City Council Meeting Notes 01/03/24
Welcome to the first Council Meeting summary of 2024! I hope this year treats you well. <3
TLDR:
The Jackstraw Project received MUPTE approval, and is moving on to the School District, the last tax district that has to vote to approve it. I covered this topic in what one might consider exhaustive detail.
Council was presented with tentative numbers and was asked to make some decisions around the implementation of the non-residential side of the Transportation Utility Fee.
Today, we're going to ignore the usual constraints of linear time and established formats to jump straight into talking about Jackstraw, because for some reason, y'all are super upset about it.
So before we can talk about the project you're mad about, first we need to walk through the tax incentive it is applying for, because it would be irresponsible to have a strong opinion about something before understanding what it is, right? RIGHT?
Right. So let's start at the beginning.
Ugh, do I have to explain Tax Increment Financing? Wait, I don't! BING, EXPLAIN TAX INCREMENT FINANCING FOR BABIES:
Tax Increment Financing, or TIF, is a way for cities to pay for new buildings, roads, parks, or other projects that make the city better. TIF works like this:
The city chooses an area that needs improvement, called a TIF district.
The city calculates how much money it gets from property taxes in that area. This is the base value.
The city borrows money to pay for the new projects in the TIF district.
The new projects make the property values go up in the TIF district. This means the city gets more money from property taxes in that area. This is the increment value.
The city uses the extra money from the increment value to pay back the borrowed money.
After the borrowed money is paid off, the city gets to keep all the money from the property taxes in the TIF district.
TIF is like a piggy bank that the city fills up with money from the new projects. The city can use the money to make the TIF district nicer and more attractive. TIF is supposed to help the city grow and create more jobs and opportunities for people. 🏙️
Some people like TIF because it helps the city pay for new projects without raising taxes for everyone. Some people don’t like TIF because it takes money away from other things that the city needs, like schools, fire stations, or libraries. Some people also think that TIF is unfair because it benefits some areas more than others. 😕
TIF is a complicated topic that even adults have trouble understanding. If you want to learn more about it, you can ask your parents or teachers, or you can read some of the articles that I found for you:
Wikipedia
Economic Policy ResearchI hope this helps you understand TIF a little bit better. Have a nice day! 😊
Thanks, Bing! That helped a lot. The Emojis were a nice touch.
We established a TIF to help develop Bend's core area in 2020. This means that the taxes that go to the City, Schools, and Parks from the shaded region in the graphic below are frozen to 2020 levels for 30 years.
All tax revenue generated by increases in the value of property in this area go into a special fund that the city can leverage to work on projects that will improve the area, such as improving 2nd Street, giving out small business grants, and building infrastructure projects like Hawthorne Crossing. 18% of the money generated is supposed to be allocated to housing, 15% to business support, 52% to transportation, and 10% to open space.
Okay, I guess that makes sense. So What is MUPTE?
MUPTE, or the Multi-Unit Property Tax Exemption, is an incentive program for projects within and around the TIF district that is intended to lower the upfront cost of building multi-unit properties. These kinds of large developments require a ton of up-front capital to get started. So even if a project would be profitable in the long run, the amount of cash you have to have on hand up front can make it prohibitively expensive to begin.
MUPTE keeps the taxes owed on a developed property at the frozen base amount for 10 years. This means that the taxes given to Schools, the City, and Parks stays the same, but the project would not contribute to the TIF fund until the 10-year period expires. Projects also still have to pay other upfront costs related to development, like SDCs. The idea is that by forgoing short-term revenue to get projects on the ground, you can greatly increase long term revenue for the TIF fund and taxing districts by getting projects constructed that would not otherwise be built.
The City's goal with the MUPTE program is to stabilize rents within the city by incentivizing the construction of new multifamily housing. 25% of Bend households are considered severely rent burdened. The city is trying to stabilize rent prices, which have been increasing unsustainably in recent years. Increasing the amount of a housing available puts downward pressure on rent costs. This is to say that the primary public benefit of the MUPTE program is the housing units themselves.
To be approved for MUPTE, a project must be built within the TIF district, and include three other public benefits from a list in our Municipal Code. One of those benefits must be selected from a smaller "Priority" list. The project also must be evaluated by a third party to demonstrate that the project would not be viable without the tax exemption. A project applying for an exemption must be approved by some combination of The City, BPRD, the school district, the County, and other districts such that 51% of the total combined levy agree to participate.
These additional public benefit requirements allow the city to influence what kinds of developments get built in the Core Area, and the third party evaluation forces applicants to develop these properties with narrow margins. Without these incentive requirements, approved properties would likely still be developed, but they would look very different.
"I'm going to pretend I already knew all of that. Will you talk about Jackstraw now?"
Absolutely, dear strawman.
