Saturday, January 20, 2018

City Council, January 22nd - Lone Oak Road and Subsidies

Council meets on Monday, and they'll be considering a proposal for a "Reimbursement District" near the Creekside Golf Course to fund extensions on Lone Oak Road.

Lone Oak Road in 2014, looking north
at Deadend to North Extension - Streetview
Proposed Reimbursement District
Going back to decisions made in 1990, and with elements reappearing in several since then, it's all very complicated and and confusing. Here we won't be able to trace out all the implications or come to anything close to a full understanding. (If you see an error, say so!)

A year ago over at SCV there was a note and video about one of the elements in the debate. A little before that LUBA remanded a case involving approvals for a four-lot subdivision at the golf course itself.

LUBA said:
[The second approval from 2003] UD03-1 contemplated that its phases would be ultimately connected by an extension of Lone Oak Road, which includes a bridge crossing over Jory Creek (Lone Oak extension). PUD03-1 included Condition 4.d, which required construction of Lone Oak Road, but provided no particular schedule or timing for construction. Instead Condition 4.d provided that “construction may be staged to support phasing of the development.”


Petitioner [the developer] argued that development of the four lots created by his application would generate only minimal traffic, and the traffic impacts would not be proportional to the million-plus dollars it will cost to construct the Lone Oak extension, not including the cost of the bridge, as required by Condition 3 [of the current matter in dispute].
As I read this, basically by not building out all the lots at once, the developer hopes to evade the requirement to build the road and bridge. It's death by a thousand cuts strategy or a kind of Zeno's paradox: Taken singly and in isolation, no single four-lot unit will ever create enough traffic impacts to warrant the Lone Oak extension and bridge. And if there is no provision to assess things by cumulative impacts, no future four-lot unit will ever trigger the requirement. And by the end, when every four-lot unit is built out, the extension and bridge will still not be built.

The proposed District at Council now includes a fee of $9,212 per lot at Creekside itself, and it may be that the proposal for the District is a partial response to this problem of cutting up that development into four-lot bits in order to evade the requirements conditioned on the traffic impacts. (It's all complicated, and much of the Staff Report seems to require an understanding of a subtext that seems like it cannot be spelled out explicitly for one reason or another. It's also interesting that the bridge across Jory Creek is also a condition of a different development. Has something shifted? So tangled!)

In any case, here we are with a different development and different developer, and the extension and bridge still need to be finished.

We'll start with these general observations:
  1. There is the proposal on its own merits.
  2. There is the ongoing dispute over developing Creekside and the golf course's future. To some extent debate on the reimbursement district appears also to be a proxy conflict on Creekside and about its developer (who is not the developer of the applicant property on observation #1).
The current matter is also a proxy conflict
Maybe Council should consider pausing this deliberation and scheduling a Work Session on it alone. The municipal finances behind projects like this are a part of what Strong Towns criticizes as the Growth Ponzi Scheme. They are complicated, and it's hard not to read the Staff Report and think that via complex financial maneuvering, some parties will benefit disproportionately, and that the City may not adequately be protecting itself in the future - or worse, that the City is covertly favoring one party or another.

At bottom:
  • What is the true cost to service high-end single-family greenfield development like this? (Both initial service requirements and on-going maintenance should be considered.)
  • Are people who make the choice to live here receiving the right pricing signals based on actual municipal costs? (There has been talk of variable SDCs, where we lower them in some locations and raise them in others, depending on what are our policy goals and the actual costs.)
  • Are buyers able to off-load some costs and is the rest of the City subsidizing this kind of development? (Especially when our crisis is with homelessness and affordable housing, not with golf-course adjacent development on hills with views.)
  • Are developers off-loading costs to the City that the developer should have borne or should be bearing? Both at the time of a decision and in the future. When infrastructure is a condition of development, does the City show a pattern of finding ways years down the road to let developers out of these conditions of development? Is there a problem with the way the City's conditions aren't enforceable?
Council Work Group Report on Sustainable Services
In a somewhat related issue, the City proposes to enlarge the Enterprise Zone for property tax abatements at the Mill Creek Corporate Center area.

We have centered a Strategic Planning process around a "structural imbalance between revenues and expenditures."

How does our Enterprise Zone programming make sense in the context of the "structural imbalance"?

The Enterprise Zone program is always talked about in terms of business recruitment or retention. But not explicitly in terms of the imbalance. The Staff Report here just notes that the property taxes would be unavailable to the General Fund because of the urban renewal zone siphoning them off. But there is no attempt to say whether the whole scheme, including the URAs, exacerbates or mitigates the problem of the "structural imbalance." It is an article of faith that the abatements are effective!
Financial modeling indicates sufficient tax increment revenues are available to meet loan debt service requirements for capital infrastructure projects that have been constructed. Expansion of the Enterprise Zone will have no negative fiscal impact to the City of Salem General Fund or any other taxing jurisdictions, because any property tax revenue abated through the expanded Enterprise Zone would go to the URA as tax increment.
Sanyo Solar got $42 million in total incentives, and they are totally gone now. There's no way the City and State recovered that subsidy in taxes generated by the property or income taxes with the new jobs. We have no holistic accounting for the total subsidy in the general Mill Creek development area and what is the time line for a realistic return on that investment.

