REPORT AND RECOMMENDATION OF THE PLANNING COMMISSION
TO THE PORTLAND CITY COUNCIL
Application Of Hoyt Street Properties, LLC For A Ten Year Property Tax Exemption For New Multiple Unit Housing (Chapter 3.104)
Known As Block 13 (Not Formally Named)
I. FACTS
A. GENERAL INFORMATION
Effective Dates: Pre-Application Date: February 7, 2002
Full Application Date: March 21, 2002
P.C. Hearing Date: May 28, 2002
Deedholder: Hoyt Street Properties, LLC
809 NW 11th Avenue
Portland, OR 97209
Applicant(s): David Sperling, Controller
Hoyt Street Properties, LLC
809 NW 11th Avenue
Portland, OR 97209
Architect: Mithūn, Architects
Pier 56
1201 Alaskan Way Suite 200
Seattle, WA 98101-2913
Proposal : Application for limited property tax exemption for a newly constructed five story, 139 unit rental development containing 143 onsite parking spaces and 8,980 square feet of ground floor commercial space.
Location: Block bounded by NW 9th, 10th , Northrup, and Marshall Streets
Legal Description: Lots 9 and 10, Block 13, Hoyt Street Yards 1N1E34BB 2611 and 2612 (R499915 and R499916)
Quarter Section: 2929
Zone(s): EX, Central Employment
d, Design Review Overlay
Central City Plan District
Description of The applicants request limited property tax exemption
Proposal: for a newly constructed five story, 139 unit rental project.
B. SITE INFORMATION
Description: The site is a subdivided portion of a larger lot (Tax Lot 2600) created by the approval of LUR 99-00542 SU, MS. The site is 40,000 square feet in area, slopes slightly to the west, and is vacant and cleared for construction. Formerly occupied by a railroad storage and switching yard, it is a part of the holdings of the Hoyt Street Properties, a major development company which is a key player in the transformation of this formerly industrial area into the River District mixed use neighborhood. See site history below.
History: There have been several land use cases involving this and the surrounding parcels during the transition of this neighborhood from a primarily warehouse-industrial district to a previously proposed office park development to the current master plan for the residential and mixed-use River District development (LUR 92-00798 and LUR 93-00279 and land division case LUR 95-00144 are the seminal cases with LUR 99-00542 SU MS representing the latest approved amendments to the master plan.). The most currently applicable policy documents which are relevant to this history of development review include the River District amendments to the Central City Plan District (Ordinance No. 168702), the Housing Implementation Strategy (Resolution No. 35350), and the Development Agreement with Hoyt Street Properties (Ordinance No. 171449). The site is also included in the adopted River District Urban Renewal Area.
C. VICINITY DATA
Surrounding Conditions: Full block mixed-use projects now characterize the major land uses within the immediate area. To the north lie vacant sites which will include the next phases of River District development. The site immediately to the south of this subject site contains the recently completed Lovejoy Station development. Across NW 9th to the east is the site of the former Horse Barn for the Mounted Police Patrol and south of that the recently opened Lovejoy ramp to the Broadway Bridge and the parking lot for the Main Post Office. To the southwest lies a site for proposed park space. The Central City Streetcar runs along the west (10th Avenue) frontage of the site. Portions of NW 9th and Marshall are now dedicated and paved along the subject site.
D. AGENCIES, NEIGHBORHOOD AND OTHER ASSOCIATIONS NOTIFIED
All appropriate agencies and associations have been notified in accordance with Title 33 regulations governing Design Review of this project. The property tax exemption program falls under Title 3, Administration, of the City Code. The public notices of the meeting dates of the Portland Development Commission, the Planning Commission, and the City Council which are printed in area newspapers fulfill the notification requirement of this review.
E. EXHIBITS
1. Zoning Map
2. Site Plan
3. North and South Elevations
4. Economic Summary and Pro Forma
5. Portland Development Commission Recommendation and Decision
F. LEGISLATIVE INTENT/STATUTORY AUTHORITY
1. Legislative Intent
Consideration for property tax exemption for a ten-year period is authorized by ORS 307.600 through 307.690 and by Title 3, Administration, Chapter 3.104 of the Code of the City of Portland, Oregon.