The Jackstraw development is a 7-story mixed-use project currently being constructed across from Market of Choice on Arizona Ave. It will provide over 300 units of housing and 17,000 sq ft of retail space, and is centrally located with easy walkable access to amenities like grocery shopping, the Old Mill, and the Deschutes River Trail. The developer of this property, Killian Pacific, is also the developer of the Box Factory next door. The project has applied for a MUPTE exemption with three public benefits: High energy efficiency, mobility supportive amenities, and a wrapped parking structure.
The upfront SDC charges the project will have to pay total $5,043,843. If the land remained undeveloped, the TIF district would generate $311,732 over the 10-year exemption period. With the exemption, the project would generate $923,365, a 3X increase. Over the 30-year period of the TIF, having this project will generate 20x more tax revenue than if the land was left as-is.
Won't the developer build this project no matter what? Why are we giving a tax incentive to a project that is going to "rake in cash"?
Nope. A third party review was conducted by PNW Economics, and they concluded that it would not be financially viable without an exemption. In fact, it might not even be feasible with the exemption. The project has an expected ROI of 5.1%. (For context, the S&P 500 has an average ROI of 7%, and you don't even need to build anything to achieve that.) The project was financed with the assumption that it would get approved for MUPTE. It is written into the loan. If MUPTE falls through, the loan dissolves, and with an even lower ROI the project will not be able to be financed. Without approval, construction will be forced to halt, and the city will be left with a half-constructed concrete skeleton in the center of the city for years
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Why would a property that is so reliant on this exemption start construction before approval?
This is a great question. Killian normally develops projects using Portland's MUPTE, which is set up in a more rational, sane way. As long as a project fulfills MUPTE requirements in Portland, the project gets the exemption. That is not the case is Bend. Our MUPTE is new and requires buy-in from each taxing district on a case-by-case basis, and each taxing district here has the discretion to revoke approval. Due to a miscommunication, Killian didn't know about this until a few months ago. Since then, it has been a scramble to get this approval to prevent the project from falling into catastrophe.
How did the public respond to all this drama?
Bend YIMBY submitted a petition with 44 signatures urging for Jackstraw to receive MUPTE approval, and asking for the approval process be changed to be less discretionary. Criteria should be changed to include stronger below market rate requirements. Two members came in person to voice support.
The Chair of the Southern Crossing NA said that Jackstraw should receive MUPTE approval, but we should make the bar higher for MUPTE approval in the future.
Immersion brewing came to object to MUPTE approval. Immersion and other businesses at the Box Factory have been experiencing a lot of issues related to the construction, and they don't feel like Killian has been responsive or made any significant effort to address these challenges, particularly around parking and issues with pedestrian lighting.
The Co-Founder of Crux is a former tenant of the Box Factory and tells the opposite story, saying that the Killian team, and in particular, President Adam Tyler, demonstrated patience, responsibility, proactivity, true partnership, and a genuine care for their business, team and the community. We should focus on the MUPTE criteria instead of blaming an undeserving target.
A homeowner in the Historic District near the construction is also trying to add housing to his property, and feels it is incredibly unfair for large developers to get assistance to build housing while smaller developers don't get similar assistance.
What does Council think?
Does this project meet the requirements? Yes.
Was it less than ideal that this construction was started on this project before getting the MUPTE? Yes.
Is that the fault of a potential cumbersome and confusing and lengthy process? Probably yes.
Do we need to take a look at this project and this program and make changes to it in the future? Yes.
Is that what we're here to do tonight? No.
Councilor Perkins
A couple of folks sitting up here were not on Council when the program was approved. This happens, it gets approved, it works through, and then it comes in front of you. And you may say: "Geez, I would have done that program differently." ,but here we are. I think this is a fundamental fairness issue, and an issue for people that are developing any kind of property in this town. If we have rules and regulations and programs, it should be clear what those are, and we should follow through with what we have on the books. Do we want to change what's on the books? Maybe yes. That is the future conversation that we're going to start next meeting. But it if we become a council that arbitrarily or for whatever reasons we think are good reasons, change programs midstream, change requirements when people meet them, say no, now you have to meet new requirements, we are not going to have people participating in the programs that we have designed to incentivize the good things we want to see in the community.
....
And I would really like to see Killian, step it up on the impact part of it. I went and stood next to those pedestrian lights that aren't working right and the impact of having, right next to your event space, the place where the construction is happening, so I think some more caring investment can be done there. That's not a requirement of this program, that's just me saying that it's important. You saw the way that the community supports our small businesses and wants to see them succeed and wants to make sure that this is not going to impact them so poorly that they can't exist. So I will just say that, but as far as coming to the requirements, I think this project does meet the requirements. So I'll be voting yes.
