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HomeMy WebLinkAboutCCMinutes - 09/29/04 WS MINUTES Eugene City Council Work Session McNutt Room--Eugene City Hall September 29, 2004 Noon COUNCILORS PRESENT: Bonny Bettman, George Poling, Nancy Nathanson, Scott Meisner, David Kelly, Betty Taylor, Gary Papd Jennifer Solomon. Council President Bonny Bettman, presiding in the absence of Mayor James D. Torrey, called the meeting of the Eugene City Council to order. A. WORK SESSION: Discussion of Ballot Measure 37 City Manager Dennis Taylor stated that he asked City Attorney Glenn Klein to address Ballot Measure 37 because the council had postponed action on a recommendation from the Council Committee on Intergov- ernmental Relations until it could have a discussion on the matter. Mr. Klein provided an overview of Measure 37 and the issues with which the City would have to cope if the measure passed. He reminded the council that he and staff would speak from a neutral position and only provide factual information. He drew the council's attention to agenda item summary attachment B that contained a summary of Measure 37. He said that Measure 37 was similar to Measure 7, but different in two primary ways: 1. Measure 37 was a statutory change, not a constitutional amendment, and the types of legal chal- lenges brought against Measure 7 would not apply. If Measure 37 passed it was likely to be in ef- fect for some time. While the Legislature had the authority to change the measure, it was uncertain whether changes more substantive than cleaning up language would occur. 2. Measure 37 explicitly stated that government had the authority to waive the regulation. The meas- ure stated that if property was owned prior to the time a covered regulation went into effect and if the regulation reduced the value of the property, an owner generally was entitled to either just com- pensation or to have the regulation waived. Measure 7 suggested but did not state that waiver was an option. Mr. Klein said that Measure 37 applied to land use regulations and included a number of exemptions such as public nuisance and protection of public health and safety. He noted that stream setbacks were likely to be covered by the measure. He said that the City had 180 days to respond to a claim and options were: pay the claim, waive the regulation, or do nothing and allow the owner to take the matter to court. Continuing, Mr. Klein related that Measure 37 granted jurisdictions the right to adopt processes for filing claims, although it did not require claimants to follow the process in order to file a claim with the court. He said that a list of changes requested of the Legislature to improve Measure 37 would be developed, including the minimum requirements for filing a claim. He said another issue likely to arise under Measure 37 was how to respond to regulation waiver requests from owners of property outside of the City limits and inside of MINUTES--Eugene City Council September 29, 2004 Page 1 Work Session the urban growth boundary (UGB). He indicated that staff would develop recommendations about how the City should process claims should Measure 37 pass, based on the assumption that it would be the council's decision whether to pay a claim or waive regulations and that authority would not be delegated to staff, although that option could be discussed. Mr. Klein identified the consequences of waiving a regulation as another unclear aspect of Measure 37. He said the measure did not address whether a regulation was entirely eliminated for a piece of property and nothing applied, or whether regulations in effect prior to the waived regulation would then be in place. He stated that if the measure passed staff would return very quickly following the election with recommenda- tions for actions prior to the effective date of the measure, which could necessitate some modifications to the mandated time period for public notice. City Manager Taylor underscored his intent to hold a work session the day following the election if the measure passed in order to consider recommendations from staff for processing claims in an expedited timeframe. Mr. Kelly thanked Mr. Klein for his presentation. He commented that if Measure 37 passed, Eugene would no longer be a livable community over time. He said that zoning and planning were implemented to provide certainty and predictability to homeowners and business owners about what could happen on their property and surrounding property; Measure 37 eliminated that predictability. He gave the example of a neighbor- hood where homeowners had owned property for 3 years, 15 years, and 40 years respectively and each had a different basis for a claim. He said that Eugene could face tens of millions of dollars in claims and without the funds to pay claims would be forced to waive regulations. He said waivers could include buffers between uses, height limitations in viewscapes, and limits on residential density. Mr. Meisner remarked that Mr. Kelly had not overstated the risk of Measure 37 and asked if the assessment of claims based on length of ownership was accurate. Mr. Klein replied that an owner could request waiver of a regulation as long as the regulation was adopted after the person or family had owned the land. Mr. Meisner clarified that a waiver was for application to a particular piece of property and not elimination of the regulation entirely. Mr. Klein agreed with that, and said that the waiver could possibly apply only to the