City Council still confused about Lone Oak Road Reimbursement District

Last night the City Council decided to take another month to consider its reconsideration of a Lone Oak Road Reimbursement District that appears to have support mainly from the developers who would pocket money supplied by lot owners in south Salem. 

A hearing was supposed to clear up questions about the Reimbursement District, but it seemed that as many questions were raised as answered. So after lengthy discussion, Mayor Chuck Bennett moved to hold open the hearing until the April 23 City Council meeting. That motion was passed unanimously by nine rather confused councilors.

In case you've missed the twists and turns of this issue -- and if you only read the Statesman Journal, you've missed out completely, because our local newspaper no longer covers most local news, including news about the Lone Oak Road Reimbursement District -- here's my blog posts about this subject, listed from oldest to newest..

City Council poised to make public pay for improvements, not Larry Tokarski
Why did Larry Tokarski start, then stop, construction of Lone Oak Road?
Larry Tokarski leaves the public with a $7.5 million development bill
Neighborhood association asks City Council to reconsider Lone Oak Road decision
Salem City Council reconsiders making public pay for Lone Oak Road improvements
Is Larry Tokarski the developer of Creekside?
Salem Weekly delves into messy history of Creekside development
Statesman Journal reporter criticizes Salem Weekly for story his paper didn't cover
City staff ignore neighborhood association questions about Creekside development

The hearing last night featured quite a few complaints from people who would have to pay thousands of dollars to the Reimbursement District when a house was built on their lot, even if they'd rarely, if ever, use an extension of Lone Oak Road.

They questioned why owners of lots quite far from Lone Oak Road would have to pay up, while current residents of the Creekside neighborhood wouldn't have to pay anything.

In my three-minute testimony, I argued that there didn't appear to be a need for a Reimbursement District. You can either listen to what I said via the You Tube video below, or read my remarks in a continuation to this post. 

Several city councilors said they'd be submitting questions to City staff that they'd like answers to when the Reimbursement District is discussed again at the April 23 City Council meeting.

Here's a key question that I hope gets asked and answered: Is the Creekside developer required to build a bridge over Jory Creek and an extension of Lone Oak Road, or is constructing these improvements the responsibility of the City of Salem?

I recall that City staff said last night that if the Creekside developer plats Phase 14, the bridge and road would have to be built as a condition of moving ahead with the development of that phase. However, the staff report for the Reimbursement District reconsideration hearing only speaks of the Creekside developer being required to construct Lone Oak Road.

The Creekside developer is required to construct Lone Oak Road between Muirfield Avenue and Augusta Drive as a condition of the next sub-phase of Creekside’s Phase 14 development. However, the timing of construction is at the developer’s discretion, not the City’s. Therefore, this condition to construct Lone Oak Road is also being imposed on other developments in the area since the street is needed to serve these other properties.

There also was considerable talk about a 2015 Memorandum of Understanding that called for the City of Salem to build the bridge and possibly also the road (the MOU language isn't crystal clear on this point), with the Creekside developer seemingly only being responsible for dedicating the right of way for the northern extension of Lone Oak Road. 
Download Attachment 7 - Creekside MOU 052715

The MOU calls for the City of Salem to include $750,000 in the Capital Improvement Plan for FY 2016 through 2020 to build the bridge. But the plan for the Reimbursement District assumes that the bridge will cost $5,6 million. So there's close to a $5 million discrepancy between what City officials thought the Jory Creek crossing would cost in 2015, and what it now is estimated to cost,

This is a major screw-up which was cause for concern at previous City Council hearings. Last night it was learned who was responsible for the $5 million mistake: Peter Fernandez, the Public Works Director. He said that he failed to get a cost estimate from the City engineering staff, choosing instead to rely on a cost estimate by the Creekside developer. 

Here's a video I made of Fernandez' admission that he was the one who screwed-up.

This $5 million mistake by Fernandez is important for reasons beyond the high dollar figure. Here's why:

(1) Peter Fernandez had numerous opportunities to come clean about why the cost of the Jory Creek crossing mushroomed from less than a million dollars to almost six million dollars. But he only revealed his failure to get a cost estimate from his engineers under close questioning from Councilor Tom Andersen last night. This calls into question Fernandez' credibility on other issues, and is a valid reason to wonder why he should continue to serve as Public Works Director.

