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Council moves ahead with new Foothills concept

Even without a streetcar, plan appears to be financially viable

The Lake Oswego City Council on Tuesday approved a new conceptual plan for redeveloping Foothills that doesn't rely on a streetcar line but still appears to be financially viable.

Last year, the council approved a Foothills framework plan in hopes of reviving the 107-acre area between downtown and the Willamette River with new infrastructure, housing, shopping and public amenities - all based on transit-oriented development. The plan addressed longstanding obstacles to the district's redevelopment such as street access and traffic, a sewer plant and floodplain issues.

But the council shelved the streetcar in January, putting Foothills efforts in jeopardy. Consultants from Williams, Dame and White could have walked away from the plan under a condition in the firm's predevelopment agreement with the city and Foothills property owners. The agreement called for plans to include a streetcar line to the area, although the partnership could remain in place without one if a viable alternative was found.

The consultants found three viable alternatives and presented one as the preferred option to the city council on Tuesday.

Without a streetcar, they had to add more parking areas and in turn reduce the amount of projected housing, shops and offices. They also had to look at whether the development could still generate enough value in property taxes to offset the costs of public projects planned to catalyze building activity.

All of the new concepts could be funded largely through tax increment financing and systems development charges, both sources generated by new real estate projects, according to an analysis by ECONorthwest. However, all three options would produce different returns on the city's investment, and all would require the city to front money to jumpstart the new development.

The recommended concept is in between the other two as far as funding requirements and physical changes go, but - like the framework approved last year - it would still require formation of a new urban renewal district.

Consultants chose the in-between option because 'it's more consistent with the original vision and goals,' said Matt Brown of Williams, Dame and White. 'Also, it tends to have the best financial performance.'

The Foothills vision no longer includes a new intersection at State Street and Terwilliger Boulevard; instead, a less expensive 'northern portal' could be built without crossing Tryon Creek, Brown said. The Willamette Steps, essentially a vertical park, would still sit near B Avenue on the east side of State Street; however, rather than a park-and-ride facility, the staircase would feature green space around it.

Developers would build 1,594 new housing units, including 988 apartments, 285 condos and 321 senior dwellings, along with 65,000 square feet of retail and 124,000 square feet of office space, altogether valued at an estimated $461 million. That compares to the previously adopted plan's 3,023 housing units, 223,000 square feet of retail and 460,000 square feet of office space, which together offered an estimated development value of $1 billion.

Councilor Mary Olson questioned the potential risk and the wisdom of committing to spending millions of dollars in Foothills when the city has other capital projects on its wish list.

Brown said the city wouldn't have to spend any money until it had an agreement with a developer in place, whether that happened next year or five years from now: 'The city doesn't have to spend a dollar until there's a contingent relationship with a developer saying, 'I'm ready to move.''

Lorelei Juntunen of ECONorthwest said any city money used to plug a $7 million financing gap could be repaid within three or four years.

'As soon as the first private building is developed … you'd be able to use the (tax increment financing) from that building to refinance that existing debt,' she said.

ECONorthwest's Nick Popenuk agreed.

'The risk is, are you going to build this infrastructure and not have this first building materialize?' Popenuk said. 'I don't want to downplay it: This is real money.' But it comes down to development of a single private building, he added.

In addition, according to ECONorthwest, new development in Foothills could generate more system development charges than the city would spend on planned Foothills projects - money that could be used to pay for additional work.

However, regional housing advocates are questioning the absence of affordable housing in the plan.

Tom Cusack, a former state field office director for the U.S. Department of Housing and Urban Development who has lived in Lake Oswego for three decades and now runs the Oregon Housing blog, said although redeveloping Foothills could increase the city's rental housing by as much as 25 percent, there's no mention of affordable housing, even though the city hopes to attract young families looking for rentals.

He also questioned whether anticipated state and federal grants would come through without a commitment to creating some affordable housing.

'The significant expansion of Lake Oswego rental housing found in the Foothills redevelopment plan gives Lake Oswego a unique opportunity to make long-delayed progress in providing affordable housing to meet local and metro Portland housing needs,' Cusack wrote in a letter to the council. 'If that commitment is not made in the Foothills plan and related development agreements, it would be fair to ask: If not now, when? If not in Foothills, where?'

Brown said he didn't see any direct tie between affordable housing and the expected government funding, which is intended to pay for street projects.

However, Councilor Donna Jordan said it could put the city in a better position to compete for funds.

'The region now is looking at social equity as one of the key components for doling out dollars that come from the federal government,' Jordan said. 'I think that's something we need to look at: how we're going to incorporate that going forward. It's not like you take the whole building and make it affordable housing. You have a percentage in the building that is less than market rate.'

Councilor Bill Tierney suggested that the project team incorporate affordable housing and additional parking to support business offices into future analyses of the project.

In the end, council members voted 4-3 to have city staff and consultants refine the recommended concept and draft a revised framework plan, which could come back before the council by mid-June. In favor were Mayor Jack Hoffman and councilors Jordan, Sally Moncrieff and Tierney. Councilors Olson, Jeff Gudman and Mike Kehoe were opposed.