Mayor Kebler
A lot of people have a lot of valid concerns, concerns like construction impact. People were concerned about loss of revenue to the school district, which is not a part of this. There's no impact to the school district revenue. We've heard about landlord tenant issues, we've heard about in town and out of town. I think from my perspective, I'm willing to set those issues aside because I don't think that they're related to the building of this actual project. This is not revenue that the city would be giving away. This is revenue that the city would be foregoing. And that is an important distinction, because without the project, there is no additional revenue generated to distribute. So it's not as if the city has $10.6 million sitting in future anticipated revenues. That doesn't exist. So it depends on this project going forward to even have this conversation. I think hearing staff present about them update makes me realize there's a little bit of a miscommunication when we talk about public benefits. When we put public benefits on those slides. I think people interpret that as an exhaustive list and that's not the case. I think the real public benefit is we have to go back to the intent of the MUPTE program. I wasn't on council, but I was on the parks district, and so we had input in designing it, and I see several Parks Board members in attendance tonight. I think the policy intent captures the real public benefit which is in terms of multiple stories, high density homes and a centrally located area. The public benefit is that these will add supply, supply that is desperately needed, even if people had more money, that doesn't help solve the problem of not having enough homes. This is growth in a way that helps us preserve our natural beauty without expanding the UGB. So the idea that public benefits that the project meets, I think is really a misnomer because it implies that those are the only public benefits associated with this project and for me, they kind of missed the biggest public benefit, which is that it's a pretty great project, and it's one that I think I want to see more of. And that's not to say that I think this is an open-ended giveaway. This is a good deal to incentivize a very good project. I don't think this is an open-ended offer. I don't expect this program to look the way it does today. Going forward. I think we'll be revisiting it. But I'm supportive of it
Councilor Mendez
Councilor Riley is the only Councilor who voted no. He voted no because he thinks approving a MUPTE exemption for a project currently under construction violates the spirit of the MUPTE code, and that beginning construction prior to submitting the MUPTE application made it clear that this project with all those benefits is financially viable without them. I personally think this is a fundamental misinterpretation of the situation.
I understand Councillor Riley's concerns entirely, but I have been in Bend for 31 years now, and I have twice lived through periods of time when partially started projects stopped and just stood there for years. You know, all the way to framing, projects just sitting, and you know, that's what we're talking about here is the need for this housing today. Not tomorrow, not in a few years, not when they can finally get it penciled and that is the real benefit. Is getting that housing, getting that housing now. I am apprehensive about this project being started, but I've been on the floor for this at every step. I've been when we decided how big is the core area I've been in Are we going to have this MUPTE program and then in the part about what will be the requirements, and it looks like now that it's coming to fruition, you know we are concerned about those requirements that we set, but I agree with the commenter who said that, you know, essentially we made the rules. We are the ones who made the rules. They're following the rules. As the chair of our urban renewal agency, I feel like I really need to say yes to this request. Again, despite that, you know, real reservation about it being started. I kind of believe your story. I can imagine just misunderstanding that in Portland, where you're familiar with. It doesn't go to counsel, you know, it never needs that, that what we're doing today. I really can, I can imagine that that's what happened and so, thank you.
Councilor Campbell
Resolution and next steps
Council voted to approve the exemption with everyone voting yes, except Councilor Riley, who voted no, and Councilor Broadman, who recused himself due to a potential conflict of interest. Next meeting, the council will discuss the MUPTE program and potential changes during the work session. The Jackstraw MUPTE approval will next go in front of the School Board, the last taxing district it needs to get above the 50% approval threshold.
Lightning Round: The rest of the meeting
I have run out of time to get this summary out the door, and you're probably also tired of reading. So let's cover some other important stuff real quick.
Non-residential Transportation Utility Fee
Presentation
During the work session, we saw tentative numbers and BEDAB's implementation recommendations for the non-residential transportation utility fee. Council agreed with all of BEDABs suggestions, and will continue to rely on the committee for implementation guidance going forward. The fee will be ramped up over three years, and for the first year the charge will be proportional to SQ foot. Before the project gets ramped up, BEDAB recommends that a more robust system to classify transportation system impact be implemented. Alternative calculations will be used for parks and schools to reduce their fee. Hotels and STRs will also be treated differently because of their higher impact. A mechanism to exempt childcare facilities will be ironed out.
Legislative Update
The city is hoping to get funding to continue operations of our shelters from the State this year, money for mental health and addition recovery centers, and funding to pay for sewer infrastructure we need in the central district and SE side of town to open up these areas for housing development.
Budget Audit
An external auditor gave the City's budget and finances a clean bill of health.
yay
Street Safety Program 2024 and Yeoman Road extension
The 2024 Neighborhood street safety program has begun. 17 of the 25 initial projects from the 2019 list have been finished. The rest will be done over the next two years. The City is connecting Yeoman Road over the North Unit Irrigation Canal.
The City signed the agreement with ODOT letting them take over the construction of Hawthorn Bridge Necessary to receive the Federal Grant paying for the construction
yay
Meeting Adjourned.