State law specifies the following intent for the tax exemption provision under ORS 307.600 (1) and (3), Legislative Findings:
"(1) The legislature finds that it is in the public interest to stimulate the construction of transit supportive multiple-unit housing in the core areas of Oregon's urban centers, to improve the balance between the residential and commercial nature of those areas, and thus, to insure full-time use of these areas as places where citizens of the community have an option to live as well as work...
“(3) The legislature further finds that the cities and counties of this state should be enabled to establish and design programs to attract new development of multiple-unit housing in light rail station areas, in transit oriented areas or in city core areas by means of the local property tax exemption authorized under ORS 307.600 to 307.691...”
The Oregon legislature further specified that the 10-year property tax exemption apply only to the building improvements. The applicant would continue to be taxed on the land or any other improvements not a part of the multiple-unit housing or associated public benefit (ORS 307.630).
Planning Commission Comment: This statutory language was amended during the 1995 Legislative session by HB 3133 which broadens this program to include “transit oriented” for-sale as well as rental residential and mixed use development. In October 1996, the City adopted a separate program for transit oriented development. Although this project can be characterized as transit supportive, its location within the Central City Plan District requires review under the City’s Property Tax Exemption for New, Multiple-Unit Housing (Chapter 3.104 of the City Code).
2. Statutory Authority/Planning Commission Review
Section 3.104.050 of the City Code requires that the Planning Commission review tax exemption applications and determine whether the applicant's proposed development is consistent with the City's Comprehensive Plan and shall recommend to the City Council that the application be approved subject to conditions which the Commission deems appropriate to achieve the purposes of Chapter 3.104.
In order for a limited property tax exemption to be approved, the following determinations must be made:
a) that the proposed housing development is eligible for limited property tax exemption according to the requirements of City Code Chapter 3.104;
b) that the proposed development is in conformance with adopted Comprehensive Plan and other adopted plans incorporated by the Comprehensive Plan, such as the Central City Plan; and
c) that conditions specify the scope and nature of public benefit recommended for the proposed project.
II. ELIGIBILITY DETERMINATION
Section 3.104.010(3) of the City Code requires that property must meet one of two locational requirements in order to be eligible for tax exemption:
(a). That it be located within the Central City Plan District boundary as shown on Map 510-1 Portland City Code Chapter 33.510; or
(b). That it be within the boundaries of any urban renewal or redevelopment area formed pursuant to ORS 457.
Planning Commission Finding: The apartment project on Lots 9 and 10, Block 13, Hoyt Street Yards is located within the boundaries of the Central City Plan District as well as the River District Urban Renewal District and, therefore, meets the locational criteria for eligibility. The Planning Commission recommendation to City Council depends on PDC approval of the requested property tax exemption based on a favorable recommendation of their staff.
The Portland Development Commission has reviewed this project and recommended approval of the property tax exemption at their May 8, 2002 meeting based on the finding that the “Project’s cash on cash return is -2.28 percent during the 10 year period without the tax abatement. In this scenario, the Project would not likely be eligible for financing without a much greater developer equity contribution because of its inability to cover debt service. The financial performance of the Project in this scenario certainly does not achieve a market return; therefore, the Project is not financially feasible with the abatement.”
PDC further notes “As shown in scenario 3, in order to achieve the 10.37 percent cash on cash return associated with the abatement, rents would need to average an additional $286 per month, or 21 percent higher. These rent increases are not possible at the present time; therefore the Project is not financially feasible without the abatement.” (see Exhibit 5).
III. DETERMINATION OF COMPLIANCE WITH ADOPTED PLAN POLICIES
A. COMPREHENSIVE PLAN CONSIDERATIONS
Chapter 197 of the Oregon Revised Statutes requires all cities and counties to develop a Comprehensive Plan for land use and development, in accordance with the requirements of the State Land Conservation and Development Commission (LCDC). Portland’s Plan was acknowledged by LCDC on May 1, 1981. An update of the City’s Housing Goal 4 was completed and adopted by Ordinance No. 172954 on December 16, 1998.