specific owner that requested the waiver. Mr. Meisner asked if the City could repeal a regulation to avoid endless claims related to a specific provision. Mr. Klein responded that the City could repeal land use regulations as long as the action was consistent with Statewide planning goals and statutes. Ms. Solomon commented that the reason Measure 37 was on the ballot was because governments across the state had been enacting regulations on property that devalued owners' ability to use their properties as they wished. She said that she did not think that Measure 37 was unreasonable and owners were entitled to just compensation. She said she supported Measure 37 and would vote against the resolution. Mr. Pap6 agreed with Mr. Meisner and Mr. Kelly regarding the retroactive aspect of Measure 37 and the resulting checkerboard of land use regulations through the City. He asked who would have the burden of proof for devaluation of a property. Mr. Klein replied that if the matter went to court the property owner would have to provide evidence of the reduction in value and the City would have to challenge that claim. He said the City could establish procedures that provided for a regulatory waiver or payment of a claim if the owner complied with specific requirements, although an owner could go to court if the City declined to act. MINUTES--Eugene City Council September 29, 2004 Page 2 Work Session Mr. Pap6 stated he would support the resolution but urged the council to consider Ms. Solomon's comments. He said he would advocate opposing Measure 37 and pressuring the State to make reform of land use planning and regulations a top priority. Ms. Nathanson observed that land use regulations were adopted by majority vote by elected officials who were thinking about the interests of individual property owners, residents, and business owners and the well- being of everyone in the community now and in the future. She said that she was sympathetic to complaints from individual property owners and looked for ways to mitigate the detrimental impact of a regulation but still achieve generally the desired result; however, in a democratic form of government some individuals would be disadvantaged by efforts to meet the needs of the whole over time. She asked how and by whom claims of reduction in value would be processed to determine their validity and to what extent a land use regulation was responsible for the reduction. Mr. Klein replied that when a claim was filed in court, a property owner likely would need to provide evidence in the form of a professional assessment of the reduction in value and reasons for it to support a claim. Ms. Nathanson asked what the consequences were if waiving a regulation for one property owner devalued adjacent property. Mr. Klein said that the City's waiver of a regulation for a property owner under Measure 37 would not give rise to a Measure 37 claim by an adjacent property owner. He said it was possible to establish procedures that would allow the adjacent property owner to bring a private cause of action against the property owner whose waiver request resulted in devaluation. Ms. Nathanson asked how the City would waive a regulation it had adopted in order to be consistent with Statewide planning goals. Mr. Klein said that Measure 37 prevailed over other State statutes and would allow the City to be consistent with State statutes as a whole, even though it had waived the regulation. Ms. Taylor stated her support for the resolution in opposition to Measure 37 and said it was clear that the measure would be harmful to the City. Referring to the retroactive aspect of the measure, she asked if building being allowed on panhandle lots that decreased the value of neighbors property would give those neighbors claims under Measure 37. Mr. Klein replied that Measure 37 only provided property owners the right to file a claim on restrictions on the use of their property; neighbors' claims could not be based on uses on adjacent property as it was not a restriction on use of their property. Mr. Poling agreed with Ms. Solomon's comments regarding an owner's expectations about the value of his or her property and just compensation for a decrease in value; however, Measure 37 went too far in some areas and for that reason he was in favor of passing the resolution. He noted that the people of Eugene had voted 68 percent against Measure 7. Ms. Bettman characterized Measure 37 as institutionalized anarchy that would destroy the livability of Oregon and at the very least was one-sided. She commented that if an argument could be made that a regulation diminished property values, there was a concomitant argument that many decisions were made by the council that vastly increased the profitability of property and governing bodies were not remunerated for those decisions. She said that zoning regulations and land use laws had created the value of property and when the ability to regulate for livability and compatibility was removed it destroyed property values. She said there would be a window of profitability for advocates of Measure 37 to cash in on the years of protection for property values by zoning and land use regulations before all property values began to decline. She said she would support the resolution in opposition to Measure 37. MINUTES--Eugene City Council September 29, 2004 Page 3 Work Session Mr. Kelly applauded Ms. Nathanson's remarks and said Measure 37 was breaking the agreements of a civilized society. He