(2) It was acknowledged yesterday that given the $5.6 million cost of a bridge over Jory Creek, there is little likelihood that the Creekside developer will ever choose to build the bridge. So this eliminates a major rationale for the Reimbursement District, which already obviously is on shaky ground given the fact that after approving it, the City Council voted to reconsider that decision, and now has decided to spend a month considering the reconsideration before the April 23 Council meeting.

(3) To elaborate on the above, it makes little sense for the City of Salem to include money to build the bridge in a future Streets & Bridges bond measure, then pay back some of that money via funds raised through the Reimbursement District. If this happened, money provided by all property tax payers in Salem would be reimbursed by assessments placed on several hundred lots in the south Salem area that are part of the Lone Oak Road Reimbursement District. Those lot owners would be justifiably irked by this.

(4) Their irritation would be justified for several reasons, one of them being that City staff said that the Lone Oak Road Reimbursement District is by far the largest district of that kind in Salem. In other words, and as already noted, lot owners who are far away from Lone Oak Road are being asked to pay for bridge/road improvements. The fact that the City of Salem would be the entity being reimbursed by those lot owners for bridge construction makes the Reimbursement District even more unfair.

Another nail in the coffin of the Reimbursement District is the fact noted by City staff last night that two subdivisions planned for the area south of Sahalee Drive include about 120 lots (outlined in purple and orange above). The developers of these subdivisions (one 10 acres, the other 20 acres) are responsible for building the southern extension of Lone Oak Road to Rees Hill Road.

Bizarrely, last night City staff said that since the Reimbursement District assessment per lot would be about $10,000, the $1.2 million raised (120 times $10,000) just about equals the cost of building the southern extension of Lone Oak Road. So the City of Salem would collect $1.2 million from the developers, then reimburse the developers for the $1.2 million they'd just paid to the Reimbursement District.

Um, here's another idea: ditch the idea of the Reimbursement District and simply have the two developers build the southern extension of Lone Oak Road for $1.2 million, sharing the cost between them. 

Bottom line: the Lone Oak Road reimbursement district is a solution in search of a problem. Read my testimony below for why this is the case.

Testimony by me, Brian Hines, at the March 26 Lone Oak Road Reimbursement District hearing

I've read and written a lot about Creekside development and the Lone Oak Road Reimbursement District. Three issues stand out for me.

First, in 2007 the Creekside developer started to construct a Jory Creek crossing and the northern unbuilt section of Lone Oak Road. 

A City of Salem staff report says permits for this work were issued after the developer’s engineering consultant prepared plans. So at that time the City and the Creekside developer had a common understanding of the Lone Oak Road improvements.

But the Creekside developer stopped work on those improvements and never completed them. 

A Salem Weekly reporter, Helen Caswell, has searched for documents that explain why the Creekside developer stopped that work and wasn’t required to complete the improvements. She couldn’t find any.

This is strange, since there are voluminous documents relating to other aspects of Creekside development. 

Since we don’t know why that work was begun by the Creekside developer, then stopped and never re-started, the claim by City officials that nothing like this will ever happen again is dubious.

Second, even though the staff report for this hearing says that the Creekside developer is required to construct the northern segment of Lone Oak Road, City staff have said that this segment will need to be in a Streets and Bridges bond. 

So why should it be included in the Reimbursement District? It doesn’t make sense for the general public to pay for the northern Lone Oak Road improvements, then have lot owners in south Salem  contribute to a Reimbursement District fund.

Third, the southern unbuilt section of Lone Oak Road should be paid for by the developers of two subdivisions planned for south of Sahalee Drive. 

Attorney Mark Shipman has said that his clients, the Oak Ridge Estates developers, wanted the City of Salem to find a way for paying for the south portion of Lone Oak Road.