The Plan establishes a set of goals and policies to guide future development of the City. Housing is addressed under Goal No. 4 which states:
“Enhance Portland’s vitality as a community at the center of the region’s housing market by providing housing of different types, tenures, density, sizes, costs, and locations that accommodate the needs, preferences, and financial capabilities of current and future households.”
The Block 13 development supports several of the policies of the Housing Goal including the following:
4.1: Housing Availability
Ensure that an adequate supply of housing is available to meet the needs, preferences, and financial capabilities of Portland’s households now and in the future.
4.3: Sustainable Housing
Encourage housing that supports sustainable development patterns by promoting the efficient use of land, conservation of natural resources, easy access to public transit and other efficient modes of transportation, easy access to services and parks, resource efficient design and construction, and the use of renewable energy resources.
4.7: Balanced Communities
Strive for livable mixed-income neighborhoods throughout Portland that collectively reflect the diversity of housing types, tenures (rental and ownership) and income levels of the region.
4.8: Regional Housing Opportunities
Ensure opportunities for economic and racial integration throughout the region by advocating for the development of a range of housing options affordable to all income levels throughout the region.
4.10: Housing Diversity
Promote creation of a range of housing types, prices, and rents to 1) create culturally and economically diverse neighborhoods; and 2) allow those whose housing needs change to find housing that meets their needs within their existing community.
4.11: Housing Affordability
Promote the development and preservation of quality housing that is affordable across the full spectrum of household incomes.
4.14: Neighborhood Stability
Stabilize neighborhoods by promoting: 1) a variety of homeownership and rental housing options; 2) security of housing tenure; and 3) opportunities for community interaction.
Planning Commission Finding: This project complies with Comprehensive Plan policies related to housing by providing 139 units of varying sizes for moderate income and middle-income small households in a well located neighborhood with emerging cultural and service amenities. This project is one element of the broader River District Development Plan.
B. ZONING CONSIDERATIONS
1. The EXd Zone and Central City Plan District. As of March 24, 1988, the Central City Plan was adopted for the inner city along the west and east sides of the Willamette River. In the Downtown areas, the Z Zone Overlay was abolished. Public review of projects in the Central City Plan District is now regulated by Central City Plan District requirements which supersede some EX regulations.
The Zoning Code regulations which apply to the subject site include the following:
• Zone and Plan Designation: EX, Central Employment
• Permitted Uses: A full range of uses including light industrial, commercial and residential. Although residential uses are not intended to predominate under the base zone, this area is governed by a specific master plan and development agreement which requires residential development at prescribed minimum densities, unit sizes, and affordability levels.
• Conditional Uses: Commercial parking is governed by the Central City Transportation Management Plan. Since no independent commercial parking is included in this project, a conditional use is not required for the proposed parking spaces.
• Permitted Floor Area Ratio (FAR): 2:1, with bonuses allowed for residential use.
• Permitted Building Height: 100 feet
Planning Commission Finding: The project complies with the major development and use regulations of the base zone and Central City development standards except for any adjustments that may be considered as part of the Design Review process. Nothing in this consideration of the tax exemption request for this project modifies the decision of the Design Review Commission or overrides any other requirement of the land use and building permit review process.
C. DETERMINATION OF COMPLIANCE WITH THE CENTRAL CITY PLAN POLICIES
The Central City Plan was adopted by the City Council on March 24, 1988. Relevant district and functional policies to be considered are the following (as amended on April 12, 1995):
"Policy 3: HOUSING. Maintain the Central City's status as Oregon's principal high density housing area by keeping housing production in pace with new job creation.
FURTHER:
1. Promote the construction of at least 15,000 new housing units in the Central City by the year 2010.
2. Preserve and encourage rehabilitation of existing housing.
3. Encourage the development of housing to meet diverse needs by encouraging a range of housing types, prices, and rent levels. Avoid isolating higher, middle, moderate, low and very low income households.
4. Foster housing development as a key component of a viable urban environment. Encourage a mix of rental and owner-occupied housing that accommodates the variety of households and families attracted to a Central City lifestyle. Include affordable housing in this mix.
5. Secure greater regional participation in addressing the housing needs of the homeless, low-income and other special needs populations.
