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Council decries impact fees

Developer's attorney says Milwaukie's development fees unconstitutional

The developer has said it. The neighborhood association has said it. And now city council members have said it: Milwaukie's downtown development plan stands in the way of downtown development.

'We have the wrong code at the wrong time for the city,' said councilor Greg Chaimov at the Dec. 18 council meeting.

Councilors Susan Stone and Joe Loomis agreed.

'I'm a huge fan of what Mr. Parecki is doing in this town,' Loomis said, referring to the development that triggered the debate. 'I think it's obvious tonight that the code has great intentions, but that it's hindering development and private investment.'

But developer Ed Parecki and his attorney, Steve Morasch said the code is unconstitutional, and it is costing them a lot of money.

Parecki's development involves a $225,000 'facelift' of the old state bank building at the northwest corner of Main and Monroe Streets in downtown Milwaukie.

'I've had contractors on hold since August waiting to complete this project,' Parecki said.

'Right now it's costing us $12,000 a month,' said Charles Aaron, another investor in the development.

The planning department's determination is not just inconvenient, but unconstitutional, said Morasch. The Supreme Court ruled in Dolan v. City of Tigard that city improvement requirements on developers must be proportionate to the development's actual impacts on infrastructure, he said.

Impacts are generally determined by calculating the number of added trips to and from the site, which can change if the building size changes or the use changes to something that attracts more people; for example, a store or restaurant would generate more trips than an office space.

The city had initially determined the impacts based on an assumption that the space had previously served as office space on the main floor as well as the second floor, and changing to retail would add trips.

As it is, Parecki argues that the city assessed his impacts improperly.

'The use has always been retail on the main floor, storage in the basement, and office on the second floor,' Parecki said. 'There's not going to be any added trips because we're not adding floor area and we're not changing the use.'

Parecki presented a letter to City Council at the meeting from the previous owner of the space saying its use had been retail prior to Parecki's purchase. Parecki said the letter was from a survey around the time the space was sold, before Parecki began planning the development.

Mayor Jim Bernard said he had served as the downtown neighborhood association chair and had been in that building many times, and he did not believe it was retail in the last 10 years or so.

City Council asked the planning and engineering staff to look into the history of the building and what impacts it would incur if it actually had been retail. The council decided it would resume discussion of the issue at its Jan. 2 meeting.

Expected improvements

The Downtown Development Plan, adopted in 2000, stipulates that developers should help pay for area improvements as well. The residents involved wanted to make sure downtown as a whole was attractive, not decent establishments on run-down, poorly lit sidewalks.

'It was important for [the downtown plan] for people not just to think about the buildings that would go there, but also the public areas, the sidewalks,' said planning director Katie Mangle.

Mangle said at the meeting that the code splits downtown developments into three categories: those that are just small improvements and don't have a large effect on the area; medium-sized developments, in which construction costs are more than half the assessed value of the property; and big projects, like North Main, in which buildings are newly constructed.

Because Parecki's development cost is $225,000 and the assessed value of the property as of 2006 was $353,000, he is over the 50 percent mark and falls into the middle category.

According to the code, middle-category developments 'must comply' with public area improvements.

Parecki asked for an interpretation of the phrase 'must comply,' and Mangle said it means that all required improvements for the site must be completed.

A full list would have included things like extending the 12-foot sidewalk to 13 feet and installing street medallions and bike racks - about $120,000 worth of projects.

Mangle determined that the sidewalks' conditions didn't warrant replacement and she cut a few of the other things that the city would provide, like the medallion, but it still expects $60,000 worth of improvements from Parecki - more than a quarter of the total project cost and almost three times what most other downtown projects, which fell into the lowest category, have been asked to pay.

Disproportionate demands

Parecki argues that the entire system is flawed.

The code stipulates that developments in the lowest category provide 10 percent of building costs for public area improvements.

But if the federal standard says charges must be proportionate, that rule may be flawed.

Among the establishments that have triggered the 10 percent improvement cost are Key Bank, the Wunderland Theater, St. John's Episcopal Church and JL Hair Design.

'How can you go to a church that renovated into a church and require public area improvements,' Parecki said. 'How can you go to a theater that renovated into a theater and require public area improvements?'

If it turns out that Parecki is right, that would mean private companies have contributed $884,000 dollars in public improvements that they shouldn't have.