Lone Oak Road Reimbursement District staggers across City Council finish line

Watching last night's City Council final deliberation on a Lone Oak Road Reimbursement District reminded me of a demolition derby.


The plan that was approved on a 5-4 vote was the last one standing, like a bashed-in car with smoke streaming from its hood, oil leaking all over, fenders missing, dents everywhere. 

Not a pleasant sight, but in the eyes of a majority of City Council members, better than nothing.

The Council considered four alternatives to the original Lone Oak Reimbursement District plan that landed with a resounding "no thanks!" thud at a public hearing a while back, which led to the Council reconsidering that plan. 

Here's a screenshot from the CCTV video of the meeting that shows the alternatives considered last night. 

The left column says "Adopted," since this was the original plan that was adopted by the Council before the reconsideration of it. The policy question was who is going to pay for a bridge over Jory Creek, a northern extension of Lone Oak Road extending south of the bridge, and a southern extension of Lone Oak Road. 

It struck me as decidedly strange that after all the criticisms of the original "Adopted" plan, and the Council's vote to reconsider it, City of Salem staff recommended sticking with the plan that hardly anybody liked except City staff. This shows a disturbing lack of both understanding political reality, and flexibility, on the part of City staff.

This screenshot shows the unbuilt sections of Lone Oak Road.

Here's some key takeaways from last night's vote:

(1) No inclusion in a Streets and Bridges bond. City staff made clear that including money for the Lone Oak Road improvements in a future Streets and Bridges bond was off the table, contrary to statements made by Public Works Director Peter Fernandez at previous meetings that this was the only way the Jory Creek bridge could be financed. So this is a win for Salem taxpayers, who shouldn't have to foot the bill that developers should be paying. 

However, since City staff didn't alter their recommended budget for the Reimbursement District ("Adopted" column above), the reason Fernandez said a Streets and Bridges bond would be needed to pay for the bridge hadn't changed. Namely, that there won't be enough money in the Reimbursement District to pay for a crossing over Jory Creek. More about this below.

(2) More emphasis on SDCs. City staff presented three alternatives to the original plan that relied more on Systems Development Charges to pay for the Lone Oak Road improvements. To my understanding based on what I heard last night, these are accumulated from citywide development to the tune of an average of $1,200,000 annually.

So even though some City Councilors said they were pleased that developers, not taxpayers, would be paying for the improvements, this is questionably accurate for several reasons. First, it is development all over Salem that produces the SDC pot of money, not development solely in the Lone Oak Road area. Second, the Reimbursement District will collect money ($4,900 to $9,200) whenever a lot is platted for a house in the district boundary. 

Often this will be a lot owned by an individual or family, not a real estate developer. So while it is true that development is paying into the Reimbursement District, this isn't always a major subdivision developer, but someone developing a single lot.

(3) Steve McCoid wanted Creekside excluded entirely. Councilor McCoid represents the Creekside area. He's in a race against Jackie Leung that will be decided tonight. McCoid said that in the course of his campaigning, he's heard from many people that they don't want to include Creekside lots in the Reimbursement District for several reasons, including a feeling that the Creekside developer should have paid for the road improvements, and not wanting the Creekside golf course turned into a subdivision.

McCoid made a motion to eliminate all Creekside lots from the Reimbursement District, a proposal that took a while to even get a second and pretty clearly wasn't favored by anyone but him. Other councilors said that it made no sense to let the Creekside developer off the hook for helping to pay for the Lone Oak Road improvements, since a 210 lot subdivision on the golf course property is expected to bring in the $1,935,000 shown in Alternatives 2 and 3.

(4) Alternative 3 ended up being chosen. Councilor Tom Andersen made a substitute motion to McCoid's motion that called for selecting Alternative 1 instead, which was the staff recommendation with the exclusion from the Reimbursement District of lots in the eastern part of south Salem, since few people who live in that area would use Lone Oak Road, and they  were irked at being part of the District.

Not much love was shown for this motion either, so Councilor Chris Hoy made a substitute to the substitute motion by calling for Alternative 3 to be approved. This was the same as Alternative 1, except for the exclusion of 50 lots in the Creekside area that already had been platted and weren't likely to be further divided.

As mentioned above, the vote was 5-4 in favor of Alternative 3, judging by a show of hands from those opposed to the motion: Councilors Andersen, Ausec, Kaser, and Lewis. 