6. Where residential development is required, assure that when development of the housing is deferred to the future, the housing site is designated and zoned residential.
7. House at least 15 percent of PSU students in university housing. Locate university housing within the District or within walking or bicycling distance of the District, or at a location with a direct transit connection to the District
8. Facilitate housing ownership in order to foster a vested interest and ‘stewardship’ in the Central City by residents."
Planning Commission Finding: The proposal complies with the overall policy statement and particularly with the elaborations addressed by the above statements 1., 3., and 4.
"Policy 14: DOWNTOWN. Strengthen the Downtown as the heart of the region, maintain its role as the preeminent business location in the region, expand its role in retailing, housing, and tourism, and reinforce its cultural, educational, entertainment, governmental and ceremonial activities.
FURTHER:
1. Maintain and implement the Downtown Plan as a part of the Central City Plan.
2. Continue to actively foster the growth and attractiveness of the Downtown, enhancing its competitive position over other commercial areas in the region."
Planning Commission Finding: The site is outside the area of the original Downtown Plan so the adopted policies associated with that earlier plan do not apply. However, the proposed project contributes to the current Plan District policies by adding 139 units targeted to the moderate, middle, and upper range of the market to an area in transition from an inner-city industrial and warehouse district to an emerging residential and mixed use neighborhood.
D. DETERMINATION OF COMPLIANCE WITH THE RIVER DISTRICT DEVELOPMENT PLAN, THE HOUSING IMPLEMENTATION STRATEGY, AND THE AGREEMENT FOR DEVELOPMENT BETWEEN THE CITY OF PORTLAND AND HOYT STREET PROPERTIES
On May 11, 1994, the City Council adopted Resolution No. 35274 endorsing the River District Development Plan and assigning various City agencies responsibility for supporting, reviewing, and coordinating public and private development activity in cooperation with the major land owners in the area.
On December 21, 1994, the City Council adopted Resolution No. 35350 which, among other things, adopted the River District Housing Implementation Strategy. This Strategy established long range goals for housing development by allocating a percentage of development to the affordability needs of various income groups. The City also established an annual monitoring requirement to assess the performance of new residential projects in meeting these goals.
On July 30, 1997, the City Council passed Ordinance No. 171449 authorizing the Mayor and the Auditor to sign an Agreement for Development between the City and Hoyt Street Properties. This Agreement specifies the long term development plans for properties in the River District owned by HSP. Elements of this Agreement address residential densities and affordability commitments by the developer consistent with public improvement and financial commitments by the City.
Planning Commission Finding: The proposed project is consistent with the overall development goals of the above noted plans and agreements. The project is consistent with the development envisioned on this site by the River District Plan.
Although this specific project does not include rental units affordable to low income households (i.e., households earning less than 80 percent of area median income), the Housing Implementation Strategy does not require that each project include lower income units so long as the overall development within the River District meets the Housing Implementation Strategy goals.
According to the Annual Report prepared by the Portland Development Commission in Summer 2001, these districtwide goals are currently being met including the goal of housing units affordable to households earning less than 30 percent of the area median income. Future development will continue to take into account these goals which may require more in the way of subsidies in order to achieve deeper affordability.
The affordability goals of the Development Agreement that apply specifically to HSP are not formally reviewed until five years from the date of its adoption. However, this project exceeds the minimum density obligations and exceeds the goal for smaller 700 square foot units that were incorporated in the Development Agreement. The rental ranges proposed by Block 13 fall within the rents that are affordable to households earning from 97 percent of median family income to over 150 percent of MFI.
F. DETERMINATION OF COMPLIANCE WITH RELEVANT URBAN RENEWAL PLANS
The Portland City Council adopted the River District Urban Renewal District in October 1998 (Ordinance No. 172808). The following Housing Goal was adopted as part of the River District Urban Renewal Plan:
A. Housing
To stimulate the development of a substantial stock of housing accessible to households with a range of incomes which reflect the income distribution of the city as a whole.
Objective 1. Achieve a Mix of Units by Household Income Categories
Objective 2. Promote Development of Services and Amenities to Support Housing
Objective 3. Promote Ownership Housing
Objective 4. Implement City of Portland Shelter Reconfiguration Plan
Objective 5. Preserve Access to Affordable Housing for Low Income Residents of the river District.
