plan point out, there's a boom happening all around Old Town. And if the city doesn't step in, the neighborhood might miss out. Beyond the fee waivers, the PDC is pledging more than $50 million in money to help refurbish existing buildings and add retail options.

"There's a roar all around this district and silence inside," Hales said this morning. "This is to get a little bit of sound."

Interestingly, according to an "opportunity sites" map obtained by the Mercury, many of the lots targeted by the PDC and the development plan sit outside the urban renewal area that snakes through parts of Old Town and Chinatown, the River District. (Bigger version here [pdf].)

That map also raises the notion of whether developers might want to build here anyway. The PDC's central city manger, Sarah Harpole, explains that the interested sites identified in the map are a mixture of lots for sale, lots that are vacant and might one day be suitable for construction, sites where the landlords have approached the PDC, and sites where tenants have approached the PDC.

That doesn't mean, the PDC says, that projects are imminent.

"I don't think I'd say there's a bottleneck" of waiting projects, says the PDC's director, Patrick Quinton.

Quinton also says he's not sure how many developers will bite on the fee waivers—part of the plan is learning whether that's enough of a push or if Old Town's so calcified against development that something else might be required. The fee waivers are good for only five years and for the first 500 units.

"It remains to be seen, Quinton says. "I think we'll get a few projects. We'll get to see what it actually takes."

From: Novick, Steve
Sent: Tuesday, July 08, 2014 10:54 AM
To: Fritz, Amanda
Cc: Crail, Tim; Abbaté, Mike; Valderrama, Andrea; Warner, Chris; Hockaday, Bryan
Subject: RE: Parks SDCs / Old Town
The SDC bureaus in Old Town are not bearing all the burden; the continued existence of the URA means the GF bureaus are bearing it too.

There is no guarantee the convention center hotel will bring in more business for the other hotels – it might in fact steal business from them (as many of them think), so the general fund will not only be foregoing new revenue that it might have gotten if a convention center hotel (or other hotels to meet increasing demand) were built without a subsidy, it might be losing old revenue as well. So the service bureaus are getting SDCs from the hotel and the GF bureaus will get nothing or less than nothing from the new hotel; it’s only if the optimistic projection that the new hotel will generate more business for other hotels is true that the GF benefits. I think waiving taxes and fees basically is waiving taxes and fees, and we lost our municipal virginity on that a long time ago. Once you cross that threshold, each case is a judgment call. I thought the Convention Center hotel was a bad call likely to cost us General Fund; you think this is a bad call that will cost us SDCs. The Mayor’s argument here is “we are in effect allocating what would have been new SDCs in a place where we weren’t getting any anyway to development, not negatively impacting any City bureaus, and it will spur development that will ultimately benefit all bureaus” – just like the hotel people said “we’re just allocating tax revenue that we wouldn’t have gotten if the hotel weren’t built, and ultimately it will generate more revenue for everybody.”

From: Fritz, Amanda
Sent: Monday, July 07, 2014 3:02 PM
To: Novick, Steve
Cc: Crail, Tim; Abbaté, Mike; Valderrama, Andrea; Warner, Chris; Hockaday, Bryan
Subject: Re: Parks SDCs / Old Town

This is different from the Convention Center Hotel in that no SDCs were waived for that. We are allocating only the new lodging taxes from the new hotel to the deal, not negatively impacting City bureaus. The only impact to the City is not collecting new taxes from that development - more akin to TIF than the current request that service bureaus subsidize the new development. My understanding of the OCC hotel deal is that while tourist taxes at the other hotels will subsidize any losses at the new one, tourist taxes that go up at the other hotels, because a successful OCC hotel generates more business at all, will go into the usual sharing formula.

There is no guaranteed upside to Parks, BES or Water from success of providing middle income housing by waiving SDCs. None at all to BES or Water except to the minuscule extent that 500 new residents share the increased costs of the entire system. And Parks is better off only if a future Council (long into the future after the URA expires) allocates more General Fund from new property taxes to Parks. There is no certainty that will happen. The proposal asks the SDC bureaus to bear all of the burden without sharing any benefits. That's how this is different from the OCC hotel.

Amanda

On 6 Jul 2014, at 06:42, "Novick, Steve" wrote:

I think the LIDs are so minimal it hardly matters to maintenance if they exist or not. How is this different from the convention center hotel deal, where I was the lone no vote? That also theoretically deprived parks and everything else of general fund money, on the guess that basically waiving taxes would generate development that otherwise would not occur. The mayor's theory here is that waiving SDCs will generate ongoing development in that area that otherwise would not occur.

