The Property:  The property in question is part of the larger 20 acre “Green Property,” which was acquired for $420,000 in 2005 for the purposes of addressing temperature discharges from our wastewater effluent in to the Umatilla River.  The theory was to land-apply all of our discharge in to open trenches on the property, which would allow it to percolate through the soil and cool down before reaching the Umatilla River, thus improving salmon survival.  After running two tests of this concept on the property in 2006, it was deemed that this solution was not viable, and it was abandoned.

At the time that the property was acquired, there was an owner-occupied single-family home, as well as two large shops/out-buildings on the property.  All of those structures have been removed.

The property is zoned R-1 for low-density residential, is inside of the City Limits, is served by all necessary utilities, and is surrounded by properties outside of the City Limits.

The Proposal: 

Senior Housing:  I am proposing that we carve-off approximately the southern 8 acres and offer it up at an incentive price (possibly free) to interested developers who commit to developing the property to expand housing options for seniors; with extra emphasis on developments which help stimulate permanent healthcare related jobs.

Stormwater Wetland Treatment Area:  I am proposing that the City retain ownership of approximately 12 acres surrounding the “Hermiston Drain,” and the land fronting on the Umatilla River, which is inside of the river’s floodplain.  The existing topography surrounding the Hermiston Drain sets up well for possible excavation to allow for converting this portion of the Drain in to a wetland.  This could be very valuable to the City’s long-range development needs, as the Drain is not currently part of the City’s stormwater permit with DEQ as a potential option to send our stormwater.  Creating a viable wetland treatment area can reduce the need for developers throughout the northern and eastern part of the City to install costly drywells, and for homeowners to maintain grassy “swales” in front of their homes.

Open Space/River Access Preservation:  Although the approximately 4 acres of land fronting the river, inside of the floodplain isn’t viable for the stormwater wetland, I believe that there is a strong public benefit to retaining public ownership of this land, which is otherwise undevelopable.

The Justification:  City Council’s 2020 Goal #2 focuses on “Fiscal Prudence,” Goal #3 focuses on expanding housing options, and Goal #4 focuses on economic development.  I believe that this proposal hits on all three of these.

Fiscal Prudence:  Liquidity

 This property currently generates no revenue for the City, in fact minor ongoing maintenance is a small drain on resources.  Liquidation of this asset can change this.

Fiscal Prudence:  Strategic Offering

 This property has many negative attributes which reduce its potential financial value if simply auctioned off as residential property, not the least of which being its proximity to the Recycled Water Treatment Plant.  Additionally, the City’s use of the land has “damaged” the property’s value because all of the structures have been removed, and we applied approximately 200,000 gallons of treated sewer effluent to the property.  Groundwater monitoring wells associated with that effluent application are still prominent on the site, and are likely to spook potential buyers.  It is therefore unlikely that the City could really hope to get much more than the original investment back ($420,000) if auctioning off the entire 20 acre site.

Fiscal Prudence:  Likely Development Pattern

Owing to the property’s proximity to the Recycled Water Treatment Plant, it is highly unlikely that someone will build a multi-million dollar home on the property.  Assessors records show that most of the neighboring properties range between $200,000 and $500,000.

 It is important to note that of the 20 acres, only about 10 acres are developable, due to the presence of the Umatilla River’s floodplain, and Hermiston Irrigation District’s drain, which bi-sects the property.  This greatly reduces the appeal of the property to developers; who don’t want to pay for undevelopable land.  Additionally, based on the nature of existing development in the area, I believe that if this property were simply auctioned off, it is very likely that any potential housing developer would get out-bid by someone simply looking for their slice of “rural” acreage where they can put down a Marlette Triple-Wide, erect a pole barn for their horses, and have a riding arena.  Even in the most optimistic scenario, I can’t imagine the fully-developed assessed value of this property exceeding $1M if simply auctioned off.

Fiscal Prudence:  20-Year Net Revenue from Auction:  $398,000

 I examined 18 properties in the vicinity of this property, both inside of the City Limits, and outside of the City Limits.  For those properties inside of the City Limits, the average Real Market Value per acre was $43,395 for raw land.  For those properties surrounding this site, the average Assessed Value for improvements was $182,000.

•  Based on this, I ran a calculation assuming that the City could feasibly assume to receive $325,000 at auction for the 7.5 acres of developable land.  Additionally, I generously assumed that someone would add $300,000 worth of improvements.  I then ran a calculation of the property taxes which would be paid to the City from this scenario over the subsequent 20 years, which would be approximately $58,000.  Additionally, assuming that a single family home is developed on the property, then water and sewer utility monthly base fees would total $15,000.  This revenue, plus the initial $325,000 from the sale, means that the net revenue, after 20 years, to the City would be approximately $398,000, if we simply auction the property off.

Fiscal Prudence: 20-Year Net Revenue from Strategic Offering:  $2,943,000

 In looking at Assisted Living facilities in Hermiston, such as Sun Terrace, Guardian Angel, and Avamere, an additional comparable facility is likely to have an assessed value of more than $3 million.  Based on my general conceptual site layouts, it is also possible to fit a complimentary development of 28 duplex rental units on the balance of the property, which is likely to have an assessed total value of $4.2 million.

•  Based on this, I ran a calculation assuming a $3M assisted living facility, and 28 duplex units were developed on the site for an assessed valuation of $7 million.  Over the subsequent 20 years, these developments would generate $1,143,000 in property taxes to the City of Hermiston alone.  Additionally, this level of development would result in approximately $1,800,000 over that time in water and sewer utility monthly base fees.  So the net-revenue to the City of Hermiston, after 20 years, even assuming giving the property away for free, would be nearly $3 million.
•  Even assuming that group-living assisted living facilities fall out of favor due to COVID-19, an alternative site layout shows that eliminating the $3M Assisted Living Facility could open space for an additional 28 duplex rental units, which would have assessed value of $4.2M.

