On a recent Saturday in downtown Independence, opinions on the riverfront redevelopment site were as divided as the busy two-way traffic on Main Street. Bonnie Andrews, co-owner of Melting Pot Candy, thinks the hotel there will be a boon. She plans on selling to its patrons – and to the hotel itself. One of the shop's specialties, "Decadent Dark Chocolate Truffle" goes nicely with wine, she noted. She can picture the gourmet candy being served at rooftop events at The Independence Hotel, which is scheduled to open later this month.
Across the street, at the Riverview Farmer’s Market, some local residents expressed a different view. Several said they think a relatively upscale hotel will be a “tough sell” except during summer’s peak times. And some are worried about increased traffic – the city’s last traffic-system plan is now a dozen years old.
With such diverse views, who is likely to have the clearest crystal ball? Maybe someone with an outside view who is familiar both with small-city government and Independence.
“I totally understand why the merchants are excited," said John Oberst, the former longtime mayor of Independence’s sibling city, Monmouth. "And I also get why there is skepticism," he said. But he's "rooting for hotel's success" as the finishing touches are taking place. "What is good for Independence is good for Monmouth," he said.
At a time when there are several long unfinished downtown buildings, including the repurposing of the old city hall, the discussion of redevelopment in Independence continues. At one meeting in late July, for example, a city official invoked “Stonehenge” as a description of Independence Station.
But Independence is no different than many other Oregon towns that have an Urban Renewal District. Through such districts, millions of dollars in incentives and infrastructure can be provided to attract new construction. The big benefit, aside from hoped-for revitalization, is tax-increment financing (TIF) from the redevelopment. It’s designed to return money spent for economic development – by designating the property at a base value, and then, as taxes rise due to the improvements on the land and building, the difference in tax revenue between the new value and the old one can be applied to pay on urban renewal debt.
This revenue source has been called “magic” by one of the most well-known experts on municipal funding in the Pacific Northwest, Spokane attorney Jeff Nave. Nearly a decade ago, he took issue with Washington State’s restrictions on TIF in an article for the Seattle Journal of Commerce. TIF is a good thing, allowing “a substantial amount of tax revenue (to) be diverted to the urban renewal agency,” he wrote. TIF is used far and wide, he observed.
However, one of the states that Mr. Nave cited as an example of good use of TIF – California, the place where it was invented – outlawed TIF more than five years ago. “City officials love TIF because it is essentially free money for them,” explained Randal O’Toole, a senior fellow at the Cato Institute, a libertarian think tank in Washington DC. The downside, he stressed, is something Californians discovered: TIF can mean comparatively less money for schools and other community services.
“Every Democrat in the (California) state legislature voted to abolish it,” noted Mr. O’Toole, who lives “outside the beltway” of the nation’s capital and right here in Oregon. TIF is associated with higher-density projects, like apartments, and TIF takes money away from public services that are funded by property taxes, he asserted.
Why? When taxes are raised, money from those hikes in the TIF district can stay earmarked for redevelopment. However, Oregon is more cautious about TIF than some states – it limits TIF districts to a certain percentage within the city’s urban growth boundary.
Still, debt is a concern because, for some cities, it becomes a funding source, according to Charles Marohn, founder and president of Strong Towns, which researches best-practice policies for cities. In his view, debt should be capped at 10% of a city’s locally-produced revenue. When asked about municipal debt in general, Mr. Marohn, an engineer, called the question a “big, important” one “that we’ve grappled with throughout the history of Strong Towns.”
Last year, a trio of academic researchers took a scientific look at municipal debt, to determine if there are ways to forecast financial stress for cities. Their study, “Local Fiscal Distress: Measurement and Prediction” in the journal Public Budgeting and Finance, found smaller cities are at higher risk of “fiscal distress.” The lead author, Evgenia Gorina PhD, an assistant professor at the University of Texas at Dallas, was asked about her findings. Put simply, one important factor is borrowing.
“The higher the debt per capita, the higher the odds of fiscal distress,” she explained. Independence, with a population of about 10,000, has a debt of approximately $37 million – the majority in bonds. The city ‘s savings account, called the Local Government Investment Pool (LGIP), has about $4 million in it.
In comparison, Monmouth, which has slightly more residents than Independence, has a debt about two-thirds that of Independence, with $10 million more in its LGIP – a savings account that totals around $14 million. Independence’s checking account stands at about $2 million; Monmouth’s is a little over a million dollars.