Sent from my iPhone

On Jul 5, 2014, at 1:23 PM, "Fritz, Amanda" wrote:

Thank you for your response. The Parks SDCs are set at 75% of estimated need generated by new development, so we are already getting further behind with each new development. Encouraging even more gap-widening by excusing all SDCs will result in more General Fund, but not necessarily more GF for Parks. Solution is to add more GF for Parks automatically when each new unit in Old Town comes on line, if you want to stimulate new development without making the challenge even worse for Parks. PPR, BES and PPB should not have to bear all the burden of encouraging the economic development in Old Town which then benefits Police and Fire disproportionately due to public safety getting the majority of the General Fund. It may not even be legal to ask ratepayers to subsidize workforce housing. It's legal for Parks, but still unfair as structured.

Do you get more maintenance money for each new LID when the new street is completed? You should, per the 2007 policy on O and M for new facilities. I don't recall seeing the line item request in the annual PBOT budget like there is in PPR, if so. If not, are you saying you want to put a moratorium on street improvement LIDs?
Not building new until we have money to maintain both old and new condemns those in areas without urban amenities to continue to pay taxes without getting equitable services.

Amanda

On 5 Jul 2014, at 19:33, "Novick, Steve" wrote:

Thank you Commissioner. And if old town were actually generating lots of SDCs now don't think anyone would be suggesting giving them away. The argument is that waiving them for awhile will help kick -start development that can lead to more SDCs on the future. I don't know that that will actually work, but if we waive SDCs for five years and there is no development in old town, then we won't actually have given anything up. If we waive them and it helps start development that keeps going after the 5 years are up, it might bring in more SDCs than we otherwise would have had. The SDC idea is very similar to the URA concept itself, really. Maybe we should abolish URAs entirely, but as long as we are doing URAs I can't dismiss the mayor's idea out of hand. On the maintenance issue, we don't see things the same way - I generally don't want to build new streets until we have some idea how to maintain them.
Sent from my iPhone

On Jul 4, 2014, at 3:28 AM, "Fritz, Amanda" wrote:

Thank you for your interest, Commissioner. Mike and Tim will respond to some of the specifics. From my perspective, the main issues are:

New residents downtown will expect and deserve parks services and capacity. That is the purpose of SDCs, to fund improvements created by increased demand from development. Block 511, Slabtown, the Greenway and South Waterfront likely have greater funding needs than current Central City SDCs will provide. It is not reasonable to set standards that help to ensure development pays its way, then say 'except where we don't really mean that'.

Regardless of past experience of whether development has happened or not, new residents of new development deserve parks.

It would send a terrible message that funding parks is not important to the City Council, at a time when we will be asking voters to approve funding for parks, if Council waives the SDCs in Old Town.
Parks SDCs are in two pots - Central City and non-Central City. So no, SDCs generated in Old Town can't be used for parks in East Portland. They can be used, and are needed, for the projects I mentioned above.
The ongoing Operations and Maintenance (for routine maintenance, not replacement) is about 10% of the construction costs. I don't know how the Council is going to be able to pay for the O and M when bringing the new facilities on line for SDC investments. But that isn't a reason to not build the facilities or insist on the SDC payments.

The Parks SDC is currently set at 75% of the calculated true cost of new development, unlike the other SDCs which are set at 100% cost recovery. So Parks is already subsidizing new development.
It is not reasonable to achieve planning, neighborhood, economic development and housing goals on the backs of the three or four bureaus that count on SDCs. If the Council wants to promote development of middle income housing in Old Town (which is a different policy decision), the General Fund should repay the SDCs to make the bureaus whole. Do you want to send GF to this cause, over say Emergency Management needs or.safety projects on streets? I don't.

Amanda

On 3 Jul 2014, at 21:06, "Novick, Steve" wrote:

Commissioner, Tim, Mike –
I was hoping I could be lazy and the Mayor and Commissioner Fritz would work this whole deal out between them without my worrying about it much. It now appears that I might actually have to learn some facts in order to have a more informed opinion. So I hereby ask the following:

Is it true that the Old Town / Chinatown area has generated little or no parks SDC money in recent years? Is there some independent reason to think that even without any targeted city effort, the area is about to explode and generate tons of SDCs?

What projects would Parks hope to fund with SDC money generated from Old Town / Chinatown? What are the construction costs of those projects? What would be the ongoing maintenance costs associated with each? What would the plan be for paying for that ongoing maintenance?

How much SDC money does Parks currently have that could theoretically be dedicated to the projects Parks would hope to fund with SDC money from Old Town / Chinatown? What other projects are competing for the same money?

Can you explain how geographically fungible Parks SDC money is? Could money generated from Old Town / Chinatown SDCs be spent in East Portland?

Feel free of course to also send answers to other related question that you think are important but which I have not asked! Thank you …

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