Fiscal Prudence:  Return of Investment to Utility Fund

 The initial $420,000 to purchase the property in 2005 was generated by the Utility Fund.  Therefore, I can understand concerns about offering the property at an incentive rate to achieve General Fund goals.  However, as I outlined above, strategically offering this property in a way that stimulates development will generate much more financial return for the Utility Fund than just auctioning to the highest bidder if that auction results in just a single home placement.

•  Water and Sewer Base-Fees alone, over 20 years, for 28 duplex units, and a 90-unit assisted living facility would generate $1,840,000; not adjusted for inflation.  The addition of this baseline revenue is important in continuing to expand and diversify the utility fund’s revenue stream and make the fund more able to withstand future revenue shocks.
•  One-time Water and Sewer System Development Charges, and Connection Fees, for 28 duplex units, and a 90-unit assisted living facility would also generate approximately $80,000 in revenue to the Utility Fund at the time of development.

Expanding Housing Options:  Direct Subsidy

 This proposal would directly lead to additional housing options within the community.

Expanding Housing Options:  Long Range UGB Infill

 I understand that this property is right next to our RWTP, so it is difficult for some to envision residential development there.  However, I think it would be extremely short-sighted of us to simply write that entire area off as not developable, because that entire area is inside of our Urban Growth Boundary, and like it or not, we will have to develop that area more densely before the State will allow us to expand our UGB.  Failing to do something to stimulate housing infill in that currently rural residential area will set us up to experience a steep decline in housing development 10-15 years out in the future, as the area around the NE Water Tank fills up, and private developers run out of viable land options inside of the UGB.

 I believe that offering this property at an incentive to stimulate dense infill development will accomplish two things toward leveraging additional development around it.  The biggest impact, I believe, will simply be creation of a physical/spatial buffer between the RWTP and undeveloped properties to the South.  Having a vacant field there psychologically makes it feel as though the RWTP is much closer than if there are 14 Duplex homes, and a large institutional living facility in between.  In addition to the spatial change, something like this will simply send a message to the development community that development of that area is viable.

Expanding Housing Options:  Stormwater Site Development Costs

 Addressing stormwater runoff from newly created public streets in new developments takes one of two routes currently.  The preferred option is to install curb and gutters on the new streets, and channelize the water to “drywells” where the water collects and simply percolates in to the ground.  The other option is to simply allow the water to run off the sides of the street in to grassy “swales,” where the water also percolates in to the ground.

 Swales are largely unpopular with homeowners because they are difficult and expensive to maintain, and many are simply being left unirrigated, causing an eyesore.  Drywells, on the other hand, are expensive for developers, as they can cost upwards of $40,000 to install.  Additionally, due to our stormwater discharge permit from DEQ, we are prohibited from allowing drywells in any area where groundwater is located less than 15 feet below the ground surface.  This poses a challenge for hundreds of developable acres near/around the Hermiston Drain inside of our UGB.  Currently, although they become unsightly and are unpopular with homeowners, swales are the default solution in these areas.

 Creation of a stormwater treatment wetland on the Green Property would allow the City to require developers in the vicinity of the Hermiston Drain to install curb and gutter that is flush against the sidewalk, with no swale; but allow them to avoid the costs of a drywell by sending the water to the drain.

Economic Development:  Direct Job Creation

 One of the main reasons I like this option is that elder care is a growing industry which is very labor intensive.  Strategically offering this property for projects which will develop something in the elder care sector will directly lead to new permanent jobs in the community.

Economic Development:  Livability for working professionals

As we began looking in to surplussing this property, the first question that we asked ourselves is, “is there any possible reason that the City could need this land for in the future.”  Below are the main considerations which staff vetted:

Recycled Water Treatment Processes:  Since the land was bought for the RWTP, we spent considerable time investigating to make sure that this land won’t be needed for that purpose in the future, and we determined that it is not needed because:

• Summertime discharge to irrigation district has solved the temperature issues which had led to the investigation of land application on this land in the first place.
•  Installation of new sludge-handling equipment allows us to haul most of our solids to the landfill, rather than it going to our lagoons.  This exponentially reduces the size of lagoons needed to the point that our current lagoons are very over-sized.
• Current RWTP is running at about ½ of it’s full capacity, and the current operation (including the vastly oversized lagoons) only uses less than half of the acreage of the current RWTP site.  Therefore, it is generally assumed that we can increase capacity 4x, or to a point capable of accommodating a population of 72,000 on the existing site.

Stormwater or Recycled Water Wetland:  I outlined above, an option to reclaim a portion of the property for use as a wetland area to handle stormwater, but that is likely to be all that is feasibly necessary.  The topography of the site rises to the South, so any additional wetland acreage to the south would become more and more costly/challenging due to the volume of fill to be removed. 

Recreational Amenity/river access:  We considered what type of recreational development could occur on this site, but we noticed the following things:

• As currently existing, this site is very poor for providing river access for things like rafting.  The portion directly along the river, in the floodplain is heavily wooded, and is very difficult to get to because of a very steep cliff caused because this property is on the outside-edge of the bend in the river.
•  The overall property slopes to the North, making it quite expensive to develop in to flat ballfields.
•  70% of the City’s park acreage already exists on the West side of the City.
• The location of the property, in the NW corner of the UGB, physically separated from any dense development within the City, and located across the UPRR branch line, means almost all usage would come to the park by vehicle.