agreed with Ms. Solomon's comments that in some instances government regulation had been heavy-handed and gone too far, but the solution for Eugene rested with the council, which could modify regulations. He expressed surprise that Ms. Solomon would support Measure 37. Mr. Meisner remarked that the council did not typically act to affect the value of a single property and Measure 37 would involve a significant change in the council's role. He asked Mr. Klein to consider as part of the analysis of Measure 37 impacts whether annexation was a land use action that could be challenged as it was required as a condition of building a home. Mr. Pap6 reiterated his support of the resolution. In response to Ms. Bettman's comments that jurisdictions were not compensated for decisions that increased property values, he pointed out that some return was realized through property taxes on the increased values. He commented that Measure 37 was also supported by rural property owners, not just developers. Ms. Solomon thanked the council for a thorough and respectful discussion of the issues. She agreed with Mr. Papa's remarks about the revenue the City realized from the increased values of property affected by a land use decision. Ms. Bettman closed the discussion. B. ACTION: Consideration of Resolution 4810 to Oppose the November 2004 General Election Ballot Measure 37 by the Eugene City Council Ms. Bettman called for a vote on Resolution 4810. The resolution was adopted, 7:1; Ms. Solomon voting in opposition. C. WORK SESSION: Economic Development Committee Recommendations Regarding an Enterprise Zone City Manager Taylor introduced Planning and Development Director Tom Coyle to discuss the item. Mr. Coyle said the recommendation represented the second of four recommendations by the Mayor's Economic Development Committee and referred to the details included in the agenda packet. He highlighted some of the issues regarding the recommendation. He said the recommendation was based on the City's historic use of enterprise zones as an economic development tool. He introduced Denny Braud with the Community Development Division, who worked closely with the committee on its recommendation. Mr. Braud used a PowerPoint presentation to describe the Oregon Enterprise Zone Program. He indicated there were 49 active zones in Oregon with four of those located in Lane County: Springfield, Cottage Grove, Florence, and Oakridge. He related that the State limited the number of enterprise zones to 49 and there was a competitive application process when a zone expired. He said two zones would expire in 2005 and provide an opportunity for the City to apply. He reviewed the eligibility criteria for businesses to qualify for a tax exemption within the zone: MINUTES--Eugene City Council September 29, 2004 Page 4 Work Session · Eligibility criteria o Manufacturing, processing, distribution, warehouse (examples of ineligible businesses: re- tail, professional services, health care) o Increase employment by ten percent; permanent, full-time jobs; maintain ten percent in- crease over the life of the exemption o New investment in building and machinery/equipment both qualify for tax exemption · Tax exemption o Three-year, 100 percent property tax exemption only on new investment within the zone; land, existing buildings and equipment already on the tax roles were not eligible o Five-year extended investment available under certain conditions such as higher wages and required special local approval o Disqualification for exemption if a business ceased operations, curtailed employment, or moved equipment Mr. Braud cited statistical information related to the expired West Eugene Enterprise Zone, noting that 57 companies participated in the zone and 47 companies were still operating in Eugene. He reported on the average new investment and three-year tax exemption, excluding Hynix and HMT, and said that most of the companies involved in the zone were small- to medium-sized local companies that were already existing in Eugene. He used the example of Custom Craflworks, which was generating over $26,000 in new property taxes annually following the three-year tax exemption period. He also cited statistics for Hynix, which had a $1.56 million tax exemption in 2004 and paid $6.3 million in taxes. Mr. Braud reported that the committee's recommendations included establishing an enterprise zone based on the boundaries of the previous zone with the inclusion of a small amount of adjacent industrial property and possible additional local conditions for greenfield development. He said that the committee expressed an interest in requiring businesses to satisfy other conditions, including: · 100 percent tax exemption for redevelopment, infill, brownfield development · 67 percent tax exemption for greenfield development, which could be increased under certain job quality standards Mr. Braud said the committee had struggled with the question of whether all tax exemptions should be conditioned on paying higher than average wages because of the bias against small businesses that could create. He said the next steps included further definition of local criteria, seeking Lane County support as a portion of the proposed zone was outside of City limits and within the urban growth boundary, draft an application to the State, obtain resolutions in support of the application from the council and Lane County, and submit the application in spring 2005. He said the goal was to have a zone in place by