Planning Commission Finding: The project supports Objectives 1 and 2 by providing a broader range of rental options to middle and upper income households and providing ground floor space for commercial and retail services.
IV. ELIGIBILITY, PLAN, AND POLICY CONFORMANCE: CONCLUSIONS
A. The proposed project is eligible for limited property tax exemption in accordance with City Code and statutory requirements referenced in Section II.
B. According to statutory intent and applicable City Code, the proposed project is consistent with and supportive of the purposes for which this authority was created. The legislative intent strongly encourages the development of new multiple-unit rental housing in the State's largest urban core areas and recognizes the need to provide a financial incentive in areas where higher than average land and construction costs exist due to a number of factors.
C. The foregoing references in Section III indicate that the proposed housing development is consistent with and supportive of adopted Comprehensive Plan policies and objectives including, specifically, the Central City Plan; the River District Plan; the River District Housing Implementation Strategy; the Development Agreement between the City and HSP; the Central City 2000 housing goals; the River District Urban Renewal Plan, and the governing development regulations of Title 33, particularly the EXd zone as modified by the Central City Plan District.
D. The property tax exemption has been in existence since 1975 and it has assisted the residential construction activity within the targeted core area of the City. This activity in large part has been made possible by the incentives of the property tax exemption in conjunction with additional direct and indirect subsidies. This project is not receiving any other direct public subsidy and is a key element in the overall development goals of the River District.
E. Currently, the site under consideration is vacant site formerly occupied by a rail yard and zoned primarily for commercial and mixed use. Therefore, public incentives, in the form of limited tax exemption, are justified in order to achieve the adopted plan goals for new residential development in this area of the Central City.
V. DETERMINATION OF PUBLIC BENEFIT
A. Examples of Public Benefit
Section 3.104.040, Public Benefits, specifies that the proposed project "must include a public benefit which may consist of, but is not limited to one or more of the following: (1) dwelling units at rental rates or sale prices which are accessible to a broad income range of the general public, (2) recreation facilities or space, (3) open spaces, (4) public meeting rooms, (5) day care facilities, (6) facilities supportive of the arts, (7) facilities for the handicapped, (8) service or commercial use which is permitted and needed at the project, but not available for economic reasons, (9) dedications for public use, (10) other public benefits approved by the Planning Commission and the City Council."
B. Proposal's Relationship to Public Benefits
The applicant notes in the project narrative the following public benefits offered by this project:
Planning Commission Comment: In establishing the review authority for tax exemption, the Portland Development Commission is given primary authority to recommend to the Planning Commission approval, denial, or approval with conditions [Section 3.104.050 (2)]. PDC's recommendation is determined by a finding that the property tax exemption is necessary in order to make the development economically feasible at rental rates or purchase prices which serve the public purposes of the tax exemption program.
The Planning Commission's role is to “review the application to determine whether the proposed development is consistent with the City’s Comprehensive Plan. A recommendation shall thereafter be forwarded to the City Council that the application be approved subject to those conditions necessary to achieve the purposes of this Chapter. The Planning Commission shall specify in its recommendation to the Council the scope and nature of public benefit recommended for the proposed project.”.
The substance of the Planning Commission's hearing on this proposal is, therefore, a determination whether the suggested public benefits are sufficient to meet the purposed of the tax exemption program in the context of wider City policy.
VI. PLANNING COMMISSION RECOMMENDATION BASED ON ELIGIBILITY, PLAN, AND POLICY CONFORMANCE FINDINGS AND CONCLUSIONS
This project will add 139 rental units to a larger development plan for housing affordable to a broad range of the market and supportive street level retail space to the growing River District neighborhood. As part of a larger, long-term development project, it complies with relevant policies and agreements applicable to the River District and the HSP Development Agreement. The Planning Commission recommends approval subject to the conditions stated below.
VII. PUBLIC BENEFIT RECOMMENDATION
The Planning Commission recommends that the City Council approve the limited property tax exemption for the HSP Block 13 rental development subject to the following conditions:
Mike Saba:mps