Fairview city council appoints Ted Tosterud to open seat

In this 2014 file photo, Ted Tosterud is sworn in as a Fairview city councilor. He is now the city's mayor and presided as the council approved a program that could grant developers millions of dollars in fee waivers at the expense of infrastructure.

(Stephanie Yao Long/The Oregonian)

A public program that could save real estate developers millions of dollars at the expense of city infrastructure has sparked backlash in Fairview, where an elected official accused his colleagues of representing only the interests of the local business association.

The Fairview "development incentive program," approved last fall and amended in February, would waive all of the city's impact fees - which pay for water, sewer, stormwater and parks infrastructure - for any new construction worth $675,000 or more. The proposal could be for any type of development, whether industrial, commercial, multifamily or single-family residential.

Residential construction worth less than $675,000 would have to pay the fee for parks, but all the other impact fees would still be waived. Builders would not have to meet affordable housing thresholds or density goals to qualify, and there's no cap on the program. Developers seeking the incentive would not be allowed to also receive property tax breaks under the state's enterprise zone or vertical housing programs.

The incentive also grants developers a credit worth 0.75 percent of the project's valuation that can be applied to the fees for a building permit; the building plan review; or the fire, life and safety plan review. And if the new building will be home to a business, Fairview will waive the business' licensing fee for the first year of operation.

"Fairview citizens are going to ultimately bear the burden of this waiver," said Fairview City Councilor Brian Cooper, the only person on the seven-member panel to oppose the program last month.

At a time when Fairview was already attracting large multifamily investment, a hypothetical 180-unit apartment complex worth $10 million would win nearly $1.3 million in waivers under the incentive program, according to calculations by city staff. It would take 25 years of property tax collections on such a property for Fairview to break even on that amount, the calculations show.

Now, city planners are "looking hard" at how they'll possibly pay for needed improvements to Fairview's stormwater discharge system and evaluating whether other parts of their capital improvement plan have to be shelved, said Nolan Young, who started January 25 as city administrator.

The plan comes at a time of political turmoil in Fairview, a city of 9,100 in eastern Multnomah County.

City Councilors Ted Kotsakis and Steve Owen resigned their seats last spring, frustrated with what they saw as the Fairview Business Association's undue influence over the council, according to reports in the Gresham Outlook. City Administrator Samantha Nelson, who had served since 2008, soon followed them out the door to take a job with the Gladstone School District.

The council then appointed Ed Bejarana, who had previously managed the Fairview Business Association's Facebook page, and Tamie Tlustos-Arnold to the empty positions amid accusations from Cooper and audience members that the council majority had already made up its mind about the two candidates before other residents had a chance to apply, the Outlook reported.

It didn't take long for Bejarana to make an impact. Meeting minutes and video recordings show that the new councilor was behind key changes to the new incentive program that made it even more attractive to developers.

The program originally was intended for only commercial and industrial development. But minutes show Bejarana successfully made a broad amendment to the program last fall that allowed all types of development to qualify.

City staff hadn't prepared information pertaining to the fiscal impact of Bejarana's amendment, Young said, and so councilors didn't know how the inclusion of residential development would affect city coffers.

Developer Jeff Parker of West Linn already had a multifamily project with 180 market-rate units in Fairview's pipeline at the time. The building, which would also have 4,500 square feet of commercial space, is slated for a lot on Northeast Halsey Street, across from Bumpers Grill & Bar.

That's when Young's staff calculated the impact of a hypothetical 180-unit project and came to the $1.3 million figure - a number far higher than anticipated, Cooper said.

"We miscalculated," Cooper said. Parker's project is now eligible for the waivers.

But instead of paring down the incentives in light of the new information, the council - led by Bejarana - broadened it again. Last month, the councilor successfully introduced an amendment to apply the program not only to all vacant land in the city, but to any "developable" land, meaning a builder could demolish an existing structure and apply the incentive to a new project, or simply add buildings to an already-developed property and win the fee waivers.

Cooper was the only "no" vote. In an opinion piece for the Outlook, he called the program a "boondoggle." He called Bejarana "the mouthpiece" of the Fairview Business Association in an interview with The Oregonian/OregonLive.

Bejarana, who said he has resigned his post with the business association, refused to answer questions over the phone. He previously got into a public spat with the Outlook after insisting he not be contacted on his personal phone, even though it was still listed on the Fairview Business Association's public Facebook page as of last week.

As of press time, Bejarana had also not responded to emailed questions from The Oregonian/OregonLive.

Ted Reid, principal planner with the Metro regional government, said he hasn't heard of development incentives as broad as Fairview's.

"There's a challenge in paying for all the pieces of infrastructure that the fees pay for," Reid said.

After the incentives were approved, Fairview Mayor Ted Tosterud received a batch of angry emails from city residents.

"The effort underway by the City of Fairview to subsidize development is simply requiring me, as a resident, to give money to developers so they can profit," resident Bill Peterson wrote to Tosterud. "I will be left in Fairview paying higher use fees for water and sewer to replace the revenues your city is choosing to give away."

Resident P.M. Sorlien's email to Tosterud wondered if city officials were aware that "the whole region is seeing the strongest bull real estate market in 20 years." The $20.8 million sale of Fairview's Fieldstone Apartments set a city record last fall.

Last week, Tosterud announced a community meeting about the incentive program to be held March 24 at 7 p.m. in the city council chambers.

"The Fairview City Council values citizen input and we want to hear from you," the announcement reads.

-- Luke Hammill

lhammill@oregonian.com

503-294-4029

@lucashammill