July 2005. Ms. Taylor commented that the agenda item summary statement that the committee's report was accepted by a vote of 7:0 was misleading because it suggested that the council was in support of an enterprise zone. She felt that sustainability was misused as a reason because it did not equal growth. She asked how much HMT paid in taxes. Mr. Braud replied that HMT had been disqualified and were subject to repayment of the three-year tax exemption of approximately $500,000. Ms. Taylor asked if the City already had the authority to grant a tax exemption ifa business wanted to develop a brownfield, using downtown businesses as an example. City Manager Taylor responded that there was no tax exemption for brownfield development and the downtown businesses had been provided incentives through urban renewal tax increment financing or multi-unit property tax exemption (MUPTE). MINUTES--Eugene City Council September 29, 2004 Page 5 Work Session Ms. Taylor commented that the City could not distinguish between desirable and undesirable businesses in an enterprise zone, using HMT as an example of an undesirable business that had no stability and low- paying jobs that did not fit the goal of financial stability. She questioned whether growth with all of its problems and needs should be encouraged. She preferred to concentrate on what businesses already existed in the community and what their needs for assistance with retention or further development might be, as well as what was compatible with what already existed. Mr. Kelly agreed that an enterprise zone could be a good economic development tool and enjoyed support in the community. He questioned whether the enterprise zone could be properly targeted so it benefited community residents. He expressed concern that the State statutes and administrative rules were so constraining that a local enterprise zone could not be defined to bring clear community benefit. He said he would support a zone if clear definitions could be developed. He described two hypothetical situations and asked if each was permissible under an enterprise zone: · an existing local company outside of the enterprise zone with 50 employees mostly earning $8-$9 per hour decided to build a larger plant on a vacant greenfield site within the zone and expand its workforce by 10 people, thereby qualifying for a 67 percent tax exemption on the new building even though it paid wages that were not livable in the community · a company in Idaho with 25 employees mostly earning $8-$9 per hour decided to relocate to Eugene and build a plant on a vacant site within the zone, thereby qualifying for a 67 percent tax exemption on the new facility even though the number of employees and wages would not change and many of the Idaho employees relocated with the business Mr. Braud agreed that both businesses would qualify for a tax exemption. Mr. Pap6 said the question for him was why the City would not apply for an enterprise zone when its previous program and zones in other communities were successful. He noted that 82 percent of the businesses that participated in Eugene's previous zone were still operating in the community. He said that an enterprise zone was a legitimate tool for economic development that served communities well. He asked why the committee had not recommended inclusion of more of the downtown area and whether the committee had suggested conditions for a five-year extended exemption. Mr. Braud replied that the types of companies that would qualify were primarily located in industrial areas and that was why downtown was not included. He indicated that time constraints prevented the committee from exploring conditions for the five- year extension. Mr. Pap6 asked for recommendations on conditions or qualifications for the extension if the council had another work session on the subject of an enterprise zone. Mr. Meisner remarked that while he had questions about the efficacy of enterprise zones he would likely support the motion to direct staff to return to the council with an application package. He said he did not understand why the City would undertake an enterprise zone program without proof of financial capability from businesses. He stated he objected to inclusion in the zone boundary of the triangle south of First Avenue, north of the railroad tracks, west of Jefferson Street, and east of Polk Street because it had been designated largely for mixed-use and was across the street from exclusively residential properties and was suspicious of the inclusion of specific parcels within the expanded boundary. Mr. Braud responded that the committee did not do a parcel-by-parcel analysis of boundary expansion; it included all industrial property that was adjacent to the old boundary. MINUTES--Eugene City Council September 29, 2004 Page 6 Work Session Ms. Nathanson referred to the committee's concern that conditioning tax exemptions on paying higher than average wages could bias the program against small businesses. She said she was not convinced that most local businesses would be infill or redevelopment and qualify for the 100 percent exemption because of the lack of available sites in industrial areas. She noted that a number of businesses had left the community over the past few years and, while some of those had received assistance from the City, there was nothing that could be done to guarantee that every business would survive and thrive beyond due diligence to assure that an investment was sound. She felt that