However, despite its debts – from founding the city’s municipal broadband MINET, from building the Civic Center and from providing incentives to the developer of Independence Landing – Independence has a balanced budget. It was adopted this past year – at just over $30 million. And one priority is updating the city’s traffic system plan, the concern of citizens who regularly use the downtown area. As for the debt from urban renewal, including infrastructure for the hotel, a pretty upbeat opinion on that comes from one town over, just past the “S Curve.”
"Urban renewal districts are designed to take it on," said Mr. Oberst. As a former long-running mayor, he is in a position to know about the ups and downs of city revenue – Monmouth has an urban renewal debt, too.
As The Independence Hotel opens its doors, questions have arisen about how much a room will cost. Inquiries to hotel management have indicated about $175 per night for a double-queen room during weekends – and each room also carries an add-on known commonly as a “bed tax.”
This is one way the city aims to collect revenue, through a “lodging fee” of nine percent applied to the bill for the room. The provision, allowed under Oregon statute (ORS 320.350), also enables the state to collect 1.8%. However, state legislators amended that statute slightly in their last full session, through House Bill 4120, which requires the use of a “specified third party” to be involved in the collection of a bed-occupancy tax.
The bulk of the money collected for the city (70%) has to be used for tourism according to Xann Culver, operating and policy analyst for the Department of Revenue’s special programs. That is “pretty loosely defined, however,” she noted. Asked if it could be applied to festivals in Independence – some of which in the past have not earned back the cost of overhead – Ms. Culver said she thought it likely that this use might fall within the spirit of the law.
For a look at questions that have arisen over Independence Landing and other aspects of the Urban Renewal District see insert “Downtown Dispatch.”
Contemplating Public Art Decisions
Statue of Dan Weaver with dog
Cities commonly choose a sculpture similar to the one at the left through use of an arts council, commission or board. Salem has the former, Monmouth has an arts commission and Corvallis uses an advisory board. Independence doesn’t. And, when former Independence City Councilor Odi Campos-Santos questioned the council’s decision to approve a statue for Main Street back in September, he was alone in his objections. He cast the only dissenting vote for the bronze likeness of Dan Weaver, which now sits beneath the clock on Main Street. Mr. Weaver, the longtime owner of an antique store and a beloved resident, seemed an ideal person to memorialize.
Mr. Campos-Santos wasn’t expressing disapproval of the selection – only the way it occurred, which was without any public citizen input. It turns out that McMinnville – the city cited that night to councilors as an example of good use of such statuary – has a “Public Arts Council.” It helps determine where art is needed, what it should be, whether donor dollars can be attained and who should be awarded the contract for creating it.
Already, Mr. Weaver’s likeness is becoming a city icon, but so far the information about him is only available elsewhere. A text request at the site is designed for community engagement. Unlike McMinnville’s statue of war hero Leonard DeWitt, there’s no plaque yet about Mr. Weaver.
Tap Station fence
When Jubilee! in downtown Independence applied for a new liquor license to serve cocktails, the coffee-slash-champagne café was halted by a barrier. A real one. Even though it doesn’t even exist – yet. Jubilee! sought to expand its guest area to the outdoor sidewalk, but cars whizzing by on Main and Monmouth worried councilors about safety. After all, ingestion of mixed drinks has been associated with … well, happy times. So a barrier seemed like a good idea. But what kind? City staff apparently are still puzzling over this. Perhaps they need some examples. How about the rustic sawhorses at a Western-themed tavern? The decorative chains strung between two posts at some wine bars? In fact, about the only thing Oregon seems to prohibit is synthetic stucco. Perhaps Jubilee! should just copy another establishment on Main Street that just received liquor-license approval. The Tap Station has a sturdy black metal fence.
A SECOND LOOK AT CITY DEBT
The biggest sources of the Independence city debt are MINET, which was co-founded by Independence and Monmouth 13 years ago, and the Independence Civic Center, which was built nearly a decade ago. The combined price tag for Independence exceeded $20 million at the time.
MINET was designed to be self-sustaining with continual payback for its start-up costs. Bonds to build the nearly 37,000-square-foot civic center were to be repaid by Tax Increment Financing (TIF).
Instead, both projects remain heavily indebted – a percentage of residential water bills go to payments for each. TIF hasn’t materialized in the amount needed for the civic center.
The “Event Center,” the meeting rooms on the lower floor of the civic center, has remained a source of some controversy. It was done without bond financing, for more needed space – with the promise that frequent rentals would subsidize it. Now the hotel will manage it – and one plan that’s been floated would give these private investors full access with no fee, other than custodial and equipment fees.
