June 9, 2011
June 9, 2011
The old saying in real estate is “location, location, location”. Reality is the most important factor in real estate is market timing. Those with the fastest feet and right product will have success in attracting and retaining companies that create living wage jobs. Portland securing the SoloPower project from Wilsonville is a good example of the importance of speed and certainty of delivery. Wilsonville’s inability to respond in a timely fashion to the market demand for space by a clean technology company became an opportunity for Portland. The good news is 500 jobs with an average salary of $51,000 and a $340 million new manufacturing plant will be coming to our region. More often than not, Oregon loses to other regions of the country that are simply more competitive and responsive with certainty of delivery of space. More jobs mean more taxpayers. More taxpayers will result in more money to fund schools, important environmental projects, infrastructure for auto, bike & rail and needed job training programs to decrease Oregon’s nation leading high unemployment rate.
Oregon has the nation’s most restrictive land-use regulatory system. Every square inch of Oregon has been zoned by government planners, with the result that development of any type is prohibited on most private land. Over 60% of Oregon’s total land mass is owned by the government, so there are relatively few parts of the state where real estate markets can function effectively.
The intent of Senate Bill 100 which created Oregon’s land use system in 1973 was that land designated for various urban uses inside urban growth boundaries (“UGB”) has to be genuinely available for those uses if the rest of the state is going to be reserved for agriculture, forest, and other rural uses. That was the understanding that made our land use program possible. It is backed by decisions of Oregon’s courts, the Land Conservation and Development Commission (“LCDC”), and the Land Use Board of Appeals, which have all rejected local attempts to double-count land for buffering or mitigation as part of a city’s supply of land “available” for industry, housing, or highways. Double-counting urban lands is not only dishonest; it is self-defeating, because it increases the need to expand UGB onto rural farm and forestlands.
While I do not like suburban sprawl like you see in cities like Dallas, Houston and Atlanta, our land use laws are having the unintended consequence of hindering our ability to attract new companies to Oregon, driving housing & business costs to unnecessary high levels and is a factor in Oregon’s continued unemployment levels above the national average.
The “post child” of how broken the implementation of our land use laws are is a project I was involved with in Woodburn. In the early 2000s, approximately 409 acres were brought into the UGB for the City of Woodburn as industrial jobs land. The land was not pristine forest or high quality agricultural land. It was flat land, on a highway interchange, surrounded by a Do It Best and Winco warehouses. Farmers struggled to grow grass on the property.
My prior company, Opus Northwest, had an option on 108 acres that could accommodate up to one million square feet of warehouse or manufacturing space. For a minimal amount of money, several other environmental groups have successfully blocked this project that could have brought over $150 million in new construction and hundreds of living wage jobs to an area that has unemployment and underemployment over 15%.
Last year, the final court of appeals hearing has held, and the court passed the entire process, after 10 years and over one million dollar in legal and other fees back to LUBA.
Both the city of Woodburn and the Department of Land Conservation and Development learned that these same environment groups would again appeal the UGB expansion proposal approved in January by the LCDC. This marks the second time an approved Woodburn UGB expansion proposal will go before the Oregon Court of Appeals. The process will now be extended at least throughout the rest of the 2011 with no mandated end date for a decision. More delay means more lost opportunities for job creation.
I had a publically traded company interested in constructing a one million square foot fulfillment center that would have brought over 50 jobs with average salaries over $50,000. Due to Oregon’s inability to provide shovel ready land in a reasonably competitive amount of time, this client elected to move forward with construction in California. The environmental groups claims that 409 acres of industrial land is twice the amount needed for a 20-year land supply is absolute bunk.
Last December, I testified before the joint Economic Development and Sustainability committees for the State of Oregon. I shared the Woodburn story. I also offered a solution on how Oregon can better compete to create jobs. Current land use law requires a twenty-year land supply. In thirty plus years, Oregon has failed to ever reach consensus on what a twenty year supply is as our crystals balls are only so clear. My suggestion was twofold: focus on a “shovel ready” five year supply, with shovel ready being defined as construction can commence within six months.
The other was to treat existing jobs land in the UGB like wetlands: if the State or Municipality passes legislation that reduces the amount of jobs lands an equal amount of jobs lands must be added to mitigate this loss.
The other solution is to require those that protest a project to have actual standing: either an interest in property or business that would be impacted by a development, or physically live or work in close proximity. Today, a resident of Roseburg can attempt to block a project in downtown Portland, even if they have no vested interest or standing. If an individual or group that does delay a project ultimately loses, the developer or tenant should be able to sue to be compensated for lost revenue, opportunity cost or increase in construction cost as a direct result of the delay. Having consequences for blocking job creation should have a penalty, which will hopefully result in less frivolous actions taken by the numerous anti economic growth groups in Oregon.
I strongly believe in the virtues of free enterprise, which is based on the enforcement of property rights. We need to slightly modify the implementation of our land use laws so that Oregon can compete in a global marketplace. Our land use laws have done more good than harm, however the imbalance toward conservation hurts the Oregon economy. Businesses need certainty and flexibility in the built environment to accommodate growth. More often than not, Oregon is not even considered by companies for relocation of headquarters or expansion of regional offices or manufacturing facilities due to our lack of shovel ready land.
Does Oregon want to continue, “playing not to lose” and being mediocre or does it want to “play to win” and have a sustainable economy?
Our state is at a tipping point, with medium income per resident drastically declining in comparison to other peer cities like Seattle, Minneapolis and Denver. Unfortunately, our region is more like Pittsburgh, Cleveland and Indianapolis economies over the past ten years. As our region positions itself to rise out of this recession, we need to take a hard look at what kinds of jobs we want to create and where we want to create them. This requires a balanced approach, one that leverages our region’s reputation for innovation in sustainable solutions with a commitment to grow local jobs and the economy.
To Quote Ronald Reagan from a 1964 speech, “The more the plans fail, the more the planners plan”. With a more balanced approach, I am hopeful of better days ahead for all Oregonians. Sensible sustainability, social equity and job creation do not have to be mutually exclusive.
Brian M. Owendoff — Brian Owendoff has been involved in commercial real estate leasing, development and construction for approximately 20 years, and has lead teams with three of the largest full service national real estate companies in the United States. Brian is principal of BMO Commercial Real Estate L.L.C. a firm that provides an array of advisory services to help owners, occupiers, developers and financial institutions make better real estate decisions. Brian can be reached at 503.201.9590 or Brian@bmocre.com.