With an equal level of detail, the quarterly report on Economic Development is also opaque on the "structural imbalance."
Local businesses continue to grow with the assistance of urban renewal grants. These grants are available in the Riverfront Downtown, North Gateway, and West Salem Urban Renewal Areas where multiple projects are underway. The Urban Development Department (UD) also coordinates with the Strategic Economic Development Corporation (SEDCOR) in the pursuit of business retention, recruitment, and expansion. Several contacts with area businesses were made over the last quarter in an effort to connect them to the resources and incentives available to help them be successful. Since the last report, SEDCOR and UD responded to 12 requests for information for new businesses considering the Salem region. Representatives from the City of Salem and SEDCOR also participated with Team Oregon in business recruitment meetings in Japan.
How does that tell us anything useful?

Buried in the Downtown Advisory Board packet for next week, there's at least a detailed list of some of these "urban renewal grants."

A partial list of downtown URA grants - DAB packet Jan 25th
That's more like what should be in the Staff Report! And it should also have some assessment - how do these grants perform? Surely some types and some grants are more effective than others! Which ones led directly to new hiring? Which ones merely funded hiring that had already been planned, and therefore represent superfluous subsidy? At least in a public-facing way, there is not enough of an assessment loop on our subsidies and business development activities.

Other Matters
  • The formal authorization for the Library Bonds
  • Black History Month proclamation
  • Proposed rules for events at Minto Park. Bike races would be excluded. In spirit, though perhaps not in the letter, this looks intended also to exclude big organized rides like the Monster Cookie (which does not use Minto at present). This seems reasonable. The Park isn't a good place for bike races or large organized rides.
  • There is an information item on approvals for a horizontally mixed-use development (not stacked), at the intersection of Wallace Road and Riverbend Road. It looks like it would have a little strip mall on the corner oriented to "neighborhood commercial" kinds of business.
  • Annual Reports for the Historic Landmarks Commission and for Travel Salem. This year's Travel Salem report does not contain much mention of bike tourism efforts. They moved recently to the Livesley Tower, nearer to the Conference Center, and refreshed the branding. The graph of TOT receipts shows the economy's rebound clearly.
  • Comments on the proposed project at Detroit Dam are interesting and worth reading. One thing that stood out is that we don't directly test our tapwater for pesticide residue: "Total suspended solids (TSS) serve as a surrogate for pesticides and is managed as a water quality pollutant. The City is concerned about the possible release of contaminants in the silt at the bottom of the reservoir and its impact to water quality downstream...." The whole thing is worth a read. (It's also interesting to see the City on the other side of an Environmental Impact Statement and NEPA process, where they are not a driver.)


Susann Kaltwasser said...

The City is working on System Development Charges (SDC) as we write this. The Committee is a relatively closed group with only one citizen that I can identify. Most people find it hard to track this process. On the City webpage there are no minutes being posted even though they have held several meetings. Today there is not even an agenda posted!

"Jan. 22
System Development Charge Methodolgy Committee
8:30 a.m.–10:30 a.m.
Public Works Department
Civic Center
555 Liberty ST SE RM 325
Salem OR 97301
Committee Meeting

Agenda: An agenda for this meeting is not yet available.
Phone: 503-588-6211

This is an open, public meeting at an accessible location. Special accommodations are available, upon request, for persons with disabilities. Services may be requested for sign language interpretation or languages other than English. To request accommodations or services, please call 503-588-6211 at least two business days prior to the meeting."

The last time the City looked at SDC methodology was back in the mid-1990s and I have a file drawer full of documents. Now we get none!

Anyway, back then the City agreed that they did not charge the full amount of what the development costs to the systems. Some were 50%, some 75% and only one that was 100% was Parks. Of course we have no school SDC yet.

The rationale for why they did not want to charge the full price to the development they said was because it would make the price of housing too high. Even though other cities did and still do charge the full impact amount, Salem never has. As a result we find ourselves will millions of dollars of street improvements put on bonds. We have no sidewalks and poor drainage systems because we don't collect enough to cover the impact of growth on the system.

You hit the nail on the head about doing phased in developments. The city should and could ask that major infrastructures like a bridge or water detention basin or a sewer pump station, be put into a USA or create a fund where the costs are collected on any new development in the catchment area. It might no cover all the costs to put through a minor arterial like this, but it could cover a significant part of the cost.

Developers have used the phased development ploy for years to avoid fees and responsibilities to contribute to the infrastructures. It is about time that the Council takes this issue on sincerely. A work session is a great way to begin!

Salem Breakfast on Bikes said...

Over at Hinessight there's a long response from the City Attorney to some questions about the bridge over Jory Creek on Lone Oak. He writes:

"Currently, when a property is proposed for a phased subdivision, the City ensures that each phase meets the land use requirements independent of other phases. That was not the case for the Creekside subdivisions, because each phase was proposed, approved, and developed as separate subdivisions.

When the initial development application for Creekside was made in the early 1990’s, the City did not have provisions for phased development of residential subdivisions, so there were few rules on the books to review and regulate multiple interrelated subdivisions. With the adoption of the Unified Development Code (UDC) in 2013, the City now has regulations in place to address phased development of subdivisions, though they are not intended to specifically address a circumstance like this.

There is much more besides this, including a reading of the LUBA decision and notes on several other details and the legal requirements behind them!