But their 10 acre, 38 lot subdivision, when combined with a nearby 20 acre subdivision, likely will constitute over 100 lots. Since the southern section of Lone Oak Road would pass by and through the two subdivisions, it sure seems like the developers should be paying the cost of extending Lone Oak Road south to Rees Hill Road. 

So there isn’t a need for the Reimbursement District, since the northern section of Lone Oak Road either is the responsibility of the Creekside developer or will be part of a Streets and Bridges bond, and the southern section should be paid for by two subdivisions constituting 30 acres and probably more than 100 lots.

 

Comments

[Salemander]

I watched the meeting on CCTV, and was amazed and angered at Peter Fernandez's reluctant admission that he made a multi-million dollar mistake at the expense of the taxpayers. He didn't even consider having city staff engineers look at the protect and cost of building, he just took the word of the developer's engineers. He obviously did not want to reveal this and it only came about after some solid questioning by Tom Andersen. This seems like a pretty sweet deal for the developers.

Of course this all calls into question what these actual estimates from the developer looked like. It would be nice to have someone knowledgeable about the issue to look at it and see if the initial estimate was even realistic or how in depth it was, and if the possibility exists that this was some sort of sweetheart deal from Fernandez to the developer, where the city assumes the costs of an expensive project to save them a few million bucks. I know that sounds like some sort of conspiracy theory, but at this point Peter Fernandez has zero credibility and seems to be really eager to do his best to do the bidding of developers at the cost of the taxpayers. He should be constantly pushing back and trying to lower costs and be a good steward of our money, not be looking to hand it out and get as good a deal as he can for developers.

Also, Brian, next time you go to a council meeting you should bring a Snickers bar for the mayor. He seems to start getting really cranky if the meeting runs late, even if they are dealing with important issues that need to be tackled (aka the job he signed up for and campaigned for... just not too late I guess!)

[Jim Scheppke]

Brian, I don't quite follow your logic that it would be so wrong for a reimbursement district in the vicinity of Lone Oak to repay the property owners of Salem if they passed a streets and bridges bond that "loaned" the money needed to build the northern part of Lone Oak, including the bridge. A bond measure should rightfully pay only for major transportation system improvements that are used by a large segment of the community. Lone Oak Road does not qualify. Of course putting the "Tokarski Bridge" in any streets and bridges bond would be kiss of death. No one should believe otherwise.

[Brian Hines]

Jim, the argument against using the Reimbursement District to repay money in a Streets and Bridges bond measure would be along these lines:

First, Lone Oak Road is some variety of collector street. It isn't a local road within a development. Yes, it should have been built by the Creekside developer. But now it seems fair for all property owners in Salem to share the cost of building the bridge over Jory Creek.

Second, this is an unusual Reimbursement District. As noted in this post, City staff said it is by far the largest such district in Salem. It doesn't seem fair to saddle many lot owners in south Salem who will rarely, if ever, use Lone Oak Road with the cost of building the bridge and road. Again, it would be more fair to have this part of a citywide bond obligation.

Third, the people already living in the Creekside area near Lone Oak Road won't pay anything for the road improvements if a Reimbursement District is used to fund the improvements. Making it part of a citywide Streets and Bridges bond would ensure that they would pay for part of the improvements.

Fourth, the South Gateway Neighborhood Association has a justified gripe that much of the Reimbursement District funds are planned to come from the development of 250 lots in what is now the Creekside Golf Course. This would raise about $2.5 million.

But this development is legally unsettled, so it may never happen. And if it does happen, then the Creekside developer should pay for the entire cost of the northern Lone Oak Road improvements, the bridge and road.

So the Reimbursement District should be put on hold until the lawsuit regarding the golf course is resolved. As I say in the post, the southern section of Lone Oak Road can be paid for by the two developers in that area. If the Creekside developer gets to make the golf course into a subdivision, then building the northern Lone Oak Road improvements can be made a condition of subdivision approval.

Lastly, why should only people in south Salem have to pay for Peter Fernandez' screw-up in having the City of Salem agree to pay for a Jory Creek bridge when the cost for this is $5.6 million rather the $750,000 he wrongly assumed? The whole city should pay for this mistake, not just lot owners in south Salem, should the golf course development not move ahead.