ORDINANCE No. 182911

* Approve three-year tax exemption extension requested by the Hazelwood Group LLC for the Hazelwood Retirement Community. (Ordinance; amend Ordinance No. 181961)

The City of Portland ordains:

Section 1. The Council finds that:

1.  City Council approved a 10-year tax exemption under the City’s New Transit Supportive Residential and Mixed Use Development (TOD) tax exemption program for the Hazelwood Retirement Community on November 12, 1997.

2.  The TOD tax exemption program provides a 10-year tax exemption on the improvement value of new multifamily and mixed-use projects located within one-quarter mile of light rail stations or other public transit service facilities. The program’s regulations are found in City Code Chapter 3.103.

3.  The City Council adopted the TOD program in 1996 to provide support for the City’s investment in the MAX light rail system and other investments in public transit outside the Central City by providing an incentive for high-density housing and mixed-use development near transit facilities. The program is authorized by the Oregon Revised Statutes (ORS) 307.600 – 307.637.

4.  Both the State Statutes that enable this program and City Code Chapter 3.103 were amended after 1996 to also allow a tax exemption to be granted to existing projects that are subject, or will be subject, to a public assistance contract to provide low income housing through June 30 of the year that the contract expires. The term “low income” is not defined in either the State statutes that enable the TOD program or in City Code Chapter 3.103. Household income ranges labeled “low income” vary.

5.  The property that is the subject of this request is located at 11933 NE Davis St. on a site that is part of a 17-acre mixed-use shopping center. The project is the upper three stories of a 4-story structure over small retail shops between a Safeway and a Target department store. It has 120 units of congregate housing for people 62 or older. The unit mix includes 28 studios, 68 one-bedrooms and 24 two bedroom apartments. The property tax account number for this project is R170779.

6.  The subject property is located within three blocks of the 122nd Avenue MAX light rail station, an eligible TOD program area as defined by City Code Chapter 3.103 as shown on Map 1 of Map 3.103-7, Light Rail Station Areas East of the Gateway Plan District.

7.  The project will continue to be subject to two affordability agreements that restrict rents after June 30, 2008. They are the PDC regulatory agreement that expires in 2028 and a State of Oregon regulatory agreement that expires in 2029. The PDC agreement applies to 80 percent of the units in the project and the State of Oregon’s agreement to 20 percent of these units in the project. The remaining 20 percent of the units are unrestricted and can be rented for market rents.

8.  The project owner, The Hazelwood Group LLC, requests an extension of the tax exemption on the entire improvement value of the project. The request is to preserve the financial viability of the project for the duration of the required period of affordability for 80 percent of the units that ends in 2029.

9.  On May 3, 2007, Portland Development Commission (PDC) staff forwarded a recommendation of approval of the tax exemption request to the Planning Commission after consulting with PDC’s Loan Committee. PDC staff found that the full tax exemption was necessary for the financial feasibility of the project but stated that the Planning Commission may only want to recommend an extension only for the portion of the project for policy reasons. The PDC Loan Committee found that with the full exemption, the internal rate of return (IRR) of the project would be only -1.55 percent. If the exemption is granted on 80 percent of the project the IRR would be -8.65 percent.

10.  The Planning Commission is not required to find that TOD tax exemption applications are consistent with City plans and policies but only that the projects for which the exemption is requested meet the public benefit requirements of Chapter 3.103.

11.  The Planning Commission held a hearing on the TOD tax exemption extension request on June 3, 2008. They voted unanimously to recommend approval of the request to City Council for 80 percent of the project that is subject to PDC regulatory agreement to keep the rents affordable to, and the units reserved for, households at or below 75 percent MFI. The Planning Commission found that the public benefit provided by the project is the preservation of the low income hous-ing units for elderly households near a MAX light rail station. The Planning Commission is not required to find that TOD tax exemption applications are consistent with City plans and policies because the TOD program regulations have density and locational requirements that ensure that eligible residential and mixed-use projects will be consistent with the City’s Housing Policy.

12.  The City Council passed ordinance #181961 on June 25, 2008 approving an extension of the tax exemption for a one-year period until June 30, 2009, for the portion of the Hazelwood Retirement Community required to be reserved for households at or below 75 percent of area median family income. The reason for the extension was to preserve the status quo while the City reviewed its housing policy and tools.

13.  The Council finds the one year extension was insufficient to allow staff to review housing policy and tools, including a more detailed policy regarding extensions of tax exemptions for affordable housing.

14.  Council believes a three year extension of the tax exemption for 100% of the units would be appropriate to allow the Council to examine and develop a more detailed policy regarding extensions of tax exemptions for affordable housing.

NOW, THEREFORE, the Council directs:

a.  The request for an amendment to the extension of 10-year tax exemption provided by Chapter 3.103 of the Municipal Code of the City of Portland, Oregon, and ORS 307.600-637 is hereby approved for a three year period until June 30, 2011 for the following property:

The Hazelwood Retirement Community at 11933 NE Davis Street in Portland Oregon. Property tax account number R170779.

b.  The application described in paragraph “a” above is approved subject to the following condition:

 The affordability requirements in the conditions of approval in Resolution 35735 be extended until 2011 and the units that are the subject of these affordability requirements be reserved for households with incomes that match the prescribed affordability levels:

▪  At least 30 percent of the total number of units (28 units) shall be affordable to and reserved for households earning at or below 50 percent MFI.

▪  At least 3.3 percent of the total number of units (4 units) shall be affordable to and reserved for households at or below 60 percent MFI.

▪  At least 46.67 percent of the total number of units (56 units which includes a manager’s unit) shall be affordable to and reserved for households at or below 75 percent MFI.

c.  The commentary in Exhibit A: Planning Commission’s Report and Recommendation on the Requested Extension of the Tax Exemption Granted to the Hazelwood Retirement Community, relating to the background on tax exemptions for affordable housing is adopted as legislative intent and findings.

d.  The commentary in Exhibit A-1: Portland Development Commission’s Report and Recommendation on the Requested Extension of the Tax Exemption Granted to the Hazelwood Retirement Community, relating the background financial analysis is adopted as legislative intent and findings.

e.  The commentary in Exhibit A-2: Extended Use Agreement, relating covenants and restrictions is adopted as legislative intent and findings.

f.  The Portland Development Commission shall provide copies of this Amended Ordinance to the Multnomah County Tax Assessor as prescribed by Section 3.103.050 (G) of the Code of the City of Portland.

Section 2. The Council declares that an emergency exists in order that there be no delay in preserving the affordable housing in this project; therefore, this ordinance shall be in full force and effect from and after its passage by Council.

Passed by the Council, June 17, 2009

Commissioner Fish            LaVonne Griffin-Valade

Prepared by: Beth Kaye          Auditor of the City of Portland

June 10, 2009              By /s/ Emily Matasar

Deputy

BACKING SHEET INFORMATION

AGENDA NO. 832-2009

ORDINANCE/RESOLUTION/COUNCIL DOCUMENT NO. 182911