(5) Peter Fernandez' surprising statement. During the deliberations prior to voting, Councilor Sally Cook asked what would happen if the Reimbursement District wasn't approved. After Glenn Davis attempted an answer, Public Works Director Fernandez jumped in with a statement that I feel deserved a lot more attention than it got. Here's a video I made of the interchange.

Fernandez said that the southern extension of Lone Oak Road likely would be built by developers of two subdivisions in that area, because the road is needed for the subdivisions. As I've noted in previous posts, this raises an obvious question: if those developers were going to build the southern extension anyway, why is a Reimbursement District being formed to pay them back for what they would do regardless?

Note in the video how Glenn Davis struggles to find words to describe how the developers would react if there wasn't a Reimbursement District that the Oak Ridge Estates developer requested after learning that they'd be expected to pay for improvements to Lone Oak Road. 

After listening to Davis, my reaction was that a perfectly acceptable response would have been: "Well, if there wasn't a Reimbursement District, the developers would just have to pay for the southern road improvements on their own, since this would be a condition of their subdivision approvals."

Those two subdivisions total about 120 lots.

Development of those lots would add about $1,100,000 to the Reimbursement District fund ($9,212 per lot times 120). So as Peter Fernandez said, it makes sense that the developers would go ahead with building the southern extension of Lone Oak Road without a Reimbursement District, since the total cost is only $15,000 per lot ($1,800,000 divided by 120).

But nobody on the City Council asked the obvious question after listening to Fernandez: "If the two subdivision developers would make the southern improvements to Lone Oak Road on their own, why are we including these improvements in the Reimbursement District?"

Bottom line: I realize this is geeky stuff. But I feel the need to go into this much detail so there's a record of what transpired at least night's City Council meeting, especially since the Statesman Journal has devoted exactly zero reporting resources to this subject. (The newspaper wouldn't even publish a guest opinion that I wrote for them.)

Because of me, Salem Weekly, the South Gateway Neighborhood Association, and numerous individuals who complained about the Lone Oak Road Reimbursement District, the original plan was improved. It's good that the eastern part of the District was dropped out, and that the idea of paying for the bridge over Jory Creek by including money for it in a Streets and Bridges bond has been given up.

But the Reimbursement District plan approved by the City Council still is tilted too much in favor of developers. Almost certainly the Creekside developer isn't going to build the bridge and northern extension of Lone Oak Road unless they get approval to convert the Creekside golf course into a 210 lot subdivision.

A City of Salem staff report gives this a 50-50 chance of happening. Which is a good chance. I'd put the odds at even higher than that. It sure seems like it would be justified to require construction of the bridge and northern extension of Lone Oak Road as a condition of approval for a subdivision on what is now the golf course.

But as it stands, the Creekside developer would be able to make those improvements, then get paid back for what they cost through the Reimbursement District. Pretty sweet deal. 

I  realize that developers are in the business of making money. I'm just saying that it would have made more sense to hold off on forming a Reimbursement District for the bridge and northern extension of Lone Oak Road until it was known whether the golf course would become a subdivision. 

If this happens, the Creekside developer could have paid for those improvements as a normal cost of doing business.

However, with the approval of the Lone Oak Road Reimbursement District, there's a very good chance that (1) a legal ruling will allow the Creekside golf course to be transformed into a housing development, after which (2) the Creekside developer will build the bridge over Jory Creek and the northern extension of Lone Oak Road, then (3) be paid back by the Reimbursement District, likely not all at once, but over the span of, say, ten or more years as the District accumulates funds when lots are developed in the south Salem area.

If people in the not-too-distant future ask, "How the heck did the Salem City Council allow this to happen?", I feel good that this blog post, and other posts I've written on this subject, will provide a detailed answer. 

Comments

[J]

Thanks for this break down of what happened and some helpful background. My dad asked me a couple of weeks ago why anyone cares about access over Jory Creek or these Lone Oak extensions. My answer, as it is more often than not, "Some land developers want someone else to pay for something that will allow them to make a killing." The timing of this discussion and vote (on election eve) just adds to the intrigue. And I can think of no explanation for the failure of even one of the councilors to ask the logical and obvious questions other than election eve distraction or Fernandez Fatigue.