focusing on a business that left, such as HMT, was not sufficient to justify questioning the worthiness of an entire program. She agreed with Mr. Kelly's concerns about the hypothetical situations, but encouraged the council to continue to discuss the wage aspect of new jobs. Mr. Poling asked if enterprise zones were required to enter into a first source hiring agreement. Mr. Braud said that all businesses that applied for the tax exemption signed an agreement to use the Oregon Employ- ment Department as part of their job referral and hiring process, although they were not obligated to hire all employees through that program. Mr. Poling commented that HMT's departure did not appear to be a purposeful effort to avoid its obligations and should not be used as an example that an enterprise zone did not work. He said that a zone was one of many tools for economic development in the community and the council should not pass it up. He observed that growth would happen and hoped that the City would use available tools to shape and control it. Mr. Poling said the enterprise zone application process was highly competitive because communities recognized the value of a zone and it was important for Eugene to apply. Ms. Solomon stated that she fully supported the concept of an enterprise zone and would vote in favor of the motion. She asked if the two businesses in Mr. Kelly's hypothetical examples would still be paying the base property tax and only exempted for taxes on the increase in value of the property. Mr. Braud replied that was correct, and the businesses would be fully taxed in the fourth year following expiration of the exemption. Referring to the use of public funds, Ms. Solomon said that the City could not give away what it did not have if the land was currently vacant and not generating revenue. She said the zone would enable development that would generate more revenue in the long-term and that was a prudent decision for the City to make. She noted that there had been no complaints from business owners about enterprise zones and she hoped the committee's recommendation would move forward. Ms. Bettman responded to Ms. Solomon's comments about not giving away what the City did not have. She suggested the comment should be reconsidered the next time the council cut services in the budget process because any entity that located in Eugene required City services and the tax cap would not recover enough to cover those services and they were paid for by diminished services to the rest of the community. She expressed concern about the committee's discussion of the perception that the City was anti-business and did not have a unified vision for economic development that reflected divisions within the community. She said that the council had an opportunity to modify a strategy in a way that would allow different aspects of the community to agree, but that was not the recommendation that was before the council. She said that when the issues was returned to the council it had an opportunity to incorporate into the proposal standards the community was asking for and obtain almost unanimous support on the council. Mr. Poling, seconded by Mr. Pap~, moved to direct the city manager to proceed with application to establish an enterprise zone in Eugene, jointly sponsored with and supported by Lane County, based on the recommenda- MINUTES--Eugene City Council September 29, 2004 Page 7 Work Session tion of the Mayor's Committee on Economic Development, and consistent with State of Oregon guidelines. The application package will return to the council for approval in advance of the Spring 2005 State of Oregon appli- cation deadline. Mr. Meisner moved to amend the motion by striking the single boundary expansion in the area bounded south of First Avenue, west of Jefferson Street, north of the railroad tracks, and east of Van Buren Street. Mr. Pol- ing and Mr. Pap6 accepted the motion as a friendly amendment. Ms. Taylor urged the council to consider what would contribute to the social fabric of the community and not increase the need for social services and subsidized housing if help was provided to an industry. She felt that HMT was a good example of problems that occurred with the previous zone because of the low wages paid to employees. She said if the State guidelines could be changed and the proposal had reasonable standards for businesses that received assistance the zone could be considered. Ms. Bettman, seconded by Ms. Taylor, moved to amend the staff motion so it applied to redevelopment, infill, and brownfield sites only. Ms. Bettman explained that her motion would provide a community benefit in terms of leveraging the public subsidy and redevelopment of those sites would help use land more efficiently. Mr. Poling asked if the motion was consistent with State guidelines. Mr. Klein indicated he would determine if Ms. Bettman's motion was consistent with State guidelines for enterprise zones if it passed. Mr. Poling, seconded by Mr. Kelly, moved to table to the October 11, 2004, work session because of time constraints and need for a response from Mr. Klein. Mr. Meisner requested that staff provide a sense of what the proposed zone boundary would look like on the ground at the next work session. The motion to table to a time certain passed unanimously, 8:0. The meeting adjourned at 1:30 p.m. Respectfully submitted, Dennis M. Taylor City Manager (Recorded by Lynn Taylor) MINUTES--Eugene City Council September 29, 2004 Page 8 Work Session