To address the matter, questions about them were put to individuals outside the city who are familiar with the issues – a former mayor and, also, the vice president of Tokola Properties, the company developing much of Independence Landing.
John Oberst, former mayor of Monmouth who was on board at MINET’s inception, weighed in on the high-speed municipal fiberoptic – with optimism. He began by responding to the observation that some residents have said they can get less expensive service by subscribing to a different internet provider. A recent hand-out at the civic center underscores that concern – it lists two other telecommunications companies – Spectrum and Century Link – before MINET. It fails to note that the city co-owns MINET.
John Oberst: Residents have been unclear on that distinction. We have to cover the MINET debt because it is really not MINET’s debt, it is the cities’ debt. We own it. If we don't cover the shortfall, we default.
MINET General Manager Don Patten walked into a bad situation, immediately got to work to fix it, and continues to make it better. MINET will be generating enough income to pay its operating expenses and cover the debt – and it will begin to pay the cities back for past debt coverage.
The payments to the cities will continue until the debt is retired because the loans were taken by the cities on MINET's behalf. The difference is that the payments to the cities will be in full, instead of requiring ‘back-filling.’ I believe MINET will begin to repay the cities for the portions of the payments the cities had to cover because MINET wasn't generating enough revenue.
The cities will continue to pay the debt, but MINET will provide all the needed funds, and eventually will do that plus begin to pay the cities back for past loan coverage. And, if they get that done, it will be long-term positive cash flow to the cities.
Jeff Edinger, vice president of Gresham-based Tokola Properties, has been the point of contact for the hotel development and the planned apartment-townhouse project next to it. He predicted a July opening for The Independence Hotel, but since then, has been revised to later this month. Mr. Edinger was asked several weeks ago about the negotiations by the hotel and city on use of the Civic Center event center.
Jeff Edinger: The Embarcadero Hospitality Group – the company hired to manage and run the day-to-day operation of The Independence Hotel – is working with the city on a mutually beneficial agreement to activate, and manage, the Civic Center Conference Center.
(Note: Independence City Manager Tom Pessemier has pledged to bring the prospective contract between the hotel and the city for management of the city’s event center to the Independence City Council for public discussion. Mr. Pessemier, who joined the city last December, just finished his first six months officially on job in July.
A “material deficiency” in city book-keeping, which was identified by an outside municipal auditor, was due to unrecorded “loan proceeds” from the 2017 refinancing of the MINET and Independence Civic Center Bonds. The amount that hadn’t been recorded was $10,915,115. It’s now recorded, correcting the error, which didn’t affect the city budget.
Preface: A survey by the Polk County Board of Commissioners to determine rural needs and preferences for internet services hasn’t included the municipal broadband company MINET, which was founded by Independence and Monmouth more than a dozen years ago. The general manager of MINET has called for unity in this effort. In an editorial for The Independent, he explains why he believes collaboration is essential.
MINET: What We Know
by Don Patten
General manager of MINET
You all know MINET as your great, local provider of internet, phone and TV services. MINET is all that, and even more: MINET is also research engine.
MINET as a research engine continually adds to its knowledge base to be prepared for opportunity.
Seneca the Younger, born in 4 BC, said, “Luck (success) is what happens when preparation meets opportunity.” MINET embraces this ancient wisdom. The MINET of today doesn’t take a step or make a change without copious research.
Imagine the research that was accumulated to accomplish the expansion we made into the Dallas, Oregon market. Other expansion opportunities are being explored, and along with very detailed business planning, this is generating even more research. Indeed, MINET is a research engine, and todays MINET keeps records.
MINET, as a quasi-governmental agency, feels a kinship and a responsibility to assist other governmental bodies. Whether it’s MINET’s two owner cities, the Polk County Commissioners, the governor’s task force on broadband, or the state of Oregon Broadband Commission all are welcome to properly access the volumes of research accumulated by MINET.
MINET has made presentations nationwide to cities interested in owning or attracting their own broadband infrastructures. These presentations have drawn from MINET’s own well of research and documentation.
The General Manager of MINET has been called – repeatedly – to Washington, D.C., to confer with Senate Committees about deployment of broadband to rural areas. What he – and MINET – knows has become valuable to Senators as they make national-level broadband decisions.
Does MINET carefully guard this information? Unconditionally. Sensitive business done by MINET’s Board of Directors is restricted to executive session. Sharing information with other governmental agencies would be done with the same expectation of confidentiality. Senate sessions are closed. Take-aways from presentations are restricted to generic information.
But via the government-to-government conduit, MINET is comfortable – even eager – to share its informational wealth. Those respective agencies, as noted above, have but to ask.